The first quarter of 2017 is in the books. That means it’s time for another quarterly financial update. In this article we’ll take a look at our investment portfolio, how it has done so far, and what we have planned for the future. Before we get going, be sure to check out my previous quarterly update here.
But first, a quick blog update. I apologize for the not-so-consistent posting schedule. I’ve hit a busy stretch recently in regards to work and taking care of Little Random Guy. Things seem to have settled down a bit, so I should be able to get back to a more consistent publishing schedule. I’ve also been trying out new themes for the site. It took me a while but I think I’ve found one that I’m happy with. But bear with me as I work out some of the kinks.
With that out of the way, let’s move on to the 2017 First Quarter Update.
As I mentioned in the previous update, we invest primarily in passive index funds and ETFs with a target asset allocation of 75% equities and 25% fixed income. Here’s a summary of our investment accounts:
- Schwab 401(k)
- Vanguard Roth IRA and joint taxable account
- HSA Bank/TD Ameritrade
- Fidelity 401(k)
- Vanguard Roth IRA and joint taxable account
- Schwab taxable account
As you can see, we have a total of seven accounts with three different financial institutions. I would prefer to have less accounts, but three of them are tied to our jobs. Outside of those, we just have holdings with Vanguard and Schwab.
Our equity holdings are a combination of domestic and international stocks with a smattering of small cap value and REITs. My wife’s old Schwab taxable account also came along with some individual stocks, which I’ll talk about later.
For those of you counting, that’s 10 different equity funds. For someone who likes to keep investing simple, that’s a bit too much for my taste. But like I said before, having our retirement accounts with two different financial institutions complicates things a bit. Also, the bulk of our investments are still in our 401k retirement accounts, so we still need to have some equity holdings there in order to keep our allocation near the 75/25 goal.
Excluding the individual stocks, there are five different equity categories: total domestic stock, total international stock, small cap value, REIT, and “other” (high dividend yield fund). Our tilt towards small cap value stocks and REITs are currently at 5% and 7% respectively. International stocks account for 21% of our equities.
Our fixed income holdings are more straightforward. We essentially have total bond index funds in additional to some California municipal bonds.
2017 First Quarter Performance
I think that we did pretty well during the first quarter of this year. Our portfolio saw a return of about 4.8% as compared to the 5.5% return of the S&P 500. This really isn’t an apples to apples comparison as about one-fourth of our portfolio is in bonds. That being said, I’m happy with our performance so far.
Other tidbits from the past quarter:
- International has done well with a return of about 8%.
- REITs, on the other hand, have returned just 0.8%.
- Overall, our investment portfolio grew by 10.8% in the quarter.
Plans Going Forward
I don’t foresee making any drastic changes to our portfolio, at least for the time being. Our current asset allocation of 76/24 is pretty close to our target, and I like where we’re at in terms of our small cap and REIT tilts. I may, however, increase our international allocation to something like 25% of equity holdings.
Over the long term, I want to eventually simplify our portfolio and cut down on the number of funds that we own. My plan is to have our retirement accounts hold our bond, small cap, REIT, and “other” funds while our taxable account will be used for total stock and municipal bond funds. I might also shift the international holdings to taxable as well.
Finally, our individual stocks* will be left as is. I’m not a fan of this investment style, so I won’t be actively purchasing more shares. Instead, I’ll just let these ride and enjoy the automatic dividend reinvestments along the way.
The first quarter ended up being a good one for investors, particularly those with international holdings. Market returns weren’t too shabby as well, although I’m hoping that small caps and REITs will pick up some momentum as the year goes on. It will be interesting to see how the second quarter pans out, but in the end it’s all about sticking with your investment plan.
Readers, how was your first quarter? Did you beat the market? Are you even trying to? Comment and share below!
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* Individual stocks are Apple, Bank of America, Citigroup, General Electric, Intel, Microsoft, and Disney.