Jemstep Portfolio Manager Review

Posted on February 18, 2013 // 16 Comments

When I first reviewed JemStep in 2011, it analyzed your current portfolio and made customized mutual fund rankings. Flash forward to 2013, and they’ve moved into the portfolio management and advice space, similar to previously-reviewed sites like Betterment or Personal Capital. Now it’s called Jemstep Portfolio Manager.

After signing into my old account and looking around at the new features, I was happy to see they’ve actually gotten pretty close to my wishlist:

  • Import my existing portfolio directly from broker. Check.
  • Track asset allocation across entire portfolio. Check.
  • Customized rebalancing alerts. Not quite. They do give rebalancing alerts, but only customized to their portfolio recommendations, not my personal chosen preferences. See below.
  • Detailed performance stats vs. benchmarks. Incomplete? I don’t see this, but I haven’t be able to get past the trade recommendations.
  • Reasonable cost. During their initial beta, the service will be free for everyone until March 1st, 2013. After that, the service remains free for those with assets of $25,000 or less. Otherwise see fee schedule discussion below.

Test Drive

The first step is to set a goal. They want things like age, income, target retirement age, risk tolerance, etc. You have provide a preference of mutual funds or ETFs. Given their previous support of actively-managed funds with high recent risk-adjusted returns, I was surprised to see the following:

[Read more…]

Filed Under: Investing, Reviews //

Market Timing Is Hard: Actual Investor Returns Lag Fund Returns

Posted on February 14, 2013 // 11 Comments

When you look up the historical performance of mutual funds, you are typically getting what is called a time-weighted return. For example, the 5-year return is what you would have gotten if you bought the fund five years ago and held it continuously until today, all the while reinvesting dividends, with no additional purchases or withdrawals.

But real life is different. People add money in, people take money out. Morningstar calculates an additional metric called Investor Return [pdf], also known as a dollar-weighted return. This measures the returns that investors actually achieved in that fund, based on dollar inflows and outflows. This means that if investors as a whole timed their purchases correctly and bought more shares when the fund was low, then their returns would actually be higher than the time-weighted returns. If instead, investors waited until the fund performed well before buying in, and/or sold their shares only after the price was temporarily lagging, then their dollar-weighted returns would be lower than the time-weighted return.

Russell Kinnell of Morningstar has a revealing article and chart comparing the performance of the average fund with the average investor, broken down by category like US stocks or municipal bonds. This higher-level view is useful because it takes out any noise you might get from just looking at a specific mutual fund. Did the average investor’s market timing efforts pay off? Here are the results, broken down into the past 3, 5, and 10-year periods.


Source: Morningstar

We see that across almost every category and every timeframe, the investor return lags the fund return. That gap also tends to grow over time, with an average underperformance of nearly 1% a year over the last 10 years. That’s a lot of money. The S&P 500 is basically back to it’s all-time high back in 2007, even though it was a crazy roller coaster in between, and it seems most people didn’t time it correctly. It would be wise to remember this consistent underperformance this the next time you think about market timing, or buying something simply because it did well in the recent past.

Filed Under: Investing //

Motif Investing Adds New Passive, Index Fund Portfolios

Posted on February 13, 2013 // 9 Comments

Motif Investing is a new brokerage firm that is unique in that it lets you buy an entire basket of up to 30 stocks for only $9.95 per trade. I previously thought that this would be useful to creating your own “custom ETF” of whatever you want, for example dividend stocks.

This week, they rolled out a new set of “motif” baskets which are focused on passive, index fund strategies. I’m happy to see this, although in my opinion some are hits and others are misses. You can find them under the “Investing Classics” category:

  • Permanent Portfolio. Based on the Harry Browne Permanent Portfolio of 25% stocks, 25% long-term bonds, 25% cash (short-term bonds), and 25% gold. Their implementation seems a bit needlessly complex, however, as they use over 15 ETFs to replicate international stocks when they could have just used something like Vanguard Total International ETF (VXUS). But again, you can edit and customize the motifs to simplify down to 4-6 ETFs. Still, buying 5 ETFs of your choice in one go for $9.95 isn’t bad, and they will even rebalance for you as well.*
  • Target Date Motifs. Based on target-date retirement funds, you can choose for example “Retiring 2050” or “Retiring 2030”. I’m not a big fan of this one, if you want to go this route I’d just stick with the Vanguard Target funds bought directly from Vanguard for no commission fees at all and the highest level of simplicity.
  • Ivy League. Based on the Yale Endowment manager David Swensen portfolio. Nice and simple, just the 6 ETFs matching each of the asset classes as described in his book Unconventional Success. I’m biased of course, as my own portfolio is very similar to this.
  • Index Fans. Supposedly based on the Boglehead philosophies of Jack Bogle, founder of Vanguard. I don’t know why they chose to use a combination of the Total World Stock ETF (VT) and Total US (VTI), when VT is already 50% US stocks and hold a lot less companies (and thus less diversification) as compared to holding US and non-US separately with VTI and VXUS. Or why they didn’t just use a single Total Bond ETF (BND) for bonds. I’m thinking they didn’t actually get official Bogle approval, nor did they read the Bogleheads book.

