$10,000 Benchmark Portfolio Update – March 2013

Time again for a Beat the Market Experiment monthly update, for the first of three portfolios started on November 1st, 2012:

1. $10,000 Passive Benchmark Portfolio that would serve as both a performance benchmark and an real-world, low-cost portfolio that would be easy to replicate and maintain for DIY investors.
2. $10,000 Beat-the-Benchmark Speculative Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
3. $10,000 P2P Consumer Lending Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Benchmark Portfolio as of March 2, 2013. My account is held at TD Ameritrade due to their 100 commission-free ETF program that includes free trades on the best low-cost, index ETFs from Vanguard and iShares. I funded it with $10,000 and bought all the ETFs required to be fully invested on 11/1/12. All trades were commission-free.

Here’s a screenshot from my account showing exact holdings and their market value on 3/2/13 mid-day:

(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:

No new trades over the past month as the allocations are still close to targets. Still no dividends or money market interest. Here is the target asset allocation:

Due to simplicity and small portfolio size, for now I am going with 100% stocks and no bonds. This is meant to be appropriate for young investors, who should try to get a long horizon for stocks and can add more bonds later on. According to popular glide paths, a rule-of-thumb is having your age minus 20% in bonds. Here are the ETF components that represent each asset class:

US Total Market – Vanguard Total Stock Market ETF (VTI)
US Small Value – Vanguard Small Cap Value ETF (VBR)
International Total Market – Vanguard FTSE All-World ex-US ETF (VEU)
International Small Value – Vanguard FTSE Emerging Markets ETF (VWO)
Real Estate – Vanguard REIT Index ETF (VNQ)

I’m thinking of switching out VWO with either Vanguard FTSE All-World ex-US Small Capital Index Fund ETF (VSS) since VEU is only large-cap and VXUS is not commission-free, or maybe even the SPDR S&P Emerging Markets Small Cap ETF (EWX) which is focused on a smaller section of the market and still on the 100-free commission ETF list. It does have a higher 0.65% expense ratio, though.

Total value of stocks: $10,621.74
Cash balance: $134.57
Total portfolio value (3/2/13): $10,756.31

2013 YTD return: 3.9% (based on $10,350.65 value on 1/1/13)
Total return since inception (11/1/12): $756, or 7.6%