July 2009 Score Card — Part II: Investment Portfolio

I should have done this last month for the mid-year checkup, but didn’t get time to record all the data and I had to delay the update to this month.

In the past, I have reviewed our investments, mainly taxable stock and mutual fund investment. The reason I skipped retirement investments before is that some of those investments, especially in the 401(k) accounts, don’t have a ticker symbol, so it’s impossible to analyze the assets allocation. This time, I think I should give a complete account of all our investments, including taxable stock and mutual fund investment and retirement investments, even those can’t be represented by symbols.

Individual Stocks

Over the years, I have opened a number of brokerage accounts, as I mentioned in my broker web-based trading platform review post. However, there’s only one account that I am very actively using now and it’s Scottrade. Most of my individual stocks were purchased through Scottrade, even though it charges the highest commission ($7 per trade) among brokers I have account with.

The following is a list of all the stocks and ETFs I currently own (current price is the price of July 31, so is the market value). Yes, it’s a long list. However, I don’t plan to hold onto every single stock in the list. In fact, many were picked up early this year when shares were beaten down badly. I used a relatively small fund (a little more than $10,000) to acquire lots of shares in cheap, and they have done very well since then. For those, I have a time frame of holding them for only one year. By next spring, I will probably cash out most of them to raise fund for our next house down payment Stocks I will definitely keep include LFC, PGJ, V, MO, PM, and those purchased through DRIP programs (PG, PGN, XOM, and BAC).

In addition to Scottrade, I also have positions with Zecco, TradeKing, and Firstrade.

Mutual Funds

Comparing to individual stock investments, our mutual fund holdings are relatively stable and much smaller. Actually, I have been buying most of those funds for years, the newest addition is Alpine Dynamic Dividend Fund (ADVDX) that I started 2 years ago. I used to buy a lot more funds, but gradually cut down the number of funds over the years and now I own all the asset classes that I want to own (large-cap, small-cap, international, precious metal, and REIT), except bond. It’s not that I don’t need to bond fund (I do buy I-bond regularly though). The reason for not having bond fund here is that I want to maximize the long-term growth potential when I can.

I buy new shares into these funds (except TGLDX) every month through their automatic investment plans, in good times and bad. While it was kind of pain to watch all the funds take a noise dive last year, I am not worried about the short-term volatility in the market. I just kept buying. Sooner or later, the benefit of these purchases will show in the performance.

Currently, all the accounts are hold at their respective fund company. I didn’t use any broker to buy mutual funds because there’s usually additional charge involved (except ADVDX, which was purchased through Fidelity without any fee until recently).

IRA Accounts

As you can see, all funds in our taxable accounts are actively managed funds. I have explained why we buy actively managed mutual funds instead of low-case, index funds before, so I am not going to repeat here. Basically, I am not against using index funds. That’s why I use mostly Vanguard index funds in our IRA accounts.

For this part, I want to use the minimum effort to manage the investments. Except making quarterly purchases, I almost did nothing to our IRA accounts, only rebalancing the accounts once last year when I moved some bond assets to stock funds to take advantage of the market condition. Due to the annual contribution limit, I can’t do what I usually do in other accounts when rebalancing, i.e., adding new money to underperformed assets without actually selling anything. The good thing is that there’s no extra cost when moving money from one fund to another withing Vanguard.

For IRA accounts, our investments are actually quite heavy in bonds (VIPSX, VBIIX, and DODBX). That’s quite different from what we have in our taxable mutual fund investments.

401(k) Accounts

Well, our 401(k) investments can be summarized by three words “what a mess”. Because this is the only part in our portfolio that we don’t have fully control on what we can buy and from where we can buy, the investments in our 401(k) plans are far more complicated than any other investments since the plan sponsors all have their different fund selections. Making the situations even worst is every time we change our jobs, we get a new plan with new funds and have to start all over again. I changed job a couple of time in the past 5 years, so I end up having 3 different 401(k) accounts

Of course, we can make our life much easier by rolling over our old 401(k) accounts to our IRA accounts at Vanguard. Actually, I have thought about the roll-over for a long time, but just seem never got the time to do it. Now looking at the performance of the stock market recently, I guess I have missed the best opportunity I could have to do the conversion, though dumping those holdings in the old plans at  multi-year lows doesn’t seem to be the best strategy either. Anyway, at some point, I will have to pull the trigger. It’s just too much

OK, that’s it. Except some simplifications,  I am pretty happy with our investments so far. I have heard that different investments, no matter where they are held, should be treated as they are in one portfolio with one single asset allocation plan. Here, what I am doing is just the opposite: I basically have one asset allocation for each account.

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