Last Week Stock Market (Dec 19-23, 2016)

Last week, Dec 19-23, 2016, all stock indexes were up slightly. The Dow Jones Industrial Average fell just short of reaching the 20,000 milestone. The Dow made a few valiant runs at 20,000 last week, getting as close as 13 points. Hovering near 20,000 means the Dow is trading at 17 times earnings, near the broader measure of U.S. large-caps (S&P 500) at 17.7, Luckily, the new highs for U.S. stock indexes are not accompanied by record-high valuations (in 1999, the original year of Dow 10,000, stocks traded at a P/E above 23). Many experts are forecasting slight volatility in 2017, despite pro-growth policies.

Last Week’s Stock and Bond Index Performance (Dec 19-23, 2016)

  • NASDAQ 0.5% (YTD 9.1%)
  • Dow Jones Industrial Average 0.5% (YTD 14.4%)
  • S&P 500 Index 0.3% (YTD 10.8%)
  • U.S. Aggregate Bond Index 0.4% (YTD 1.8%)

How did my retirement portfolio perform last week (Dec 19-23, 2016)?

Below is a snapshot of my three biggest retirement portfolio mutual fund movers in terms of percentage gained last week.

The below mutual funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard Small Cap Value Index Fund (VSIAX) 0.7%
  2. Vanguard Extended Market Index Fund (VEXAX) 0.4%
  3. Vanguard S&P 500 Index Fund (VFIAX) 0.3%

Year-to-date my retirement portfolio is up 11.9% (the S&P 500 is up 10.8% YTD). I am my own portfolio manager. I don’t have help from a Certified Financial Planner or Advisor. I was a liberal arts major and I do all my own research on investing by reading regularly. My philosophy is to use low-cost index funds and its been working for a decade.


Last Week Stock Market (Nov 14-18, 2016)

Last week, Nov 14-18, 2016, was another solid week following the election of Donald Trump as our 45th president. The S&P 500 was up more than the Dow on the week (the Dow was flat), as the industrial and financial services sectors (where the Dow has relatively more exposure) trailed the index after their strong gains seen immediately after the election. The stock market has found improved confidence following the passing of the election, with attention now turning to the outlook for economic growth, the forecasts of an uptick in inflation and an increase in interest rates.

Last Week’s Stock and Bond Index Performance (Nov 14-18, 2016)

  • NASDAQ 1.6% (YTD 6.3%)
  • Dow Jones Industrial Average 0.1% (YTD 8.3%)
  • S&P 500 Index 0.8% (YTD 6.7%)
  • U.S. Aggregate Bond Index -0.8% (YTD 2.3%)

How did my retirement portfolio perform last week (Nov 14-18, 2016)?

Below is a snapshot of my three biggest retirement portfolio mutual fund movers in terms of percentage gained last week.

The below mutual funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard Small Cap Value Index Fund (VSIAX) 2.8%
  2. Vanguard Extended Market Index Fund (VEXAX) 2.5%
  3. Vanguard S&P 500 Index Fund (VFIAX) 0.9%

Year-to-date my retirement portfolio is up 9.3% (the S&P 500 is up 6.7% YTD). I am my own portfolio manager. I don’t have help from a Certified Financial Planner or Advisor. I was a liberal arts major and I do all my own research on investing by reading regularly. My philosophy is to use low-cost index funds and its been working for a decade.

How did the stock market perform last week (August 1-5, 2016)?

Last week, August 1-5, 2016, the market started off with a dip due to European banks scaring the whole world market. However, a very strong jobs report (much better than expected) released later in the week, moved the S&P 500 and Dow Jones Industrial Average to all-time highs. Stocks had seemed to be petering along all summer until this report. Next Friday there will be a retail sales report released, which will indicate how well U.S. economic growth is.

Last Week’s Stock and Bond Index Performance (August 1-5, 2016)

  • NASDAQ 1.1% (YTD 4.3%)
  • Dow Jones Industrial Average 0.6% (YTD 6.4%)
  • S&P 500 Index 0.4% (YTD 6.8%)
  • U.S. Aggregate Bond Index -0.6% (YTD 5.3%)



How did my retirement portfolio perform last week (August 1-5, 2016)?

Below is a snapshot of my three biggest retirement portfolio movers in terms of percentage gained last week.

The below funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard Small-Cap Value Index Fund (VSIAX) 0.8%
  2. Vanguard Target Retirement Fund 2040 (VFORX) 0.4%
  3. Vanguard REIT Index Fund (VGSLX) -2.5%

 

Top 10 Mutual Funds for Millennials

Update: Read 2018’s 10 Best Mutual Funds for Millennials

Suggested Reading: Best Smart Beta ETFs for 2018

Become a Millennial Millionaire

Millennials, are you looking to become financially independent, and eventually a wealthy ‘Millennial Millionaire‘? We’re extremely lucky to be at an age where compound interest makes all of that way more attainable than most Millennials believe. Regardless of your income.

