Quarterly Financial Performance Update

October 1, 2009 by  
Filed under Financial Planning, Investing

Three quarters of 2009 are in the books. Time to update the Mr. and Mrs. ToughMoneyLove financial performance metrics. I actually review this information at least weekly but no need to bore you with updates that often. 

On the investment side, our year-to-date internal rate of return (IRR) for all of our investments is +20.0%. For the third quarter only, our annualized IRR was a whopping +48.9%.  That’s due to this summer’s market resurgence.

For the past twelve months, our average annual rate of return for our entire portfolio was -3.28% which compares favorably with the Dow which suffered a 12.8% decline over the same period. You may recall the pain of the market drop that continued through the early months of 2009. The subsequent market bounce has been nice but there is still room for improvement!

Our best performing investments over the past year have been the Lehman International Treasury Bond ETF (+11.3%), Vanguard International Emerging Markets ETF (+12.2%), our I-Bond portfolio (+6.5%), and the Vanguard Inflation Protected Securities Fund (VIPSX) (+3.4%). There is a pattern to be discerned from this.  Three of these four investments include features that make them inflation-fighting assets. This helps to explain both why we own them and why they have performed relatively well under the circumstances.  Inflation is under control for now but the smart money says it won’t stay that way. We remain intentionally over-weighted in the VIPSX fund (which invests in TIPS) but that will change as I shift some of that money into actual TIPS holdings to fund our guaranteed retirement income plan that I wrote about last week.

Our net worth increased by 7.1% in the third quarter and is up 3.0% compared to a year ago. We are now at our highest net worth ever.  This is a good feeling because it helps us pretend that our retirement portfolio has fully recovered from the market losses of 2008 and the first quarter of 2009. That’s actually not quite true and now I am concerned (as are others) that the rally has stalled and the markets are teetering on the edge of another decline.

Gold is up and if our diplomatic efforts to keep Iran and North Korea from becoming nuclear powers remain ineffectual, gold could become even more popular. I am taking another look at how we might exploit that. I still don’t like the idea of investing in bad news but in some cases you have to go with the flow.

As a final performance metric, our credit scores are now ….. well, I actually have no idea what they are. I have never known our FICO scores and don’t care. I did pull free copies of our credit reports last month. No problems were noted so I stopped investigating right there. I’ll add this for the FICO fear-mongers: If some business de-values me as a customer because of a credit score, two things will happen. First, I will find out and correct the error that caused our credit history to take a hit. Second, I will take my business elsewhere.

So do any of you critically examine your financial performance on a regular basis (and I don’t mean checking credit scores)?

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6 Responses to “Quarterly Financial Performance Update”
  1. MasterPo says:

    TML – Do you have your total portfolio holdings posted somewhere?

    ps- I wouldn’t put too much faith in those inflation protected bonds. Take a look at the Treasury’s website under I-bonds. The rate is ZERO-%!! Afterall, Lord Obama says there was no inflation in 2009 and won’t be in 2010 either. 😉

    • MasterPo – I don’t have all of my portfolio posted so I probably should do that. The core of my 401(k) holdings generally track Scott Burns’ “10 speed” portfolio.

      I follow I-Bonds closely. I bought mine earlier this decade, when the fixed interest rates were between 4.1% and 6.62%. Considering that the inflation adjustment is added to this, there are lots of folks who would be thrilled to get those rates today. I don’t expect much movement in the fixed rate this Nov. 1 but next May they probably will become attractive again. Or, the rumored “R bond” may be introduced which will be huge for retirement savers.

  2. MasterPo says:

    Couldn’t find anything about a “10 speed” portfolio on the Assetbuilder website.

    But if you look at the comparison to Vanguard index funds, the returns as a whole are NOT that impressive for the fees. :-(

  3. MasterPo says:

    OK, I found the 10 speed. Still have to think about it.

    As for the R’s, that scares me.

  4. Master Po’s – As I hope you discovered, the 10 speed portfolio uses low cost index funds, mostly Vanguard.

    If R bonds are done right, it could take some of the pressure off Social Security.

  5. MasterPo says:

    The R bonds as I understand them are still a debt obligation of the U.S. Treasury. So whether the treasury has to pay bonds back to SS or to the public it’s still on the shoulders of the fed.

    IMO this is a back-door into an Al Frankin style proposal to have the government “guarantee” “private” retirement funds that otherwise would be in stocks and non-gov bonds.

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