LikeAssets Review: A Reality Check For Your Portfolio

Posted on April 3, 2013 // 9 Comments

Over the years, I’ve noticed that people tend to overestimate their own stock-picking prowess – myself included. Especially over longer periods of time, if you’re not tracking things carefully you probably don’t know how well you’re doing on a relative basis. We all tend to remember the winners and forget the losers. The sooner you figure out you’re not Buffett, the sooner you can improve your returns. (Otherwise, the sooner you can start your own hedge fund.)

If you like the idea of my Beat The Market Experiment but don’t want to expend too much effort in tracking your own performance, you should check out LikeAssets.com. This new portfolio tracking site recently became the backend for the Wall Street Journal’s Portfolio tool (paid subscribers only), but the direct site is free to all. I’ve been playing around with it for a few days, and here’s my review.

LikeAssets is similar to a Mint.com, SigFig, or Personal Capital (review) in that you hand over your login information and they automatically sync with your brokerage accounts to pull in your holdings. However, their key differentiator is that they automatically choose the appropriate benchmark ETFs based on your holdings in order to determine your “alpha” (excess return above benchmark). You don’t have to do anything. So if you’re holding a bunch of big dividend-paying companies, you’ll probably be matched up with a large-cap value index ETF. The custom benchmark goes even further to match your trades in real-time, not just your current asset allocation:

How is the LikeAssets custom benchmark calculated?
A benchmark portfolio is constructed based on the types of securities in your portfolio. When you make a trade, your custom benchmark portfolio mirrors the trade using an appropriate ETF or set of ETFs.

Once you sign up, you can either choose to import your data electronically from a supported brokerage firm, or manually input your trades. Supported firms include Fidelity, Vanguard, TD Ameritrade, Schwab, E-Trade, Scottrade, and OptionsXpress. Below is a screenshot of my linked TD Ameritrade benchmark portfolio. I would expect my “alpha” here to be close to zero as they are already passive investments, and that is indeed the case.


(click to enlarge)

Unfortunately LikeAssets only works with about 50 brokers right now, and my TradeKing speculative portfolio is currently not supported. Typing in the trades manually is somewhat of a pain as you’d expect, although the software does automatically fill in your buy/sell price based on the market’s closing price that day (not exact, but a good estimate and you can edit it). In addition, dividend distributions are automatically calculated for you (any reinvestment of dividends still must be input manually). Here’s a screenshot of my manually-input TradeKing account:

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Filed Under: Investing, Reviews //

$10,000 Beat-the-Benchmark Speculative Portfolio Update – April 2013

Posted on April 3, 2013 // 4 Comments

Here’s the April 2013 update for my speculative portfolio, the second of three portfolios being tracked monthly as part of my Beat the Market Experiment. Here’s an update on the overall race; the bull stock market has pushed the passive benchmark portfolio into the lead past my lagging stock picks.

$10,000 Beat-the-Benchmark Speculative Portfolio as of April 1, 2013. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Here is a screenshot taken from my TradeKing home page on 3/31/13 after market close:

[Read more…]

Filed Under: Investing, Monthly Updates //

$10,000 Benchmark Portfolio Update – April 2013

Posted on April 1, 2013 // 4 Comments

Here’s the April 2013 update for my benchmark portfolio, the first of three portfolios started on November 1st, 2012 as part of my Beat the Market Experiment:

  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 class 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 April 1, 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 3/31/13. With the current bull market, the benchmark portfolio gained nearly 10% in just 5 months.


(click to enlarge)

Here’s the asset allocation pie chart, tracked with a simple Google Docs spreadsheet:
[Read more…]

Filed Under: Investing, Monthly Updates //

Investment Returns By Asset Class – April 2013 Update

Posted on March 31, 2013 // Leave a Comment

Here is my April 2013 update of the trailing total returns for selected major asset classes. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of March 2013.