If you invest in a low-cost mutual fund via dollar-cost averaging, e.g. investing regularly (month, weekly, bi-weekly) then you’re on one of the surest paths to wealth. But you have to start investing now. The best time to plant a tree was 20 years ago…the next best time is today. Same goes for investing. Millennials should begin investing right now and make saving regularly a habit, e.g. pay yourself first, always.

10 Best Mutual Funds for a Millennial

  1. Target Date Retirement Funds (2045, 2050, 2055, 2060)
  2. Total Stock Market Index Fund (VTSAX)
  3. 500 Index Fund (VFIAX)
  4. Small-Cap Value Index Fund (VSIAX)
  5. LifeStrategy Growth (VASGX)
  6. Vanguard Total International Stock Index Fund (VTIAX)
  7. Emerging Markets Stock Index Fund (VEMAX)
  8. Value Index Fund (VVIAX)
  9. Small-Cap Index Fund (VSMAX)
  10. Intermediate-Term Bond Index Fund (VBILX)




My aforementioned list of the top 10 mutual funds for a Millennial is made up of all Vanguard funds. I absolutely love Vanguard and their funds, which are the lowest cost funds out there. Keeping your fund expenses low is extremely importing, and that’s what Vanguard has set up to do.

Index Funds for Millennials

Of the 10 funds listed, 8 are index funds. The Target Retirement funds are not “index” funds, however they are comprised of 3 index funds to create one fund. The LifeStrategy fund is the exact same concept. Its comprised of 4 index funds and stays steady at an 80% stock / 20% bond asset allocation, whereas a Target Date fund adjusts to be more conservative and increase your bond allocation as time goes on and you get closer to retirement.

All of the Vanguard mutual funds are fantastic standalone funds you can use in your retirement portfolio. The only fund listed that I would never invest 100% on my assets in is the Intermediate-Term Bond Index Fund. That is to supplement another fund listed. For example, you could invest 85% in the Total Stock Market Index Fund, and then 15% in the Intermediate-Term Bond. The first fund is really interchangeable.

Millennials, today is the day to begin investing for your future. Invest today so you can become a wealthy, financially independent ‘Millennial Millionaire’ tomorrow. But you have to start investing in mutual funds now. I would recommend opening a brokerage account with Vanguard, Schwab or Fidelity.

Update: Read 2018’s 10 Best Mutual Funds for Millennials

Suggested Reading: Best Smart Beta ETFs for 2018




What do Millennials invest in?

I hear this question a lot, “as a Millennial, what exactly should I invest in for retirement?”

A lot Millennials aren’t sure which mutual funds or ETFs they should be investing in for the greatest success. I am a Millennial and I’m very proud of my personal performance on my retirement portfolio, which I’ve 100% managed myself.

My personal rate of return since I began investing in 2008 is 9.8%. I am my own financial advisor because I don’t want to spend the money on one. And I strongly believe you should be too.

What I invest in for retirement as a Millennial

My work Roth 401(k) retirement account

  • Vanguard 500 Index Fund Admiral Shares (VFIAX)
    • Expense ratio = 0.05%
    • % of my work Roth 401(k) = 55%
  • Vanguard Extended Market Index Fund Admiral Shares (VEXAX)
    • Expense ratio = 0.09%
    • % of my work Roth 401(k) = 25%
  • Vanguard LifeStrategy Conservative Growth Fund (VSCGX)
    • Expense ratio = 0.14%
    • % of my work Roth 401(k) = 20%

My Roth IRA retirement account

  • Vanguard Target Retirement 2040 Fund (VFORX)
    • Expense ratio = 0.16%
    • % of my Roth IRA = 100%

My wife’s Roth IRA retirement account

  • Vanguard Small-Cap Value Index Fund (VSIAX)
    • Expense ratio = 0.08%
    • % of Roth IRA = 42%
  • Vanguard REIT Index Fund (VGSLX)
    • Expense ratio = 0.12%
    • % of Roth IRA = 40%
  • Vanguard Target Retirement 2040 Fund (VFORX)
    • Expense ratio = 0.16%
    • % of Roth IRA = 18%

Overall my asset allocation mix is 90% stocks and 10% bonds. I know I am very aggressive with my investment mix, but I feel strongly about that aggression as a Millennial, considering I have just under 30 years before I will retire (hopefully by the age of 60). I will begin to get more conservative as I hit 40 years old.



How did the stock market perform last week (July 25-29, 2016)?

