I haven’t written about the Asset Class Battle in a while. The last update I wrote was all the way back in June. With all of this talk about allocation on the blog lately, now is a good time for an update.
I like to learn new words. I also like to pass them on to you. Long time readers may recall that I’ve talked about piloerections. In the last Asset Class Update, I discussed floccinaucinihilipilification. Try saying that one three times in a row! Try saying it at all!
Since I’m behind in my updates, today I’m going to give you a bonus. You are going to learn a new word that will make you sound witty, hyper-intelligent and get you sued for sexual harassment all at the same time. The word is:
Callipygous
Impressive looking, right? I’ll get to the meaning of it later. In the meantime, no Googling please. I’m watching!
Let’s take a look at a subset of my callipygous portfolio. I call it the
AssAsset Class Battle.
What is the Asset Class Battle?
I rolled my 401(k) over earlier this year. Instead of just putting it all into VTI, I decided to get a little crazy and roll it into different assets. Nothing like experimenting with almost $300,000, right? What could possibly go wrong!!
I put $30,000 into each of the following callipygous investments:
- VTI (same as VTSAX): This is the benchmark (US Total Market Index) and where most people should invest the majority of their money. The other eight investments will be judged based on how well they do against this one.
- VOO (same as VFIAX): This is the S&P 500 index. I had $30,000 dollars still sitting around the account, so I picked this one up during a market dip on 8/24/2015. To make it fair, I bought an equal amount in dollars to what I had in VTI at the time. I’m curious to see how the S&P 500 performs against the US Total Market Index.
- FCNTX (Fidelity Contrafund): This is an actively managed mutual fund that my 401(k) was invested in prior to rolling it over. Giving it a chance against VTI is a worthwhile exercise, although I hate the premium fee.
- VXUS (Vanguard International Stock): This provides exposure to investments outside of the U.S.
- VBR (Vanguard Small-Cap): I have read that small caps beat the bigger guys over time. Besides, Betterment also has this in its portfolio and the folks who work there are smart.
- VNQ (Vanguard REIT): I love real estate, but so far, I’ve been wildly unsuccessful in my attempts to purchase any property. A REIT allows me to own real estate.
- SCHD (Schwab US Dividend Equity): There are no shortage of people obsessed with dividends. I consulted Jason over at Dividend Mantra and this was his recommendation as far as funds go (Jason prefers to buy individual stocks over funds).
- VGT (Vanguard Information Technology): I love technology and feel that this sector has a better than average chance of outpacing the rest.
- BRK.B (Berkshire Hathaway): This is Warren Buffett and Charlie Mungers’ conglomerate. I’m a big fan of them, so why not see how they do?
Here is where my experiment sits as of 11/15/2015 (7 months from the start):
From best to worst:
- VGT: $30,421 (Tech is kicking ass!)
- FCNTX: $30,050
- SCHD: $29,046
- VOO: $28,964
- VTI: $28,827 (Total US Markets, the baseline)
- VNQ: $28,228
- BRK: $27,843
- VBR: $27,727
- VXUS: $26,444 (International markets are sucking it)
Total: $257,550
Observations
The technology index fund, VGT, continues to lead the pack. If I were to rank my investments on a Callipygian Scale, VGT would be at the top of the list.- The Fidelity Contrafund continues to outperform. The Contrafund has a high percentage of holdings in technology, so I expect it to move in similar fashion to VGT. Very callipygous indeed.
- The dividend growth fund, SCHD, moved up from #5 to #3 and is beating the market. I’m not a dividend investor, so all of you Dividend Heads can rub it in my face.
- Warren Buffett’s Berkshire Hathaway continues to underperform as some of its holdings have been struggling. Berkshire typically outperforms when the markets are underperforming, so I’m not worried about this one in the slightest.
- VNQ (real estate REIT) moved out of its last place position, but still lags the index.
- VXUS (foreign markets) is bringing up the rear. Not very callipygous. Or maybe it is?
- VBUTT*: Just kidding; there is no such thing.
What if I put it all into VTI or left it all in FCNTX?
- Current value: $257,550
- Everything in VTI: $259,443
- Everything in FCNTX? $270,450
Whoah, look at that? If I had just left it all in the Fidelity Contrafund, I’d be up almost $13,000! No worries here though. This experiment started in April, so isn’t even a year old. The true measure of performance (or callipygous character) will be how these investments perform over multiple decades.
Blasphemous, Scandalous, Callipygous
Now for the moment you’ve all been waiting for. I hope you didn’t already ask Google for the definition of callipygous. Brace yourselves.
Come back in the first half of 2016 for Update #3! I promise I’ll behave myself**!
And one more thing that has nothing to do with butts: My buddy Jeff over at Sustainable Life Blog asked me and a bunch of other bloggers some fun questions. The answer I gave to this question is one of the best things I’ve written in a while:
What do you think is the MOST Important thing people need to do to reach FI? (This could be something huge, like savings rate or something that is more directly related to expenses, like learning to cook)
*Even at the advanced age of 41, I am wildly immature.
**Hell no, what fun would that be?
Join the 10s who have signed up already!
