2021’S FINANCIAL TO-DO LIST WITH MORNINGSTAR’S PERSONAL FINANCE GURU, CHRISTINE BENZ

January 22, 2021

Blast off! Stock markets are setting records, with tech stocks leading the charge once again. “Don’t fight the Fed” should now encompass “don’t fight the Treasury, fiscal stimulus, vaccinations and investor demand for ‘real’ (after inflation) returns.” The Wall Street Journal reports that the “S&P 500 rose 14.3% from Election Day through Inauguration Day, its best performance on record for that period.” (The Wall Street Journal “Stocks Climb To Records, Led By Tech Sector” 1/21/21)

In retrospect, 2020 was an entire year for the record books:

  • A once in a century global pandemic;
  • Unprecedented, massive monetary and fiscal stimulus;
  • A brief deep recession and the shortest bear market in U.S. history;
  • A record breaking stock market rally;
  • The continuation of near record low interest rates
  • And the election of a new president with a very different policy agenda.

If there was ever a time to rebalance your portfolio this is it. After a nearly uninterrupted, decade-long bull market in large-cap U.S. stocks they dominate many portfolios. Using Vanguard’s index ETFs as proxies, Christine Benz shows how much portfolios have changed.

  • U.S. stocks[1] v. bonds[2]: 50/50 on 1/03/2011 would be 71% stock/29% bond on 12/31/2020
  • U.S. stocks[1] v. foreign stocks[3]: 50/50 on 1/03/2011 would be 69% U.S./31% foreign on 12/31/2020
  • Growth stocks[4] v. value stocks[5]: 50/50 on 1/03/2011 would be 62% growth/38% value on 12/31/2020
[1] For U.S. stocks, Vanguard Total Stock Market ETF (VTI) as proxy.
[2] For bonds, Vanguard Total Bond Market ETF (BND) as proxy.
[3] For foreign stocks, U.S. Vanguard FTSE All-World ex-US ETF (VEU) as proxy.
[4] For growth stocks, Vanguard Growth ETF (VUG) as proxy.
[5] For value stocks, Vanguard Value ETF (VTV) as proxy.

Portfolio rebalancing is just one of the actions on Christine Benz’ financial to-do list this year. In part 2 of our interview with Morningstar’s Director of Personal Finance she helps us get in personal financial shape for the year ahead.

WEALTHTRACK Episode #1730; Originally Broadcast on Janurary 22, 2021

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CHRISTINE BENZ

REBALANCE YOUR PORTFOLIO

  • Extreme divergence among U.S., International, Growth & Value stocks
  • Many portfolios heavy in some areas, light in others

ACTIVE INTERNATIONAL VALUE REBALANCE

VTRIX Total Return Level Chart

VTRIX Total Return Level data by YCharts

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Christine Benz from the WEALTHTRACK archives:

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