Last week, July 25-29, 2016, the market was flat (actually down 0.1%). It makes sense the markets were flat and quiet this last week of July, given the jobs report is expected to be released next week in August. However, the bittersweet news of a strong jobs report may lead the Federal Reserve to hike interest rates in September.

Last Week’s Stock and Bond Index Performance (July 25-29, 2016)

  • NASDAQ 1.2% (YTD 3.1%)
  • Dow Jones Industrial Average -0.7% (YTD 5.8%)
  • S&P 500 Index -0.1% (YTD 6.3%)
  • U.S. Aggregate Bond Index 0.4% (YTD 5.9%)



How did my retirement portfolio perform last week (July 25-29, 2016)?

Below is a snapshot of my three biggest retirement portfolio movers in terms of percentage gained last week. Good news, I beat the market again (S&P 500).

The below funds are held within my work 401(k) plan as well as two separate Roth IRA plans. All accounts are held with Vanguard.

  1. Vanguard REIT Index Fund (VGSLX) 0.7%
  2. Vanguard Extended Market Index Fund (VEXAX) 0.7%
  3. Vanguard Target Retirement Fund 2040 (VFORX) 0.7%

YTD my retirement portfolio is up 8.9% overall.

Food (and funds) for thought on Mr. Bogle’s 65 years in the investment industry

By Vanguard

When Vanguard founder John C. Bogle and columnist Jane Bryant Quinn met for lunch about 40 years ago, the data and documents on the table didn’t leave much room for salad and sandwiches.

Mr. Bogle was promoting Vanguard’s First Index Investment Trust, now Vanguard 500 Index Fund, the first-ever index mutual fund. Ms. Quinn, who wrote a syndicated column for The Washington Post, was trying to digest a relatively fresh concept that would one day revolutionize the investment industry.

“I don’t think I ate much lunch,” said Ms. Quinn, who like Mr. Bogle would become a best-selling author. “He was spreading papers all over. He’s explaining, and I’m pushing. I thought, ‘It can’t really be this simple.’

“I took all of the stuff and read it and called him back. I wrote about the 500 Index Fund as one of the great products and have been boosting it ever since.”

As Mr. Bogle, 87, approaches his 65th anniversary in the investment industry, in July, he has been called a legend and a genius, an icon and an innovator. He founded Vanguard on the idea that a mutual fund company should be managed in the sole interest of its shareholders and he structured it as a client-owned company with no outside owners seeking profits. His launch of the first index mutual fund was also a game-changer and helped make investing more affordable for the masses.

“Jack took a job with Wellington in 1951 at the age of 22, entering an industry he would eventually transform,” Vanguard Chairman and CEO Bill McNabb said. “Since then, he has never wavered in his passion for standing up for the interests of the everyday investor.”

John Rekenthaler, a Morningstar columnist and vice president for research, said Mr. Bogle has had a greater effect on the mutual fund industry than “anybody or anything.”

“He’s been the main driver of change,” said Mr. Rekenthaler, who has covered the industry for Morningstar since 1988. “He’s had a huge impact. You can’t get any bigger.”

Investors come first

Mr. Bogle’s mission led to the launch of Vanguard in 1975 and the first index mutual fund in 1976. It took a few years for indexing and the Vanguard way to gain traction. The First Index Investment Trust was originally derided as “Bogle’s Folly.”

It wasn’t until the 1980s that indexing and Vanguard caught on. Vanguard is now the nation’s largest mutual fund company with about $3.5 trillion in assets as of May 31. Most mutual fund firms now offer index funds, which account for more than 20% of all fund assets nationwide.

“Jack is an idealist and a missionary and he is incredibly competitive,” said Jim Norris, the managing director of Vanguard International and a former research assistant for Mr. Bogle. “He believed with absolute certainty that he was right about what was best for investors.”

From the heart

Mr. Bogle, who underwent heart transplant surgery in 1996, put his new heart through a major stress test just a few days after the operation. It seems Mr. Bogle disagreed with a column Mr. Rekenthaler wrote about academic theory and efficient markets, and he let him know about it.

“He was on his recovery bed,” Mr. Rekenthaler said. “He dictated a three- or four-page letter to me and just destroyed me. He couldn’t wait.”

Mr. Bogle made his point, and Mr. Rekenthaler agreed it was a good one.

“He was mostly right,” Mr. Rekenthaler said. “It wasn’t one of my most insightful columns.”

All-weather advice

Mr. Bogle, so revered and respected by investors over the decades, was rescued from the rain by one years ago. Walking from his hotel to a client meeting in San Francisco, Mr. Bogle got caught in a downpour and was forced to use a copy of The Wall Street Journal as an umbrella. Needless to say, the paper’s coverage of Mr. Bogle was inadequate that day.