Subscribing will improve your life in incredible ways*.
*Only if your life is pretty bad to begin with.
It’s always interesting to see how the different asset classes perform. Personally for my taxable accounts I like to follow the individual dividend growth picking but for all the tax deferred accounts it’s primarily S&P 500/Total US stock market indexes and then I mix a mid cap and small cap index as well to hopefully add a bit more of a growth factor since I won’t be touching that money for decades. Wouldn’t mind a technology fund but alas there’s none to be found in my 401k.
JC @ Passive-Income-Pursuit recently posted…Net Worth Update – October 2015
I’d be curious to know why you have different strategies for taxable and pretax accounts.
From a tax perspective, it seems like you’d be better off with the opposite. Put the tax inefficient dividend investments in the tax deferred accounts and have more growth oriented investments in taxable.
Thats what i would do if i ever leave and roll my 401k into an IRA.
Unfortunately im still working so my only options are index funds in the 401k. I do DGI in the taxable because hopefully, the plan is to retire early and use the income stream / cash on hand to cover until i can tap the 401k.
I waited in suspense till the end to find out what callipygous meant and…I couldn’t have been more pleased to find the answer!
I love experiments like this because it puts real dollars and a real-time timeline on it. So many people backrest everything so it fits their reasoning. This, very simply, puts asset classes against each other, apples to apples, to see how they perform. Very informative!
Yeah, there is no substitute for using real money. Perhaps not wise, but I enjoy some drama!
Haha, you might be immature Mr 1500….but you’re damn sure funny. Your ETF experiment is interesting. While different sectors, or whole markets, rotate ……I hope to take advantage of their minimally correlated returns. Giving the portfolio time, and rebalancing periodically, this approach seems like a low hassle approach. The Seeking Alpha article about my intention to convert 70% of our portfolio dollars to index ETFs over the next couple years, goes live this morning. Looks like our conversations have converted me. Have a great day!
-Bryan
Income Surfer recently posted…My Interview on Islands of Investing
Whoah, where is this article?
Read this article at work, suddenly my colleagues started asking why I’m smiling……
Team CF recently posted…Dutch Taxes – Part 4: Box 3
Thanks CF! Glad I made you smile!
And don’t forget the word “steatopygian”
Nice one!
Very interesting. I could look it myself, but off-hand, do you know how each fund fared during the market correction back in August?
Great, thought Mattattack! I’m not sure how they did, but next time their is a correction of at least 10%, I’ll publish an update.
What do you know? I learned a new word today, thanks to Mr. 1500!
The index experiment is an interesting one but the reality is, the different asset classes will perform differently in different times. Tech is hot right now probably because of the likes of Apple and Facebook. The REIT sector seems to have suffered this past year and a bit due to the on-going interest rate raise concern.
Tawcan recently posted…Guilty pleasure
Exactly, I think it will even out over time. Every dog has it’s day. I do expect the index fund to be near the top over a very long time period though.
*Giggle* Butts!
My favorite vocab word has always been defenestration. It’s a wonderful threat for misbehaving electronics.
This experiment is really interesting. I wonder how long the fancy technology will be on top. I know it’s a staple in the current market but as someone who works for big old school manufacturing (casting has been around since what, the bronze age?) I’d like to see if Berkshire, the baseline, and the dividend funds start overtaking in the future.
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Defenestration! I’ve been tempted to defenestrate various gadgets on more than one occasion. Temper, temper.
Like everything else, it’s all cyclical. Google and facebook are kicking some serious butt, but nothing lasts forever.
Hey, more ‘butt’ references!!
I did a very similar experiment many years ago designed from actual scientific papers written on this seemingly diverse allocation. But alas if you did an analysis of all of these you would see much overlap and duplication of effort. The added con is you are paying much more in fees. My Vanguard Flagship advisor convinced me to drop most of these in favor of just a few ADMIRAL indexes with a token international allocation. Simple!
Wayne, I know what the right answer is! I think stuff like this is fun for others to see. No new money is going into this experiment. Most of it goes into VTI with a small side helping of international, just like you said.
That’s a cool 300k$ experiment Mr 1500!
Technology has been king of the market this year. I read an analysis a few days ago that so far in 2015, the top10 firms in the S&P gained as much as the other 490 lost so far and half of them are tech: Amazon, Google, FB, Microsoft and Netflix (the other 5 Starbucks, Visa, Disney, Home depot and GE).
Would the winning asset class so far actually be cash on a 1% savings account?
I don’t index but if I did VIG would be on my list. That’s the Vanguard Dividend Achievers index. All companies that have increased dividends at least 10 years straight!
Financial Velociraptor recently posted…Buy to hold SPDR Series Trust – SPDR S&P Regional Banking ETF (KRE)
That was the one I originally had: https://www.1500days.com/what-i-did-with-my-275000-401k-rollover/
Jason from Dividend Mantra told me to go with the Schwab one instead.
Many say that VTWB is a better small cap value slice than VBR. Has more small value in it.
Take a listen. http://paulmerriman.com/small-cap-value-etfs/
Oops VTWV
Interesting, thanks for the advice!