*Excerpted from a previous interview with Tariq Hilaly, Motif Investing’s Co-Founder & Chief Investment Officer:

MMB: Does the motif ever “rebalance” in the future back to the original weightings to prevent drift?
A: Yes, we rebalance most motifs on a quarterly basis. On rare occasions, with longer-term investing strategies that take longer to play out, we rebalance once a year.

$150 Sign-up Bonus.

Motif Investing is also offering a $150 cash bonus when you open a new brokerage account with $2,000+ and make 5 trades at $9.95 each. If you make 1 trade, you’ll get $50. 3 trades will get $75. The new funds must be posted to the account within 10 calendar days of account opening, and must remain in the account for 45 calendar days.

Filed Under: Deals & Offers, Investing //

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

Posted on February 6, 2013 // Leave a Comment

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 February 2013.

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 2/1/13. Keep in mind that I had loans before, but sold them all on the secondary market and started fresh for this tracking experiment. However, the charged-off loans from that period stayed on my record even though the overall return for my very conservative loan portfolio back then was over 5%.


(click to enlarge)

I now have a total of 194 active and issued loans. I used simple loan criteria based on my LendingClub filters post as well as my Prosper filter research noted below, saving me from having to look through individual loan descriptions. The portfolio is very young, but so far all loans are current (16 days past due is considered late). The current weighted average interest rate is 11.66%, which means I can lose 3.66% to defaults and still net an 8% return.

LendingClub.com account value: $5,113.27 (includes principal + accrued interest, after fees)

$5,000 Prosper.com Loan Portfolio. Below are screenshots of my Prosper account page as of 2/1/13.
[Read more…]

Filed Under: Investing, Monthly Updates //

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

Posted on February 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:

  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 February 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 simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page after market close 1/31/13:


(click to enlarge)

New activity. Well, this certainly wasn’t a great month for my stock picks. I basically tripled-down on Apple prior to their earnings announcement in late January, betting that they would have record-breaking profits in the 4th quarter. Well, they did, but the stock went down anyway due to growth concerns. I’m still giving it until the end of 2013 to see this play out, although I may pare back the position. I think Steve Jobs left us one last surprise… or I might just lose a bunch of money on this highly un-diversified move.

I also sold my Emerging Markets ETF (DEM) at a slight profit and used the proceeds to buy 500 shares of Enphase Energy (ENPH) at $3.77. Enphase manufactures micro-inverters for solar photovoltaic systems, which converts DC to AC and also allows you to individually track the power output of each panel on your roof. I believe that residential solar PV will take off soon, as electricity prices continue to rise and equipment costs drop. (Low interest financing won’t hurt either.) However, betting on a specific solar installer like SolarCity (SCTY) or a solar panel manufacturer when there is so much competition seems even harder. In addition, I believe that Enphase is a good takeover target in the future.

Here’s a pie chart of my holdings, tracked with a simple Google Docs spreadsheet (2nd tab):

[Read more…]

Filed Under: Investing, Monthly Updates //

$10,000 Benchmark Portfolio Update – February 2013

Posted on February 5, 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 February 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 as of 2/1/13 before market open:


(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, no dividend distributions, no money market interest. Here is the target asset allocation:

[Read more…]

Filed Under: Investing, Monthly Updates //

Investment Returns By Asset Class – February 2013 Update

Posted on February 3, 2013 // 15 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 January 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		 5.49% 16.85% 4.69% 8.79%
Broad International Stock Market
Vanguard Total International Stock (VXUS)
MSCI All Country World ex USA Investable Market Index		 3.35% 13.83% -0.63% 10.20%
Emerging Markets
Vanguard Emerging Markets ETF (VWO)
FTSE Emerging Index		 0.61% 7.61% 1.61% 16.36%
REIT (Real Estate)
Vanguard REIT ETF (VNQ)
MSCI US REIT Index		 3.72% 14.64% 6.92% 12.40%
Broad US Bond Market
Vanguard Total Bond Market ETF (BND)
Barclays U.S. Aggregate Float Adj. Bond Index		 -0.64% 2.47% 5.39% 5.09%
US Treasury Bonds – Short-Term
iShares 1-3 Year Treasury Bond ETF (SHY)
Barclays U.S. 1-3 Year Treasury Bond Index		 0.00% 0.19% 1.85% 2.61%
US Treasury Bonds – Long-Term
iShares 20+ Year Treasury Bond ETF (TLT)
Barclays U.S. 20+ Year Treasury Bond Index		 -3.86% -0.47% 8.30% 7.36%
TIPS / Inflation-Linked Bonds
iShares TIPS Bond ETF (TIP)
Barclays U.S. TIPS Index		 -0.68% 3.72% 5.91% n/a
Gold
SPDR Gold Shares (GLD)
Price of Gold Bullion		 -0.01% -4.93% 12.04% n/a

Here is a chart of the 1-year trailing returns for the major asset classes above, which I use to help decide where to invest new funds and for rebalancing. Note that I do not necessarily invest in all the listed asset classes, see my personal portfolio for details.

