Mid-Year Adjustment

As we are approaching the half-year mark, do you plan to do any adjustment of your portfolio?

I usually don’t make any change on our investments in the middle of the year. Any rebalancing will happen when the full year ends as I always feel the stock markets will do better in the second half of the year than in the first six months. Waiting till the end of the year will allow me to have a better assessment of performance of each individual investment and the overall asset allocation. This year, while most of investments will remain intact, there’s one change I want to make, though it doesn’t have to be at this particular time. My target is PowerShares HighYield Dividend Achievers (PEY).

I started investing in PEY in December 2004 and currently have about 500 shares in my Firstrade account. At that time, the only alternative was iShares Dow Jones Select Dividend Index (DVY). Eventually, I chose PEY over DVY as the two had similar performance, though PEY was more expensive to own. For a while, I was quite pleased with PEY’s performance and increased my purchases after it shifted from quarterly distribution to a monthly based scheme. However, the fund wasn’t able to keep pace with larger rival DVY since 2006 and now has lagged the benchmark significantly.

Actually, I have considered this change for a while and it seems the time has finally come to pull the trigger. But I am not jumping on DVY. The replacement will be Vanguard High Dividend Yield Index (VYM). The fund has a slightly lower yield than PEY, but the 0.25% expense ratio is the absolute bottom.

The following plot is the YTD performance comparison of PEY, VYM, and S&P 500 index, which clearly shows how PEY is performing poorly against its rival.

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