What Happens In The Real World: The Average Joe Broad Market Portfolio Q3 Update
Summary About the Average Joe broad market portfolios. The Q3 drop in the major averages. The results of the portfolios. Introduced to the SA audience earlier in the quarter ( here ), the Average Joe Broad Market portfolio(s) seek to provide a methodology and platform for the Average Joe to perform real world comparisons to the broader market. Since these are passively managed portfolio(s) requiring little interaction, they can also be used to amass a decent retirement account with a minimalist approach. There a lots of ways to make money out there. Some of them are a bit slower. Alright, a lot slower. The third quarter of 2015 is now in the books so let’s review the changes and results to the portfolios. The AJ Broad Market Portfolio concentrates its investments in three broad market index funds, the State Street Global Advisor’s SPDR S&P 500 ETF (NYSEARCA: SPY ), Invesco’s Powershares QQQ (covering the NASDAQ 100(NASDAQ: QQQ ), and another State Street Global Advisors product covering the Dow Jones Industrial Avg., the SPDR Dow Jones Industrial Average (NYSEARCA: DIA ). A new portfolio was started each year beginning 1/1/2000 with weekly data provided by Yahoo (Author’s note: Yahoo weeks are listed as the “week of _____.” These portfolios therefore are not on a fiscal nor calendar quarter. Instead, they begin with the first Monday of every quarter and end on the last day of the week of the last Monday of the quarter. This could actually fall into the following calendar quarter as it does in this Q3 review.). For other rules applied to the input of cash and the methods used to make purchases, please see Part 1. About the Averages The S&P 500 began the fiscal quarter at 2076.72 and ended down 125.36 (-6.036%) to 1951.36. While this is a steep drop for the quarter, the October 2nd fiscal close puts the decline for the year at a more manageable -4.57%. In an article/video published on 10/5 on Yahoo, Estimize ( estimize.com ), the open financial estimates platform, reported that current expectations for S&P 500 Q3 earnings will reflect a 2.2% decline. That leads to a big question. Are the earnings baked into the prices yet or do we still have more losses ahead. The NASDAQ 100 followed suit for the quarter dropping 152.7 from the beginning of the quarter (4420.15), ending at 4267.45 (-3.454%). The index is still in positive territory for the year, but trimming its gain to just 54.07 points or 1.283%. The Dow Jones Industrial Average continued the trend for Q3, losing 1288.04 points to finish at 16472.37. This is a -7.252% drop for the quarter and a -7.132% drop for the year. The Average Joe Broad Market Portfolios With a new portfolio starting every year since 2000, there’s never a shortage of data to crunch. First, let’s start with the beginning and ending positions of each fund. Fund Start SPY Shares End of Q2 SPY Shares End of Q3 QQQ Shares End of Q2 QQQ Shares End of Q3 DIA Shares End of Q2 DIA Shares End of Q3 2000 54 54 55 55 46 54 2001 46 46 46 46 38 46 2002 38 38 38 38 38 38 2003 31 39 31 31 31 31 2004 31 31 23 23 23 23 2005 23 23 23 23 19 19 2006 19 19 19 19 15 15 2007 15 15 15 15 11 15 2008 11 11 11 11 11 11 2009 11 11 11 11 7 7 2010 7 7 7 7 7 7 2011 5 7 5 5 5 5 2012 5 5 3 5 3 3 2013 4 4 2 2 2 2 2014 2 2 2 2 1 2 2015 1 1 1 1 1 1 Next, the update