Portfolio Two Updated December, 2018

Portfolio Two is over 14 years old.  The beneficiary contributed $7500 and the trustee $15,200 for a total of $22,700.  The current value is $38,227 for a gain of $15,527 or 68%, which is 6.3% / year when adjusted for the timing of cash flows.  Go here or to the link on the right for details.

Portfolio two has switched to ETF’s which mostly track the US and world wide markets.  This portfolio also has $12,568 in cash, which is almost 1/3 of the portfolio.  The portfolio is doing OK in the current market downturn.

Portfolio Two Updated July, 2018

Portfolio two is almost 14 years old.  The beneficiary contributed $7000 and the trustee $14,200 for a total of $21,200.  The current balance is $39,012 for a gain of 84% or ~8% / year when adjusted for the timing of cash flows.  You can see the detail here or at the link on the bottom.

This portfolio is unique because it has moved to ETF’s and ~ 25% cash position.  The ETF’s have been doing well, with a large position in VTI (total US market) and a split between VEU (all world non US) and HEFA (all world non US hedged against the US dollar to get local market performance).  There also is a small biotech position (IBB) and gold ETF position (IAU).

When we moved to ETF’s from individual stocks in 2016, we also purchased a 2 year CD which paid 1.55% interest, because our money market fund was essentially offering “zero” interest on our money and we wanted to keep about $10,000 or so in cash and yet get some sort of return on the money.  This CD recently redeemed into cash in the account.  We could buy a new CD, but we are currently getting 1.85% return in our money market so we can just leave it there because the 2 and 3 year CD’s aren’t offering much more than that, and interest rates seem more likely to go up than down.  Thus we are planning (for now) to just leave cash in the money market instead of buying a CD because the incremental interest is negligible.

I want to have the beneficiary contribute now and have the trustee match, make our investments for summer 2018, have everything clear, then move the fund out of UTMA status and to the beneficiary (like we did with Portfolio One).  Then we can give the (technically former) trustee “agency” capabilities so that we can still take advantage of my free trades (which apply to the accounts that are under me or I have agency capabilities for).


Portfolio Two Updated February 2018, and It’s Tax Time

Portfolio Two is our second longest lived portfolio, at 13 1/2 years.  This portfolio is unique because the individual stocks have been sold off and replaced with ETF’s and a CD.  See the details here or at the link on the right.

The beneficiary has invested $7000 and the trustee $14,200 for a total of $21,200.  The current value is $38,428 for a gain of $17,228 or 81%, which is 7.7% a year when adjusted for the time value of cash flows.

Walking through the detailed transactions often helps you to find items you’ve overlook – we noted that the biotech ETF IBB had a stock split (3-1) in December 2017 so I have been understating the value of this portfolio by almost $2000 since that time on my consolidated view.

There were no stock sales last year so the only tax impacted item is dividends which were approximately $632 during 2017.

The portfolio is doing well.  It is interesting to see that the VEO ETF has returned 33% including dividends since we’ve owned it but the HEFA ETF has returned 19% including dividends… the difference is due to the 10% or so fall in the US dollar vs a basket of other world wide currencies.  HEFA is hedged so you get returns in original currencies while VEO also includes the net effect of the dollar on returns (which magnified returns in this case).


Portfolio Two Updated August 2017

Portfolio Two is our second longest lived portfolio.  This portfolio has been converted to ETF’s and a CD.  Beneficiary investment is $6500, trustee investment is $13,000 for a total of $19,500.  Current value is $34,290 for a gain of $14,790 or 76%, which is 7.8% over the life of the fund annualized.  Go here or to the link on the right for the portfolio detail.

This portfolio is different from the others in that there is a 1.55% CD for $10,000 and the rest are ETF’s.  The largest ETF is VTI (US total index) with VEU (all world ex US) and HEFA (non US, hedged).  We also have a small position in IBB for biotech.  All seem to be doing well.

It is a symptom of ZIRP that our CD returns less than the US or European stock funds, which are around 2.5% / year.

