So as not to keep you in suspense…
- 76% = VTSAX
- 23% = VBTLX The Total Bond Market Index Fund.
- 1% = Cash in VMMXX.
- A checking account at our local bank for ready cash and paying bills.
Back in the day…
Way back in June, 2011 I launched this blog. That month I put up 16 posts. Imagine. Now I might do that in a year. Guess I am getting lazy. Or more retired. Or just old.
Of those, the ninth was What we own and why we own it. It remains the sixth most popular of all time.*
It was published ten months before the Stock Series was even a glimmer in my eye. As such, in it I took the time to make the case for VTSAX which was then and is now my major holding.
It is interesting, to me anyway, to look back and see what we held then. It is also a reminder of how my own slow transition from active investing to indexing was entering its final stages. June 2011:
- 45% = VTSAX
- 25% = VBTLX The Total Bond Market Index Fund.
- 5% = Cash in VMMXX.
- 25% = Real Estate. VGSLX This is an Index Fund that invests in REITs (Real Estate Investment Trusts).
- A checking account at our local bank for ready cash and paying bills.
Four Index Mutual Funds and a checking account. Low cost, effective, diversified and simple.
But there was a bit more. I went on to say…
“I do still have a few other investments left in old 401k plans and from my many misguided attempts to pick stocks and fund managers.
“HAINX. Harbor International Fund. I own this in the 401k from the job I just left. It is an actively managed fund and, as such funds go, it has relatively low costs. It also has performed very well over the 5-6 years I’ve owned it.
“So, I got lucky. But that’s what it is: Luck. Actively managed funds can and do outperform their indexes. This one has for me. But rarely for the long term. Meanwhile, the higher expenses are always there. Now that I can, I’ll be rolling this over to Vanguard. It’s been a nice run. No great hurry, but no sense pressing my luck either.
“CGMFX. CGM Focus Fund. This is a very aggressive fund run by Ken Heebner. Heebner is a super-star fund manager and Focus was, a few years back, the best performing fund there was. Or close to it.
“The last few years? Not so much. I’ve gotten killed in it. Did Ken get stupid? I doubt it. Will he get his mojo back? Who knows. The take away here is fund managers don’t get any better or smarter than Heebner. But the index has still left him in the dust. Beating the index year after year is vanishingly hard, even for guys this good.
“I also have a very few dollars in a handful of stocks. Not gonna name them ’cause it’s a bad idea to have them. But I like to play.”
Those “cats & dogs” are long gone now and I unwound them as I described in this post. I also no longer bother with individual stocks, even to play. It is such a silly idea. I’d only invest an amount that would be meaningless if I lost it. That also makes it meaningless when I get it right. Even when it is a “ten-bagger” (up 10x your investment).
Writing this I got curious as to how CGMFX is doing. As always it is very volatile, but over the last 5 years it is up 29.30%. For that same period, VTSAX is up 69.59%.
For the same five years, HAINX is down -9.16%.
In addition to those odds and ends, also gone is VGSLX; for reasons I explain here: Stepping away from REITs.
2018
Enough history. Where are we today? As you saw in the opening of this post and might have guessed, as of 2018 things are even simpler. Again:
- 76% = VTSAX
- 23% = VBTLX The Total Bond Market Index Fund.
- 1% = Cash in VMMXX.
- A checking account at our local bank for ready cash and paying bills.
Because the market has been climbing, this is slightly off our target of 75% VTSAX/25% VBTLX and VMMXX. But as I explain in the Asset Allocation post, we don’t obsess when these percentages drift. We rebalance once a year, on my wife’s birthday. The only exception would be if the market made a major move, say in the 20% range.
It is also worth noting, that our allocation reflects the fact that we are in the “Wealth Preservation Stage” as described in the asset allocation post. Or, at least we used to be.
The Wealth Preservation Stage simply means that our portfolio is supporting us and we have added bonds to smooth the ride.
But something remarkable has happened in the last couple of years. I have an income again.
Income returns
When the blog started back in 2011, it cost nothing to run and generated no revenue. Then, as it grew, new requirements meant spending money. Not wanting to be out of pocket, I started to look for ways to monitize it. These were modest, but so were the expenses. For 2014-15 this resulted in small losses I reported to the IRS. But the IRS gets itchy if losses continue too long. For that reason, and because costs continued to rise, I got more serious about seeking revenue.
Beginning in 2016, I reported a healthy profit and that has continued into this year.
Then, in June 2016, I published
Instead, sales began to rebound and now are holding at a remarkably steady pace. Friends in the publishing industry tell me this is because “word-of-mouth” on it has taken on a life of its own. So far it has sold >50,000 copies across the print, Kindle and audio versions.
Between the blog and the book, our expenses are met and since 2016 we’ve not had to draw on the portfolio. Arguably, we are back in the “Wealth Accumulation Stage” and that would suggest a return to 100% equities with VTSAX. But, clearly, we haven’t. So, why not?
Why not 100% stocks?
Mostly, because these new revenue streams seem a bit unreal and I’m not convinced they will last. Plus, being in the “Wealth Accumulation Stage” implies (to replace bonds in smoothing the ride) saving and investing a healthy portion of one’s income. But we haven’t been. We’ve been spending ours, mostly on travel and Kibanda.
At the end of the last post, I shared with you the sources of income for the blog. 80% of that revenue comes from the top two, and those could disappear without warning. Even as I type, one or both might be sending me an email saying they wish to end our relationship. Or one demanding I write something for their needs and not yours.
While I don’t expect either to happen, either could and it would mean the end of that revenue flow. Given how fussy I am about who I support here on the blog, it wouldn’t be easy to replace them and, candidly, I might not bother.
