My Vanguard performance

I have a 401K at Vanguard that I don't contribute to anymore. Consequently, any changes in account value result from investment performance. Here's my performance (for periods ending Dec 31st.).


these are the averages for world allocation funds for ytd, 1 yr, 3yr, 5yr, and 10 yr:



My performance turns out to be pretty good. I used morningstar to find world allocation funds with similar performance to mine. This provides an estimate of my rank among world allocation funds:

5 yr rank: top 31%.
3 yr rank: top 13%.
1 yr rank worse than 86%.

Now, if you understand the math behind these things, you'll realize that while I outperformed the average, I also did it with less risk.

Below you see the performance of the best world allocation fund that beat my performance over 5, 3, and, 1 years. You also see the average performance for the world allocation category.



Looking at the big dip, the Waddell & Reed fund went from 40K to 22K. A drop of 20%. It still hasn't fully recovered. The average performance for the category went from 17K to 11,272; a drop of 33.7%.

In contrast , my portfolio dropped from 30,250 to 25,212; that's only 17% (see below). At the end of 2009 my portfolio had fully recovered and stood at 33K. (On the whole, not as good as Waddell and Reed, though).


Much better performance than average, with a lot less risk. Pretty good, pretty good. I certainly earned my investment management fees.

more words of wisdom from bill gross

In a morningstar video, bill gross says he estimates that the Fed buying has lowered the 10 year treasury yield by 50 basis points (1/2 a percentage point). A 50 basis point increase means about a 14% price drop. He also says he prefers German bonds because the German budget policy is less inflationary.

time to get out of treasuries ?

Bond genius bill gross is reducing his exposure to treasuries. In his post (Jan 2010), he explains that Treasury yields are too low, and that the Fed has been buying up too much of them. (Same deal for the Bank of England buying gilts). Gross is expecting a drop in treasury prices soon, especially since the Fed is plotting its exit strategy (i.e. selling its Treasury holdings). (See also Jubak's post on Gross' moves and comments)

More generally, there appears to have developed a supply and demand imbalance for government bonds. The supply has gone up due to various bailouts, but empty pockets are lowering demand. This should mean that gvt bond auctions won't attract that many buyers, meaning low prices and higher yields. To prevent that, central banks, like the Fed, have been buying up their own national bonds. It can't go on forever. When it stops gvt bonds prices will drop.

Gross suggests TIPS (real return bonds) might be an option because these mega deficits will result in inflation, but TIPS yields are really low too. According to bloomberg, the yield on a 5 year TIPS is 0.17%. Yuk.

Baby Boomer Retirement & Corp Profits

A couple of interesting stats from a survey of Canadian baby boomers. First, of those who kept track, they decreased their spending by 30% the first year of their retirement. Of course, that's the ones who kept track of their spending. They'll tend to be the more fiscally responsible ones. The others are probably out buying miatas, gold-plated golf clubs and world cruises. The other stat is just as concerning: 75% of yet to retire respondents project that will just just get by when retired.

When baby boomers retire (starting now) you can expect a big drop in consumer discretionary spending.