Portfolio 2 Updated April 2017

Portfolio Two is 12 1/2 years old.  The beneficiary contributed $6500 and the trustee $13,000 for a total of $19,500.  The current value is $33,334 for a gain of $13,834 which is 71% or 7.4% / year when adjusted for the timing of cash flows.  You can see the portfolio detail here or go to the links on the right.

This portfolio is different than the other portfolios because it has shifted to ETF’s and CD’s.  The ETF’s are broadly tied to the US and non-US stock indexes.  There is also a CD that returns 1.55% / year for $10,000 in the portfolio.

Since markets have gone up over the last year, this portfolio has done well (it tracks the market).  All of the ETF’s are near 100% of their 52 week high, which means that they are at or near their highs and the indexes have been rising continually over this time period.

Unlike the other portfolios, which are invested in individual stocks, these ETF’s do have annual expenses.  You can’t “see” the expenses because you receive the returns “net” of expenses, but this is disclosed.  Over the 1 1/2 years that we’ve had this portfolio the low cost ETF’s cost $86, which is very low for a portfolio of over $30k.  If you go back ten or fifteen years ago mutual funds would routinely cost 2% or more each year which would be $600 / year on a portfolio of this size.  It is a testament to the efficiency of ETF’s (which drove competition in the mutual fund markets, mutual fund expenses have been driven down proportionally, as well) that these sorts of rock bottom expenses are now commonplace if you know where to look.

In a technical note, the CD does fluctuate in value (a bit), but I record it at cost ($10,000) since we intend to hold it to maturity.  The cost fluctuations thus do not matter.

Finally, in another note, when I moved this portfolio over to Google Sheets, I noticed that I had been overstating the contributions in the “cash flows” calculation since 2012.  Thus the recorded return since inception now looks higher.  The value of the fund was always correct it was just the calculation of total gains to date that was incorrect.


Portfolio Two Updated January 2017 – Tax Time

Portfolio 2 is our second longest lived fund, at over 14 years.  This fund has transitioned from individual stocks to an ETF and CD mix.  The beneficiary contributed $7000 and the trustee $14,000 for a total of $21,000.  The current value is $32,151 for a gain of $11,151 at 53% or about 5.5% / year when adjusted for the timing of cash flows.  You can see the spreadsheet supporting this at the link on the right or download it here.

The fund contains 4 ETF’s and one CD.  The $10,000 CD earns 1.55% and will redeem in July, 2018.  This investment is essentially risk free (if the issuer goes under the FDIC will pay out the accrued interest and return the principal).

The largest ETF is VTI, which covers the US stock market on a capital weighted basis (that is to say that the largest market capitalization stocks comprise a larger portion of the index).  Since we have had a rally in Technology (prior to the election) and financials and commodities (mostly since the election), this ETF has done well.

There are two non-US ETF’s, the VEU (all world non-US, unhedged) and HEFA (major non-US markets, hedged against the dollar).  Surprisingly, these two funds mostly performed alike in terms of returns, even though the dollar rose during this period.  This is something I will investigate further in the future when I have some more time.

The fourth ETF is IBB, a NASDAQ bi0technology ETF.  This one was kind of a bet on future growth since it had been pummeled in the period before we purchased it.

In general, these ETF’s are low expense and overall the portfolio has a decent yield at 1.9% comprised of dividends and interest on the 1.55% CD.  This is a nice cash addition in an era of zero yields on short term cash and when even some large issuances have negative yields over a ten year span (in Europe).

I noted that the ETF HEFA (the hedged fund) had a small capital gain.  This is rare for ETF’s (they are common for mutual funds).  Since it is immaterial it is listed as a dividend on the report.

Due to the fact that these trust funds are “subsidiaries” of my account, typically they don’t pay any fees on transactions for individual stocks (essentially zero expenses every year).  Since ETF’s do have expenses, this portfolio will incur implicit expenses (they come out of the returns of the ETF’s so you don’t see them directly).  About $70 in implicit expenses hit the portfolio during 2016 (the CD is free of all expenses).