December 2008 Investment Portfolio Update

I’ve been trying to re-balance my portfolio using my recent 401k contributions, but I ran into some speed bumps, so here is a brief interim update.

Retirement PortfolioActualTarget
Asset Class / Fund%%
Broad US Stock Market27.7%34%
VTSMX – Vanguard Total Stock Market Index Fund
DISFX – Diversified Stock Index Institutional Fund*
FSEMX – Fidelity Spartan Extended Market Index Fund*
US Small-Cap Value9%8.9%
VISVX – Vanguard Small Cap Value Index Fund
Real Estate (REITs)8.5%8.5%
VGSIX – Vanguard REIT Index Fund
Broad International Developed25.8%25.5%
FSIIX – Fidelity Spartan International Index Fund*
International Emerging Markets7.1%8.5%
VEIEX – Vanguard Emerging Markets Stock Index Fund
Bonds – Short-Term4.6%3.8%
VFISX – Vanguard Short-Term Treasury Fund
Bonds – Inflation-Indexed12.7%11.3%
VIPSX – Vanguard Inflation-Protected Securities Fund
FDRXX – Fidelity Cash Reserves
Total Portfolio Value$95,678

* denotes 401(k) holding given limited investment options

Contribution Details
For 2008, we have finally both contributed the annual maximum of $15,500 each towards our respective 401ks. We have not made any 2008 IRA contributions, but we did make 2007 contributions in April 2008. We will likely do our 2008 contributions in April 2009 deadline.

YTD Performance
The 2008 year-to-date time-weighted performance of our personal portfolio is now -42.5% as of 12/8/08.

For reference, the Vanguard S&P 500 Fund has returned -36.69% YTD, their FTSE All World Ex-US fund has returned –47.98% YTD, and their Total Bond Index fund is +2.20% YTD as of 12/8/08. The Vanguard Target 2045 Fund has returned -35.79 YTD, primarily due to a small international allocation.

Investment Changes
In my wife’s 401k plan, a few new investment options were added, including the Fidelity Extended Market fund (FSEMX). This is a nice complement to their in-house S&P 500 index fund. If you take 75% S&P 500 and 25% Wilshire 4500 Completion Index, you pretty much get the Total US Market, so we have moved our investments to that and sold off the bit that we had in the actively-managed Dodge & Cox fund. Nothing else in that 401k is terribly appetizing.

We have used our new contributions to bring us back towards our asset allocation target, with a 85% stocks/15% bonds split. This means I have been buying more International, REIT, and Small Cap. I have also been swapping funds around to make things “fit” better, due to the limitations of spreading money across different accounts.

You’ll notice that I am really below-target in my US allocation, and have $4,500 in cash. This is because the fund minimum for the Fidelity Spartan Total US index fund is $10,000 (in my 401k). In early 2009, I hope to add enough money to reach the minimum. I could buy ETFs instead or another more expensive Fidelity fund as a tracker, but not sure if I want to pay the roundtrip commissions given that it will be less than a month. Currently on the fence.

You can view all my previous portfolio snapshots here.

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