on the values including input, quarterly gain/loss and gain/loss since portfolio inception. Fund Start Portfolio Value End of Q2 Q3 Cash Input Cash Position Investments Value Total Value Q3 Gain or Loss Q3 % G/L G/L since Inception 2000 $26,021.14 $585.00 $136.08 $25,137.33 $25,273.41 ($747.74) -2.87% $9,162.41 2001 $22,599.90 $507.00 $533.42 $21,324.68 $21,858.10 ($741.79) -3.28% $8,050.10 2002 $18.821.95 $455.00 $661.12 $17,616.04 $18.277.16 ($544.79) -2.89% $6,451.16 2003 $16,645.10 $403.00 $273.46 $15,930.90 $16,204.36 ($440.74) -2.65% $6,152.36 2004 $13,170.75 $351.00 $603.34 $12,222.26 $12,825.60 ($344.75) -2.61% $4,336.60 2005 $10,888.78 $299.00 $623.81 $10,004.02 $10,627.83 ($260.95) -2.40% $3,493.83 2006 $ 8,790.39 $247.00 $432.99 $ 8,149.70 $ 8,582.69 ($207.70) -2.36% $2,595.69 2007 $ 7,149.38 $221.00 $ 76.86 $ 6,953.70 $ 7,030.56 ($118.82) -1.66% $2,008.56 2008 $ 5,921.86 $195.00 $728.06 $ 5,099.38 $ 5,827.44 ($ 94.41) -1.59% $1,670.44 2009 $ 5,104.82 $169.00 $588.54 $ 4,441.06 $ 5,029.60 ($ 75.22) -1.47% $1,627.60 2010 $ 3,711.20 $143.00 $424.97 $ 3,245.06 $ 3,670.03 ($ 41.17) -1-11% $ 919.03 2011 $ 2,807.31 $117.00 $ 72.60 $ 2,707.88 $ 2,780.48 ($ 26.83) -0.96% $ 576.48 2012 $ 2,112.36 $104.00 $112.27 $ 1,988.74 $ 2,101.01 ($ 11.36) -0.54% $ 353.01 2013 $ 1,488.12 $ 91.00 $186.71 $ 1,317.14 $ 1,503.85 ($ 6.93) -0.47% $ 163.85 2014 $ 962.40 $ 78.00 $ 56.42 $ 927.16 $ 983.58 $ 21.18 2.20% ($ 5.42) 2015 $ 614.91 $ 65.00 $190.02 $ 463.58 $ 653.60 $ 38.69 6.30% ($ 36.40) And the dividend and yield data: Fund Start Dividends Received Q3 Yield (on Value) Yield (on Cost) 2000 $123.46 1.90% 2.75% 2001 $109.31 1.93% 2.92% 2002 $ 93.47 1.99% 2.98% 2003 $ 76.25 1.83% 2.77% 2004 $ 64.60 1.93% 2.96% 2005 $ 51.76 1.90% 2.86% 2006 $ 41.93 1.91% 2.74% 2007 $ 34.29 1.92% 2.59% 2008 $ 27.06 1.83% 2.88% 2009 $ 22.25 1.74% 2.88% 2010 $ 17.22 1.86% 2.74% 2011 $ 12.30 1.75% 2.18% 2012 $ 9.89 1.87% 2.32% 2013 $ 6.93 1.86% 2.32% 2014 $ 4.44 1.85% 1.87% 2015 $ 2.46 1.60% 1.95% Current Expectations The intent of these portfolios is to show the real results of the market, one that even the little guys, the average Joe’s can build. It will amass to wealth over time, but it is slow moving and prone to many whip-saw antics in the short run. This quarter is a perfect example of how a quarter can change long-term projections. The tables below shows the current growth rate and the expected portfolio value at 20, 25, 30 and 35 years based on the Q2 and Q3 closes. The Q3 dip did considerable damage to the older portfolios while the newer ones fared better based on the size of the cash input rather than market changes. 2000 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 8.4353% $54,269.54 $112,121.92 $214,894.36 $389,271.82 Q3 7.4110% $49,722.27 $100,719.91 $188,832.05 $333,778.68 Difference -1.0243% ($ 4,547.27) ($ 11,402.01) ($ 26,062.31) ($ 55,493.14) 2001 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 8.9419% $56,744.68 $118,457.28 $229,688.59 $421,488.74 Q3 7.7992% $51,377.73 $104,834.63 $198,151.43 $353,429.82 Difference -1.1427% ($ 5,366.95) ($ 13,622.65) ($ 31,537.16) ($ 68,058.92) 2002 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 8.9246% $56,657.42 $118,232.41 $229,159.78 $420,328.64 Q3 7.7529% $51,176.13 $104,331.32 $197,006.19 $351,003.16 Difference -1.1717% ($ 5,481.29) ($ 13,901.09) ($ 32,153.59) ($ 69,325.48) 2003 