This article is composed by Bogleheads® from member digarei.
TWELVE (12) persons gathered around tables in the community room upstairs at the C. K. McClatchy Library in midtown Sacramento at 10:35 am on Saturday, January 9, 2016. A lively exchange that broached dozens of subjects over two hours, those attendant were spared (for once!) an unending plethora of articles and handouts. Christy distributed a listing of Vanguard mutual funds with updated 2015 YTD returns.
The other handout, “Add Topics/Speakers” hints at the purpose of this meeting. Although the schedule called for a discussion of an article (“Buy Like Bogle”)¹ and then an Investor Q&A session, both were set aside to begin winnowing the lists of topics for the year. A discussion about Vanguard’s performance figures, following introductions, morphed quietly into other related topics. No one thought to object—or if they did, it remained a thought for the duration of the meeting.
Vanguard Funds performance & Paying it Forward
A list of funds from Vanguard, showing their end-of-the-year performance and average annualized market return over various periods was produced. The S&P was up 1.3% for the year. Recent returns for all but a handful of the the funds were… disappointing but not unexpected.
carruthers209’s father was instrumental in introducing her to investing many years ago when he gave her several thousand dollars and suggested that she invest it. carruthers209 said because she felt responsible for the investment, it was taken seriously and that it had felt like real money. She is trying to pass this on doing the same thing with her daughter and hoping that her grandchildren learn how economics work.
Vanguard Health Care Fund
There was some discussion regarding Vanguard’s Health Care fund, which has in recent years returned extraordinary profits, though it dipped in August.² Several members spoke of purchasing Health Care during 2015, though the ideal period to buy in was some years ago.
It wasn’t entirely clear which of the two (2) Vanguard health funds was being touted. There are two funds with four share classes (tickers) among them: 2 reference an active fund, containing 1/5th international; and 2 are share classes of an all-US index fund. Research the actively-managed Vanguard Health Care Fund – Investor shares (VGHCX) by clicking on the chart below. Links to all Vanguard Health Care funds/share classes:²
Portfolio Rebalancing Practices
On Rebalancing: “You have a fund that’s doing smashingly well and then you’re going to buy a loser. Does that make any sense?” It does at first seem counterintuitive. ³
Two members, late arrivers to low-cost investing, briefly discussed the different experiences that initially led them to Vanguard. One said, “It took me a long time to find Vanguard, when you’re starting out the learning curve is huge.”
Digarei noted that his path was made easier when Motley Fool became more commercial and he discovered an archive of white papers (research) on the Vanguard site. The papers were an important part of his informal education.
Investment Policy Statements (IPS)
One member admitted to not having [an IPS] plan that included rebalancing. If a fund is doing well they will “just let it ride…” In contrast, other members shared how their respective plans helped them stay on track. krmann said that her IPS plan fit on a single page: “It’s where I rebalance,”and it lists all cash, bonds and stock holdings. Each asset class is broken down by percentage. “My IPS is just rebalancing to those losers,” krmann said. “Buy low, sell high!”
l82start asked if anyone rebalancing considered how wide the rebalancing bands have to be so one doesn’t rebalance too soon and forfeit “the full ride.” A meeting attendee commented that this approach, “sounds like ‘momentum’”.
Other members spoke briefly about the methods, tasks and insights they employed in rebalancing their portfolios and managing risk. Someone said that they like the Vanguard website: one can view both the personal investor or dollar-weighted returns for each account or all accounts in aggregate. Vanguard also publishes average annual and cumulative returns for each of the funds themselves (these are called time-weighted returns.)
The coordinator suggested that this coming year we could revisit IPS construction and portfolio rebalancing since these topics were last discussed mid-summer and then, not in great detail.
One member’s investments are with Schwab in an IRA and he noted that it works with Quicken; every few days he imports portfolio data from Schwab into the software, everything in one place. Sharing some of the components of his portfolio, the member said it included REITs, which were paying 12%, but it’s down now, and a few unconventional assets: market calls and limited partnerships. He uses Morningstar for information and analysis of the funds and other investments.
Calculating Personal Investor Returns XIRR
Stephen and a few others track IRR (internal rate of return). He’s only interested in the cumulative return, the entire history, all years from the beginning of his investment to current. The chair stated that the group might want to go over some of the various methodologies used to track personal returns.
Discussion of Topic Suggestions & Speakers
A first draft of suggested topics & speakers to be scheduled in the coming year ( 2016 ) culled from suggestions made in December and received via email, was passed out to attendees. Several members brought with them additional topics suggestions and the group evaluated these and added to the list.4
Chapter members briefly discussed the difficulties relating to Social Security (SS), where successful completion of the filing process requires extensive knowledge to take full advantage of the benefits accorded claimants. The SS office representatives aren’t going to suggest the best strategies in filing.
Recent changes in congress that impact file and suspend provisions and spousal benefits for those who have not yet attained minimum retirement age will make the system fairer (and simpler) in the future, but there’s still plenty of complexity to present challenges.
Meeting was adjourned at 12:35 pm • Six members gathered at Kupros for lunch
“When you’re retired, you have all the time in the world…And it takes all the time in the world to get anything done.” – Christy
¹ Program note: One agenda item, discussion of the article, “Buy Like Bogle”, was conceived back in August as a companion item to a discussion on the three-fund portfolio in November. It didn’t get a place on the agenda that month, so was scheduled for the month of December. But time ran out so it was postponed again, until January…then re-slotted on the February agenda.
It didn’t happen. For three consecutive months it soldiered on, bumped, battered, and a tad bruised. Twice, handouts were provided but it seems it was not meant to be… I think at this point, on the cusp of tax season and the other topics that await, that we pay our respects and move on. If you would like to read the article but didn’t get a copy in print, see below.
“Buy Like Bogle: 7 Essential Lessons from the Founder of Vanguard” Source: http://fundreference.com/guides/bogle/
² The recent downturn has affected prices and P/E ratios since the chart was created in January. For current pricing information, visit Vanguard – click the chart or a link below.
- VGHCX – Health Care Fund Investor Shares
- VGHAX – Health Care Fund Admiral Shares
- VHCIX – Health Care Index Fund Admiral Shares
- VHT – Health Care ETF
³ Rebalancing was added to the list of topics to be discussed in 2016. 1/10/2016
4 To protect the privacy of individual participants, most discussions specific to topics taken under consideration and the names of contributors is information that is deemed privileged, but is available to the chapter members in attendance and other meeting attendees. The Topic list will be submitted to members for approval in March and then published.