Annual Financial Performance Review

January 3, 2010 by  
Filed under Financial Planning

It’s the beginning of a new year and new decade and therefore time to update the Mr. and Mrs. ToughMoneyLove financial performance metrics.

All of our investments collectively gained 24.06% for the year (as a percentage of our cost basis) and 5.86% in the 4th quarter. Our average annual return (IRR) in 2009 for all of our investments was 17.81%.  This compares favorably with the Dow which had an annual average return of 18.9%.  We reduced our exposure to equities in 2009 but still did well with lower risk.

Our best performing investments over the past year have been the Vanguard International Emerging Markets ETF (+74%), the T. Rowe Price New Era Mutual Fund (+47.5%), and the Vanguard Total International Stock Market Index Fund (33.6%).  Of course, these investments had a long way to go to recover from their previous declines. Our inflation-protection investments continued to anchor things: Vanguard Inflation Protected Securities Fund (+8.99%), Lehman International Treasury Bond ETF (+5.2%), and I-Bonds (+5.8%).

Our only losing investment was a regional bank stock (SYBT) at -20.2% but I did not sell it because it still pays a decent dividend.

Our net worth increased by 5.4% in the 4th quarter and is up 16.2% compared to a year ago. We continue to reach new highs in the net worth department which, in these times, is so important to baby boomers like us.

I checked our credit reports for any unusual activity. All is good. I did not check our credit scores – still don’t see a need.

On the retirement planning checklist, this is what we accomplished in 2009:

1. We paid off the mortgage on our lake house.

2. We created a plan for guaranteed retirement income.

3. We maxed out our HSA contributions (and didn’t spend any HSA funds) as part of our plan to use our Health Savings Account for tax-free retirement investing.

4. We started a condo purchase. We discovered in an equestrian community (Long Branch Lakes) on the Cumberland Plateau, liked it, and put some money down on a condo that should be finished some time this year. That will give us a pre-retirement opportunity to experiment with condo living.

CNBC has produced a video documentary about the financial bubbles of the past decade. Take a look if you are interested, courtesy of Hulu TV.

So how did things end up for you in 2009? Do you conduct self-reviews of your annual financial performance?

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13 Responses to “Annual Financial Performance Review”
  1. MasterPo says:

    You don’t seem to be following the pure Portfolio 10 model.

    Do you have a list of what you actually are invested in?

  2. MasterPo says:

    Ooops – I meant a 10 Speed model.

  3. averagejoe says:

    I find your math a bit fuzzy.

    Let’s address one thing (at a time).

    Vanguard Intern’l Emerging Market, is this the same fund as Vanguard Emerging Market VEIEX? If so, how do you calculate you made 74% on this investment? That would only be if you bought this fund on 1/1/09. Back before the recession hit, this fund was selling at $35.47 per share on 11/1/07. Today, it is only selling at $26.62. So if I owned 100 shares in Nov 2007 it would have been worth $3547. At todays’ prices, the same 100 shares is worth $2662, a loss of $885 or 25% less of it’s original value. A far cry from the 74% increase you stated. Explain please.

    #2 I wouldn’t be funding an HSA account with a President like Obama floating around. You may find yourself holding some sort of bag or something.

    #3 Aren’t you and your wife a little bit too old to be bouncing on the back of some horse? Don’t people your age get bad backs or something as you age?

    #4 What are the common charges going to be per month on the condo? I checked their website and I found this info to be omitted (wonder why?) It is not uncommon for monthly fees to start out low and then as the years (and your years) progress, the fees rise astronomically. Duh?

    #5 As for experimenting with condo living….trust me…it sucks! Especially for retirees. Better off going to an assisted living arrangement.

    #6 Lastly, your calculation that you averaged an annual return of 16.8% on your investments, did you calculate your 20.2% loss from the regional bank stock? If not, why not? An investment is an investment. If you calculate this loss, you’re really down 3.4%. Not much here to emulate. More like a big bag of bloated boomer wind, if you ask me.

    • Nothing wrong with my math – the performance data I reported is for 2009 only – and yes it does include all of our investments, of which the bank stock was a small part. The Vanguard International Emerging Markets ETF we own is VWO.

      I am not concerned about the HSA. Yes, the rules can be changed but the changes will not be retroactively applied. Even if that were to happen with a even a few days notice, I have saved enough health care receipts such that I could liquidate the entire account tomorrow – tax free.

      The condo fees have not been set yet because the condos are not finished. Our costs are covered for at least the first year because I will be renting the unit back to the developer for the days we are not there. As I said, it’s a low risk experiment. If we don’t like it, we sell or continue to rent it.

      I assure you my wife and I are capable of riding – we are boomers but we are not decrepit.

      You seem to have issues with boomers. Hope you can overcome it. Thanks for stopping by.

  4. averagejoe says:

    Do you think it is wise to purchase a condo without knowing what the monthly fees will be? Suppose they are $1200 a month (not uncommon from where I am from) So, you rent the condo back to the developer, is there any guarantee that he will rent it? If not, then what? In this current financial status (which I don’t think will be changing anytime quickly) what is your Plan B & C should you not be able to sell nor rent the condo? Also, will the condo be replacing your primary domicile and will you be keeping your paid off lake house?
    I note that Vanguard’s VWO charges stockbrokers fees for both the purchase and sale of these ETF’s. What are the costs? I need that info so that I can cost compare it to Vanguards other emerging market fund VEIEX. Thanks.

    I appreciate your clarity.

    Lastly,I have nothing against boomers,but as being a horse person myself (on my own property)I find a few comments necessary on aging boomer riders. It’s just that as one ages, they look ridiculous on top of a horse PLUS they get tremendous problems with their backs (brittle bones et al). The riders, I mean. Not the horses. Hope your experiences will be different.

    Take care.

    • Joe: This a brand new condo development, part of a larger community. The developer cannot set high monthly fees for the initial years because that would scare all the buyers away. The developer has promised me a minimum rental amount for the first year that is enough to cover my out of pocket expenses because he is selling the units fully furnished. I believe that he will continue to rent the condo from me for another year after that. If I can’t sell or rent the condo (unlikely), we will keep it and live in it part-time as desired. It is not replacing our primary domicile and yes we are keeping the lake house.

      ETFs like VWO are bought and sold like stocks so your transaction fees are whatever your broker charges you. Mine are free to extremely low. VEIEX is a mutual fund, not an ETF. The annual fund fees for all Vanguard mutual funds and ETFs are among the lowest in the business and are published on their site.

      My wife has owned horses for years and has never had problems with riding. She also teaches riding to physically/mentally handicapped children at a NARHA facility. We pasture board her horse at a horse farm five minutes down the road now. We will probably move it to Long Branch Lakes eventually.

  5. Steve says:

    I have just completed tax planning for 2010, and also started running a custom Monte Carlo analysis for retirement rather than the tried and true 8% return, 5% inflation and live to be 100 (we are 43).

    I understand there are concerns about using Monte Carlo analysis, but as anything related to financial planning is, it is just that…planning.

    The conversation my wife and I had after I ran several thousand simulations of differing inflation rates and rates of return was productive in itself (and a little concerning at times). However, it was definitely productive :)

  6. Lefty33 says:


    It’s amazing that you were able to type this article.

    With your brittle, crooked, boomer-fingers it explains why your posts are a few days a part and not daily on this site. LOL

    Good luck with the condo and the riding

  7. averagejoe says:

    I see you’re not answering my questions. Typical. Liberal hit and run. As to the aging baby boomers and their preposterous behaviour, read this article from the NY Times:

    You’ll see I am not alone in my thinking. Globally.

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