2013 has been the year of stock market recovery in the US and abroad. Both DOW Jones and S&P 500 indices reached new high’s since the internet bubble of late 1990s.
S&P 500, which is considered as a broad barometer of the US economy, closed the year at 31.84%.
Total International Stock Market index capped 18% gains this year. Emerging Markets index performed poorly at 1.72% due to broader cool-off of emerging market economies in China, Brazil, Russia, and India.
The REIT index did not perform well this year because of the taper talks from the fed and somewhat slow-down of the house purchases in the last quarter of 2013 due to rising interest rates.
I do not invest in bonds. But, the Total Bond Market index is -2.31% this year. This is to be expected because equities rose faster which in turn boosted investors’ confidence. So, they moved money from bonds to stocks this year.
This year, I made a few tweaks to my portfolio.
- I re-balanced my portfolio four times during the year. I sold off some of the shares in the S&P 500 Index Fund, Large-Cap Value Index Fund, Small Cap Value Index, and Small Cap Index Funds. This has resulted in quite a large amount of capital gains this year. The proceeds are being invested into a temporary fund Vanguard Target Date Retirement 2060. I am using this fund as a temporary placeholder as a house-payoff fund. We are planning to pay off our house at the end of 2015.
- This year, I moved my brokerage account from Sogotrade to Vanguard. This account had XLE ETF (energy sector) and BRK.B (Birkshire Hathaway). I plan to simply hold these two funds forever or as long as I feel.
- I also added Vanguard REIT Index ETF to my brokerage account and invested $1000. I currently hold the Vanguard REIT Index Mutual Fund in the Roth IRA account. But, contribution limits prevents me from adding more to the real-estate part of the portfolio. The REIT Index performance took a backseat this year due to taper talks from the Fed. So, I saw this as an opportunity to grow the real estate portion of my portfolio. I will make some additional purchases of this ETF next year.
NOTE: As I think back, I feel that I should not have re-balanced my portfolio this many times during the year. I should have waited until the year-end to re-balance the portfolio. Because I was doing it whenever the market reached new high’s, I may have missed opportunities for additional gains in the second half of the year. Oh well..as they say, emotions often get in the way and I got a little too carried away with rebalncing. I’m not planning on making further re-balancing until the year-end in 2014.
Below is personal performance rate of return calculated by Vanguard. It uses a formula called internal rate of return (IRR), which is a dollar-weighted return. IRR takes into account new money coming into the investment, as well as how long that money has been held. Don’t confuse this personal rate of return with the returns posted for funds and indices (second table). The returns presented in these instances use a time-weighted calculation, which does not take cash flow into consideration.
|Vanguard 500 Index Fund Admiral Shares||32.33%||32.33%||16.14%||17.94%||7.39%|
|Vanguard Value Index Fund Admiral Shares||32.85%||32.85%||15.56%||16.09%||7.38%|
|Vanguard Total Stock Market Index Fund Admiral Shares||33.52%||33.52%||16.25%||18.86%||8.11%|
|Vanguard Developed Markets Index Fund Admiral||21.97%||21.97%||8.19%||11.99%||6.98%|
|Vanguard Emerging Markets Stock Index Fund Admiral Shares||– 5.02%||– 5.02%||– 2.81%||13.99%||10.44%|
|Vanguard International Value Fund||22.15%||22.15%||7.83%||12.47%||7.83%|
|Vanguard REIT Index Fund Admiral Shares||2.42%||2.42%||9.39%||16.89%||8.58%|
|Vanguard Small-Cap Index Fund Admiral Shares||37.81%||37.81%||16.61%||22.55%||10.34%|
|Vanguard Small-Cap Value Index Fund Admiral||36.58%||36.58%||15.73%||20.32%||9.54%|
|Vanguard Target Retirement 2030 Fund||20.49%||20.49%||10.77%||14.53%||—|
|Vanguard Target Retirement 2050 Fund||24.34%||24.34%||11.89%||15.67%||—|
|Vanguard Target Retirement 2060 Fund||24.35%||24.35%||—||—||—|
|Energy Select Sector SPDR Fund (XLE)||21.25%||21.25%||18.41%||16.39%||21.64%|
|Berkshire Hathaway Inc (BRK.B)||27.21%||27.21%||26.8%||17.74%||10.7%|
Overall, I am pleased with the performance of the stock markets this year. If you were out on the sidelines, you probably have missed 30% or so growth of your money. I hope the rally continues into the next year. But, I’m suspecting that gains will be modest next year.