Asset Class
Representative ETF
Benchmark Index		 1-Mo 1-Year 5-Year 10-Year
Broad US Stock Market
Vanguard Total Stock Market (VTI)
MSCI US Broad Market Index		 3.91% 14.62% 6.682% 9.24%
Broad International Stock Market
Vanguard Total International Stock (VXUS)
MSCI All Country World ex USA Investable Market Index		 0.87% 8.72% -0.54% 10.43%
Emerging Markets
Vanguard Emerging Markets ETF (VWO)
FTSE Emerging Index		 -1.56% 1.69% 0.90% 16.44%
REIT (Real Estate)
Vanguard REIT ETF (VNQ)
MSCI US REIT Index		 2.90% 15.97% 7.37% 12.36%
Broad US Bond Market
Vanguard Total Bond Market ETF (BND)
Barclays U.S. Aggregate Float Adj. Bond Index		 0.08% 3.66% 5.46% 5.04%
US Treasury Bonds – Short-Term
iShares 1-3 Year Treasury Bond ETF (SHY)
Barclays U.S. 1-3 Year Treasury Bond Index		 0.00% 0.48% 1.61% 2.56%
US Treasury Bonds – Long-Term
iShares 20+ Year Treasury Bond ETF (TLT)
Barclays U.S. 20+ Year Treasury Bond Index		 -0.31% 6.70% 8.28% 7.43%
TIPS / Inflation-Linked Bonds
iShares TIPS Bond ETF (TIP)
Barclays U.S. TIPS Index		 0.22% 5.17% 5.80% 6.45%
(est.)
Gold
SPDR Gold Shares (GLD)
Price of Gold Bullion		 0.58% -5.02% 10.90% 16.5%
(est.)

For an easy visual comparison, here is a chart of the 1-year trailing returns:

April 2013 Trailing 1-year Returns

I collect this information because it allows me to keep an eye on the market while still keeping the long-term returns in perspective. Often, the asset classes with the best long-term returns have had recent poor performance. The 1-year chart helps me decide where to invest new funds and also for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

[Read more…]

Filed Under: Investing, Monthly Updates //

Rule of Thumb: When To Pay Off The Mortgage Early

Posted on March 18, 2013 // 20 Comments

There was a lot of good discussion in my lengthy early mortgage payoff post. Now instead of lengthy details, let me try out a quick rule of thumb about early mortgage payoff. Recall from Wikipedia:

A rule of thumb is a principle with broad application that is not intended to be strictly accurate or reliable for every situation. It is an easily learned and easily applied procedure for approximately calculating or recalling some value, or for making some determination.

So roughly applicable to many – but not all – situations.

Early Mortgage Payoff Rule of Thumb

You should time your mortgage payoff date to coincide with the date of retirement, or semi-retirement. Here, I would define retirement or semi-retirement as a time when you’ll be wholly or partially dependent on non-work income like Social Security, pensions, annuity payments, stock dividends, or other investment income. A downshift into a lower-paying second career would count as a semi-retirement.

In my humble opinion, this quick and dirty rule will help you balance the opportunity to invest in potentially higher-returning investments (stock mutual funds, dividend-paying stocks, real estate, high-yield bonds) with pursuing the benefits of having a fully-owned house (less stress, less leverage, lower required monthly expenses, lower required withdrawals from investments and thus lower marginal tax rates).

Example 1. 20s, 30s, 40s with long future career. You love your job and/or want to be doing it for the next 25+ years. In this case you have lots of human capital and a regular stream of income. You also won’t be needed to cash out your retirement assets for a long-time, making it much more likely that your stocks will achieve their higher average returns. Take on the 4% interest rate fixed for 30 years, and over time your salary will rise with inflation while your payment stays the same.

If anything, you could do a DIY biweekly payment plan and pay off your mortgage in under 24 years with less “pain” due to a behavioral trick (works best for those on a biweekly paycheck schedule).

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Filed Under: Investing, Real Estate //

Fidelity iShares Commission-Free ETF List Updated

Posted on March 14, 2013 // 5 Comments

Fidelity recently announced new changes to their commission-free ETF list.

When Blackrock iShares introduced their 10 new Core ETFs, I wondered how they would market these ETFs. Well, that question was answered today with Fidelity and Blackrock announcing a “long-term strategic alliance”, otherwise known as Blackrock writes a big fat check to Fidelity:

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive, long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs.