“He was getting soaked,” said Andy Clarke, a principal in the Investment Strategy Group and former research assistant for Mr. Bogle. “A cab pulled up next to him. The passenger rolled down the window and said, ‘You’re Mr. Bogle, aren’t you? Hop in.’ Turns out he was a Vanguard client who owned the 500 Index and Explorer Funds. Mr. Bogle gave him an impromptu update on both as the cab detoured to take him to his meeting.”

Staying the course

Since stepping down as Vanguard CEO in 1996 and as senior chairman in 2000, Mr. Bogle has continued to be a fierce advocate for investors, a major influence on the investment industry, and an admired and accessible presence at Vanguard’s Malvern, Pennsylvania, headquarters.

As president of Bogle Financial Markets Research Center, Mr. Bogle maintains regular office hours in the Victory Building and keeps research assistant Michael Nolan and administrative assistants Emily Snyder and Kathy Younker hopping. Mr. Bogle has written nine of his ten books since he departed as CEO, and he often speaks at conferences and other events.

“My favorite memory of Mr. Bogle is when I drove to his house with copies of his first book, Bogle on Mutual Funds, hot off the presses,” Mr. Norris said. “He was so deservedly proud of the book and I still have a picture of the two of us in his driveway holding a copy of the book. I am sure he never considered how many more books were to follow!”

In 2004, Time magazine named Mr. Bogle one of the world’s 100 most powerful and influential people. Fortunemagazine, in 1999, designated him as one of the investment industry’s four Giants of the 20th Century.

“He changed investing, and changed investing for individuals,” Ms. Quinn said. “It’s an absolutely remarkable thing that he did.”

By Vanguard

Why Warren Buffett’s bet matters . . . and doesn’t

By John Woerth / Vanguard

In 2008, the world’s most famous investor made a bet. Warren Buffett, also known as the Oracle of Omaha, wagered Protégé Partners that the returns generated by its hedge fund strategy would not outpace that of a low-cost index fund seeking to track the performance of the S&P 500, a widely followed proxy of U.S. stocks, over a ten-year period.

At stake: $1 million, with the proceeds donated to the winner’s choice of charity.* Not surprisingly, the bet generated some news, and it’s recently been in the headlines as Buffett is winning with less than two years to go.

My colleague Andy Clarke opines on the topic in his recent blog, Buffett’s bet, but I wanted to weigh in with this perspective: The bet matters . . . and it doesn’t.

It matters because it brings attention to a powerful, yet simple, investment strategy: low-cost, market-cap weighted indexing. Vanguard and others have demonstrated that low-cost index funds have displayed a greater probability of outperforming higher-cost actively managed funds.

From my vantage point, if Buffett’s bet and the accompanying publicity lead investors to drink from the indexing well, then they’ll likely have a much better chance of investment success. This is not to say other factors are unimportant, such as the proper asset allocation, a sufficient savings rate, and the discipline to stay invested during market downturns.

On the other hand, the bet doesn’t matter. It doesn’t matter to the extent that beating the return of a hedge fund is an irrelevant goal. Your goals should be more personal and practical—ensuring a secure retirement or funding a child’s higher education.

Indeed, beating a hedge fund or the stock market isn’t the aim. I recall this passage from then Vanguard CEO Jack Brennan’s 2002 book, Straight Talk on Investing: What You Need to Know, which has stuck with me and is memorialized below in its entirety:

Some investors become so obsessed about beating the market (or other investors) that they lose sight of the reason they’re investing at all. They measure their funds against the S&P 500 Index of the Nasdaq or the Dow from quarter to quarter as if everything depended on staying ahead all the time. But it’s misleading to obsess over whether your fund is two lengths of a point ahead of this index or half a point behind that one. In fact, the only meaningful measure of your success is whether you eventually reach your investment objective, whether that’s a down payment on a home or a retirement nest egg.

One of my all-time favorite commentaries on the beat-the-market obsession was a January 2000 column by Jason Zweig in Money magazine. Among other things, he pointed out that it’s hard to beat indexes because they don’t have any expenses, and that many investors who think they are ahead of the markets really aren’t. Zweig ended the column with a great anecdote:

“I once interviewed dozens of residents in Boca Raton, one of Florida’s richest retirement communities. Amid the elegant stucco homes, the manicured lawns, the swaying palm trees, the sun and sea breezes, I asked these folks—mostly in their seventies—if they’d beaten the market over the course of their investing lifetimes. Some said yes, some said no. Then one man said, “Who cares? All I know is my investments earned enough for me to end up in Boca.”

We all would do well to think like that investor. Whether your “Boca” is a comfortable retirement or a college education for your kids, or an estate to bequeath to your heirs or to charity, the idea is to focus on getting there and worrying as little as possible about how your portfolio is performing relative to something else.

So, bets aside, getting to Boca—reaching your financial goals whatever they may be—is what it’s all about.

By John Woerth / Vanguard