As for the book, it has been a wonderful ride, but who’s to say how long it will last? While sales have been higher and have lasted longer than I ever expected, my guess is still that they will taper off over time. That’s me being cautious.
Publishing friends tell me there are two other, more optimistic, possibilities:
- Word-of-mouth will continue to grow and sales will actually expand.
- Some major influencer, think Oprah, will discover the book and propel it to stardom. If you know someone like that, please pass them a copy.
Both those are fun to daydream about, but are not a foundation upon which to build my allocation strategy.
So, it is the insecurity of how long these very nice income streams will last that keeps me holding bonds. Meanwhile, I’ve long since put the hard work in, and it is now…
I’m trying to relax and enjoy it.
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*Top Ten Posts
- Why your house is a terrible investment
- How I failed my daughter and a simple path to wealth
- Stocks — Part I: There is a major crash coming!
- Stocks — Part IV: Portfolio ideas to build and keep your wealth
- Why you need F-you money
- What we own and why we own it
- About
- Stocks — Part II: The market always goes up
- Stocks — Part XVII: What if you can’t buy VTSAX? Or even Vanguard?
- Manifesto
Personally, I think Manifesto should be #1
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Addendum 1: This is a great example of the right way to use and think about VTSAX
Addendum 2: The Path to 100% Equities
Addendum 3: Investing in a raging bull
I wrote that post in 2013 in response to all those insisting the market was then “due” for a fall. I’d say exactly the same today. As, in fact, The Wealthy Accountant just did in his post:
Where to invest your money when the stock market is overpriced
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Fidelity’s new zero ER funds
Recently Fidelity came out with a couple of index funds touting a zero percent expense ratio (ER). I recognize a loss-leader come-on when I see one and so rolled my eyes and turned the page.
But then I started getting questions about it in the comments here on the blog. Sometimes it is hard for me to remember what is obvious to one person is not to the next. I have been surprised that anyone would care about these, and I have been wrong about that. Seems this has been a very successful move for them.
After fielding this a few times, I decided to summarize my take for those of you interested here.
There is, in my view, zero chance that FZROX or the others will maintain a 0% ER for 60 years (as one reader suggested). Or even six. These are loss leaders and loss leaders are short term hooks to lure in the suckers, er, investors.
Vanguard is structured to seek ever lower costs for its shareholders.
Fidelity is structured to seek maximum profits for its owners, which means raising ERs whenever possible.
Plus, FZROX and the other zero fee funds still have operating expenses. Fidelity is just shifting those expenses to the holders of their other funds. I have an ethical issue with that. Not to mention a practical one if I owned one those other funds.
One last thing that likely no one but cranky old geezers like me even know or care about:
Back in the 1970s and early 1980s, when indexing was new and struggling for acceptance, Fidelity led the effort to strangle the concept in its crib. They even ran ads personally attacking Jack Bogle and calling index investing “un-American” which is, of course, the same as saying giving your customers a better product at a lower cost is un-American. That takes some hard bark.
Bogle, in turn, had the ads framed and mounted on his wall. A badge of honor.
Clearly, they recognized the threat indexing represented to their very profitable (to them) traditional high fee mutual funds. Those are where their hearts still lie. They’d kick indexing to the curb the moment they thought they could get away with it.
Something to think about when making a long-term investment.
This is the post I should have written…
https://www.whitecoatinvestor.com/expense-ratios/
…but Jim wrote it first, and better.
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Recent Interviews & Projects
Bigger Pockets Money Show: JL Collins Edition
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Chautauqua
Next month, October, we head to Greece for Chautauqua. So very excited! Both weeks have long been sold out. But if you want to add this to your bucket list, please feel free to put yourself on the:
Here’s what it is all about:
Millennial Revolution — Chautauqua: Come Join the Family (This is a brilliant post with all the details!)
1500 Days to Freedom — Meet some awesome people… (Another brilliant post, this one with dinosaurs!)
ChooseFI — Oh, the Places we will go Chautauqua in the words of the speakers who will be in Greece. There is nothing quite like hearing the voices behind the words.
Also, be sure to listen to this incredible episode with Travis Shakespeare. Travis is a master story teller and, among other things, he shares how the FI movement fits into the cultural fabric of America and its traditions of rugged individuals charting their own course.
Mad Fientist — Money Talks panel discussion at Chautauqua UK Attendees discussing FI and also a great inside look at the Chautauqua experience.
JL Collins — Greece 2018 Mount Olympus
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The Happiest Teacher, who happens to live in Dubai at the moment, teaches us about
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I’ve joked that we bought Kibanda because I needed more aggravation in my life. Turns out, that’s a real thing:
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Haters gonna hate and we are always going to be the odd ones out…
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JD Roth takes us for a ride in his way-back machine:
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The coming Singularity…
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Kinda like a more interesting version of Downton Abbey.
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This is a beautifully written novel that tells the story of, and the stories around, the creation of a sacred Native American drum and its journey from tribal origins in Minnesota to a collector in New Hampshire and back again. If that sounds boring, let me mention there are starving and freezing children and hungry wolves and not even in the same story.
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Whitehead is a gifted story teller and writer and his tale of escape from slavery is a page turner. Characters are extremely well drawn. Be warned: This is the tale of slavery up close and it is frequently brutal.
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Old Post
Every now and again I get a comment on an old post. It is always nice to see those getting some attention and it is fun, for me anyway, to re-read them. Maybe you too. Here’s one:
Travels with “Esperando un Camino”
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Kibanda Hummingbird