The move definitely makes sense though, as Fidelity doesn’t have a broad line of in-house ETFs and iShares doesn’t have their own brokerage arm. In general, I think the move is a positive one for Fidelity customers as they now have exposure to a much wider range of low-cost index ETFs meant for long-term holding periods. There are now a total of 65 iShares ETFs where you can avoid the standard $7.95 trade commission. You could build a low-cost, diversified portfolio with just these ETFs, resulting in a weighted expense ratio of just 0.10%:

33% Core S&P Total U.S. Stock Market (ITOT)
33% Core MSCI Total International Stock (IXUS)
33% Core Total U.S. Bond Market (AGG)

However, a few big names were also removed from their commission free list – iShares MSCI EAFE (EFA), and iShares MSCI Emerging Markets (EEM), and most of their Russell Index-based ETFs. If you had a large position in one of these ETFs, now you’re either stuck paying the standard $7.95 commission or you’d have to replace them with their new “Core” versions and thus incur possible capital gains taxes. I’d certainly be annoyed. There will be a short grace period (details below).

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Filed Under: Investing //

Pay Off Mortgage Early vs. Save More For Retirement? Digging Deep Into The Details

Posted on March 14, 2013 // 31 Comments

In the world of personal finance, you can always generate a good debate if you talk about paying off your mortgage early. The argument usually boils down to something like this:

If your interest rate is 4%, then paying extra towards that mortgage will earn you 4%. If you think you can earn more than 4% elsewhere, then don’t pay off your mortgage.

However, when it comes down to if YOU should pay extra towards YOUR mortgage, the above statement is an oversimplication. As Einstein is credited with saying, “Make everything as simple as possible, but not simpler.”

Since I am faced with this decision myself, let’s address the implied assumptions in the sentence above and all the other little details that go into the decision.

Warning: This is a braindump post and thus rather long and detailed…

Assumption #1: Your mortgage interest is 100% tax-deductible.

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Filed Under: Investing, Real Estate //

Barron’s Best Online Broker Rankings 2013

Posted on March 12, 2013 // 15 Comments

The stock market is at or near all-time highs, which means that brokerage firms should be seeing a lot more interest (for better or worse). Weekly business newspaper Barron’s just released their 2013 annual broker survey rankings. Here’s a snippet about their criteria:

We looked at eight categories of service, examining what can be traded online, how the tools work together across platforms, the design and capabilities of mobile platforms, educational offerings and customer service, as well as the nuts and bolts of placing and executing a trade. We closely scrutinized the various tools available for finding appropriate trades, including scanners and charts. When examining costs, we considered stock and options commissions as well as platform or maintenance fees, margin debt, and charges for transferring an account out.

Barron’s notes that overall, the online experience is improving with a growing number of brokers offering their clients real-time quotes, easier-to-use websites, and a better mobile trading experience. They also admit that their overall rankings are based on the needs of their subscribers – namely “wealthy, active traders”. As such, their overall winner was again Interactive Brokers, a broker designed for highly-active traders with an extensive feature set and low commissions. However, IB also has a minimum opening balance of $10,000, a minimum monthly fee of $10 even if you don’t trade at all, and customer service that does not cater to casual investors.

I am not an active trader, but I still like having real-time quotes, a nice user interface, and friendly service when I need it. Thankfully, Barron’s also ranked the brokers for the rest of us:

Top 5 Brokers for Novice Investors

  1. TD Ameritrade. Performed well in customer service & education, research tools, and mobile offerings. Free real-time quotes from NYSE, AMEX, and NASDAQ Level 1 and 2. When placing an order, the trigger price is automatically set at the midpoint between bid and ask.
  2. Fidelity
  3. E-Trade
  4. Charles Schwab
  5. Capital One 360 Sharebuilder

Top 5 Brokers for Long-Term Investing

  1. TD Ameritrade
  2. Fidelity
  3. Charles Schwab
  4. Merrill Edge
  5. E-Trade (down 1)

Top 5 Brokers for In-Person Service

  1. Scottrade. Scottrade has over 500 physical branches across US, so that when you call you reach a human in that local branch. Free in-person educational seminars are offered as well.
  2. Merrill Edge
  3. Charles Schwab
  4. Fidelity
  5. TD Ameritrade

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Filed Under: Investing //

$10,000 P2P LendingClub / Prosper Loan Portfolio Update – March 2013

Posted on March 6, 2013 // 7 Comments

Here’s the 3rd and last piece of the monthly updates for my Beat the Market Experiment, a set of three real money portfolios started on November 1st, 2012. See also my $10,000 Benchmark and $10,000 Speculative portfolio updates for March 2013.

For this one, I started with $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return.

$5,000 LendingClub Loan Portfolio. Below is a screenshot of my LendingClub account as of 3/1/13. I’ve had loans at LC before, but sold them all on the secondary market and started fresh for this tracking experiment. Here are screenshots of my total balance and my portfolio details. I would say my overall risk level is moderate-conservative with mostly A and B rated loans (top two grades).