February 2013 Trailing 1-year Returns

[Read more…]

Filed Under: Investing, Monthly Updates //

Index Fund vs. Top Hedge Funds: Buffett Bet Halfway Update

Posted on January 28, 2013 // 14 Comments

Halfway Update – 5 Years Later! Carol Loomis has posted the 5-year update in Fortune of the $1,000,000 index fund vs. hedge fund bet. Halfway through the 10-year bet (1/1/08 to 12/31/17), the Vanguard S&P 500 index fund backed by Buffett is up by 8.69%. The group of hedge funds hand-picked by Protégé Partners are up by 0.13%. Note that the index fund had been lagging just about ever year since this one, but that’s why we are looking at a longer period. Consider this halftime. 🙂

It will be very interesting to see how this turns out. Hedge funds charge fees of roughly 2% of assets annually + 20% of any gains. You may notice that five years of 2% fees would be 10% (ignoring the compounding effect for simplicity), and the hedge funds are lagging by about 9%. Costs matter!

You can read the terms of the bet and each side’s arguments at LongBets.org (also see original Fortune article below for backstory). This carefully-tracked bet was part of the inspiration for my transparent Beat the Market experiment. Too often, people are not honestly and accurately tracking the total performance of their portfolios. These ongoing updates help illustrate how hard it is to consistently beat a low-cost, diversified portfolio over the long run, and how it’s incorrect to declare yourself a winner even after several good years. Who knows, the hedge funds may still win.

Original blog post from 2008:
[Read more…]

Filed Under: Investing //

My Money Blog Retirement Portfolio Update – January 2013

Posted on January 23, 2013 // 9 Comments

Here’s a belated 2012 year-end update of our investment portfolio, including employer 401(k) plans, self-employed retirement plans, Traditional and Roth IRAs, and taxable brokerage holdings. Cash reserves (emergency fund), college savings accounts, experimental portfolios, and day-to-day cash balances are excluded. This is the portfolio that we are depending on to create income and thus financial freedom.

Asset Allocation & Holdings

Here is my current actual asset allocation:

The overall target asset allocation remains the same:
[Read more…]

Filed Under: Goals, Investing, Retirement //

$10,000 P2P LendingClub and Prosper Loan Portfolio Update – January 2013

Posted on January 9, 2013 // 7 Comments

Here’s the last part of the monthly update 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 January 2013.

On 11/1/12, I deposited $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, January 2013 Update. (A little late on the update, although only about $9 in extra interest was accrued since 1/1.) Below is a screenshot of my LendingClub account as of 1/9/13. Keep in mind that I had loans before, but sold them all on the secondary market and started fresh for this tracking experiment.


(click to enlarge)

Since last month, I invested another $400 for a total of 191 active and issued loans. I used simple loan filters based on my LendingClub filters post as well as my Prosper filter research noted below, and haven’t spent any time looking through any individual loan descriptions. The portfolio is very young, but so far all loans are current (16 days past due is considered late).

LendingClub.com account value: $5,082.51 (includes principal, accrued interest, net of fees)
[Read more…]

Filed Under: Investing, Monthly Updates //

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

Posted on January 8, 2013 // 3 Comments

Here’s another piece of the monthly update for my Beat the Market Experiment, a set 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 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 January 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 simple $4.95 trade structure and free tax-management gain/loss software. Here is a screenshot taken from my TradeKing home page as of market close 12/31/12:


(click to enlarge)

[Read more…]

Filed Under: Investing, Monthly Updates //

Have Both TradeKing and Zecco Accounts? Merge Them Together

Posted on January 8, 2013 // 1 Comment

If you are a former Zecco brokerage account holder, you should have been migrated over to TradeKing by now as a result of their merger/acquisition. However, I already had a TradeKing account, and now when I log in I can swap between them but they are still separate with unique account numbers and holdings. I didn’t really want two accounts, and I didn’t see it covered in their merger FAQ, so I contacted TradeKing and asked them about it:

Hi, I had a TK account and a Zecco account. I migrated over my Zecco account to TK, but I am wondering if the two accounts will eventually be merged or if they are going to be kept separate.

Their response:

Thank you for contacting TradeKing. Your Tradeking account and Zecco account will remain separate. If you want to merge the two accounts, you can fill out our Journal Request form found in Client Services > Forms > All Forms. Under the sub heading “Other Forms”, you will find the journal request form.

It appears you can also directly access the form via this link [pdf]. If the transfer involves different ownership types (individual to joint or vice versa), you’ll need it notarized and send in the original via snail mail. Otherwise, it just needs a signature and you can fax it in. Before doing so, I’d download or record any cost basis information just in case it gets lost in the shuffle.

Filed Under: Investing // Tagged: , , ,
« Previous Page
Next Page »