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 9.9939% $62,427.06 $133,331.41 $265,246.35 $500,865.21 Q3 8.7847% $55,959.67 $116,438.32 $224,950.44 $411,116.55 Difference -1.2092% ($ 6,467.39) ($ 16,893.09) ($ 40,295.91) ($ 89,748.66) 2004 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 9.3866% $59,052.89 $124,444.74 $243,866.38 $452,819.50 Q3 8.0701% $52,581.31 $107,852.39 $205,048.52 $368,112.68 Difference -1.3165% ($ 6,471.58) ($ 16,592.35) ($ 38,817.86) ($ 84,706.82) 2005 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 9.6044% $60,232.88 $127,534.63 $251,255.28 $469,317.85 Q3 8.2226% $53,276.59 $109,605.63 $209,079.28 $376,747.06 Difference -1.3818% ($ 6,956.29) ($ 17,929.00) ($ 42,176.00) ($ 92,570.79) 2006 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 9.4431% $59,356.13 $125,236.94 $245,756.14 $457,028.17 Q3 7.9500% $52,042.67 $106,499.14 $201,949.24 $361,500.35 Difference -1.4931% ($ 7,313.46) ($ 18,737.80) ($ 43,806.90) ($ 95,527.82) 2007 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 9.5552% $59,963.08 $126,826.43 $249,557.47 $465,516.79 Q3 8.0202% $52,356.29 $107,286.55 $203,751.34 $365,342.29 Difference -1.5350% ($ 7,606.79) ($ 19,539.88) ($ 45,806.13) ($ 100,174.50) 2008 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 10.4279% $65,006.71 $140,230.05 $282,110.25 $539,404.49 Q3 8.6808% $55,449.00 $115,129.74 $221,891.10 $404,446.28 Difference -1.7471% ($ 9,557.71) ($ 25,100.31) ($ 60,219.15) ($ 134,958.21) 2009 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 12.8882% $82,817.34 $190,156.98 $410,397.39 $848,582.02 Q3 10.8746% $67,820.57 $147,855.41 $301,011.00 $583,235.22 Difference -2.0136% ($14,956.77) ($ 42,301.57) ($ 109,386.39) ($ 265,346.80) 2010 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 11.3194% $70,792.82 $156,020.83 $321,542.12 $631,570.31 Q3 9.0629% $57,359.89 $120,045.72 $233,431.60 $429,717.73 Difference -2.2565% ($13,432.93) ($ 35,975.11) ($ 88,110.52) ($ 201,852.58) 2011 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 11.0573% $69,020.03 $151,137.06 $309,226.75 $602,488.89 Q3 8.3983% $54,094.82 $111,678.09 $213,866.13 $387,051.38 Difference -2.6590% ($14,925.21) ($ 39,458.97) ($ 95,360.62) ($ 215,437.51) 2012 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 11.3342% $70,894.80 $156,302.99 $322,256.82 $633,266.39 Q3 7.9611% $52,091.81 $106,622.44 $202,231.19 $362,100.92 Difference -3.3731% ($18,802.99) ($ 49,680.55) ($ 120,025.63) ($ 271,165.47) 2013 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 10.0768% $62,908.74 $134,612.77 $268,361.34 $507,942.33 Q3 6.1444% $44,837.55 $ 88,828.93 $162,473.94 $279,438.99 Difference -3.9324% ($18,071.19) ($ 45,783.84) ($ 105,887.40) ($ 228,503.34) 2014 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 4.3849% $39,170.40 $ 75,523.24 $134,060.28 $223,109.02 Q3 -0.0829% $27,668.78 $ 50,273.02 $ 83,687.16 $130,019.77 Difference -4.4678% ($11,501.62) ($ 25,250.22) ($ 50,373.12) ($ 93,089.45) 2015 Start Quarter Growth Rate 20 year Value 25 year Value 30 year Value 35 year Value Q2 -5.5230% $21,424.38 $ 37,624.45 $ 60,433.49 $ 90,530.88 Q3 -9.7270% $17,664.10 $ 30,381.94 $ 47,773.74 $ 70,100.49 Difference -4.4678% ($ 3,760.28) ($ 7,242.51) ($ 12,659.75) ($ 20,430.39) With apologies to the Las Vegas Convention and Visitor’s Authority for paraphrasing their slogan, What happens in the “Real World”, happens.