(click to enlarge)

The portfolio is now 4 months old, with 206 currently active loans, 7 loans that were paid off early, and one is in funding. Two of the active loans are currently between 16-30 days late. The current weighted average interest rate is 12.36%, which means I can lose 4.36% to defaults and still net an 8% return.

I pick loans using a preset filter based on my LendingClub filters post as well as my Prosper filter research noted below. I never spend any time reading individual loan descriptions, as I’m trying to keep this mostly passive and scalable. The filters are saved online and it takes just a minute to reinvest interest, although I still tend to forget until I do these updates. In additional to outstanding loan principal, the account also has $249 in idle cash, $25 in funding limbo, and $38 in accrued interest.

LendingClub.com account value: $5,160 (includes principal + accrued interest, after fees)

$5,000 Prosper.com Loan Portfolio. Below are screenshots of my Prosper account page as of 3/1/13.
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Filed Under: Investing, Monthly Updates //

$10,000 Beat-the-Benchmark Speculative Portfolio Update – March 2013

Posted on March 6, 2013 // 4 Comments

Here’s the 2nd piece of the monthly updates for my Beat the Market Experiment, a set of three portfolios started on November 1st, 2012. Since this update is rather boring, let me provide an update on the overall experiment:

  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 Consumer Loan Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment of peer-to-peer loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

$10,000 Beat-the-Benchmark Speculative Portfolio as of March 2, 2013. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I am using a TradeKing account for this portfolio as I’ve had an account with them for a while and am comfortable with their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Here is a screenshot taken from my TradeKing home page 3/2/13 mid-day:

[Read more…]

Filed Under: Investing, Monthly Updates //

$10,000 Benchmark Portfolio Update – March 2013

Posted on March 4, 2013 // Leave a Comment

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:

[Read more…]

Filed Under: Investing, Monthly Updates //

Investment Returns By Asset Class – March 2013 Update

Posted on March 3, 2013 // 2 Comments

Here is my monthly update of the trailing total returns for the major asset classes that I find useful. Passive ETFs are used to represent major asset classes, as they represent actual investments that folks can buy and sell. Return data was taken after market close at the end of February 2013.

Asset Class
Representative ETF
Benchmark Index		 1-Mo 1-Year 5-Year 10-Year
Broad US Stock Market
Vanguard Total Stock Market (VTI)
MSCI US Broad Market Index		 1.29% 13.89% 5.62% 9.12%
Broad International Stock Market
Vanguard Total International Stock (VXUS)
MSCI All Country World ex USA Investable Market Index		 -1.20% 6.98% -0.93% 10.33%
Emerging Markets
Vanguard Emerging Markets ETF (VWO)
FTSE Emerging Index		 -1.73% 0.14% 0.34% 16.60%
REIT (Real Estate)
Vanguard REIT ETF (VNQ)
MSCI US REIT Index		 1.23% 17.36% 8.00% 12.34%
Broad US Bond Market
Vanguard Total Bond Market ETF (BND)
Barclays U.S. Aggregate Float Adj. Bond Index		 0.51% 3.09% 5.41% 5.46%
US Treasury Bonds – Short-Term
iShares 1-3 Year Treasury Bond ETF (SHY)
Barclays U.S. 1-3 Year Treasury Bond Index		 0.07% 0.43% 1.65% 2.58%
US Treasury Bonds – Long-Term
iShares 20+ Year Treasury Bond ETF (TLT)
Barclays U.S. 20+ Year Treasury Bond Index		 1.29% 3.24% 8.62% 7.17%
TIPS / Inflation-Linked Bonds
iShares TIPS Bond ETF (TIP)
Barclays U.S. TIPS Index		 0.01% 4.06% 5.66% 5.9%
(est.)
Gold
SPDR Gold Shares (GLD)
Price of Gold Bullion		 -4.61% -10.62% 9.90% 15.9%
(est.)

For an easy visual comparison, here is a chart of the 1-year trailing returns:

March 2013 Trailing 1-year Returns

I like collecting this information because it allows me to keep an eye on the market while still keeping the long-term returns in perspective. Often, the asset classes with the best long-term returns have had recent poor performance. The 1-year chart helps me decide where to invest new funds and also for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

[Read more…]

Filed Under: Investing, Monthly Updates //
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