How Did the 'Saver' Portfolios Perform in the First Half?

If the books were closed on 2019 thus far, it would go down as a heck of a year for investors.

The same goes for my core Mutual Fund and Exchange-Traded Fund Saver Portfolios. Thanks to widespread strength in core asset classes, all of the portfolios logged double-digit gains in the year's first six months. As with my "Bucket" portfolios, whose performance I recapped last week, the equity-heavy Aggressive and Moderate versions of the Saver portfolios outperformed the more bond-heavy Conservative versions. (The Aggressive and Moderate Saver portfolios hold 95% and 80% in stocks, respectively, whereas the Conservative versions hold just a bit more than half of their assets in stocks.)

The first half of this year marked a dramatic reversal from 2018, when all of the portfolios logged losses and the equity-heavy portfolios underperformed the Conservative ones. Chalk up the turnaround--in the markets and in the portfolios--to a still-decent economy and the growing sentiment that the Federal Reserve would adopt an accommodative interest-rate posture this year. Bonds performed well during the period, while equities of all stripes--even long-suffering international stocks--soared.

Given that pure, unadulterated equity exposure performed better than anything else during the year's first six months, it's not surprising that the ETF portfolios thwacked their mutual fund counterparts, which hold a blend of actively and passively managed funds.

Here's a recap of my core Mutual Fund and ETF Saver Portfolios in the year's first half: what worked and what didn't work so well. (I didn't make any changes to the portfolios during the period; both the mutual fund and ETF portfolios remain the same.)

Aggressive Mutual Fund Saver Portfolio 20% Primecap Odyssey Growth POGRX 20% Oakmark Fund OAKMX 15% Vanguard Extended Market Index VEXAX 33% Vanguard Total International Stock Index VTIAX 7% Oakmark International Small Cap OAKEX 5% Metropolitan West Total Return Bond MWTRX

2019 Return (through June 30): 14.87%

Moderate Mutual Fund Saver Portfolio

15% Primecap Odyssey Growth

15% Oakmark Fund

15% Vanguard Dividend Appreciation Index VDADX

10% Vanguard Extended Market Index

21% Vanguard Total International Stock Index

5% Oakmark International Small Cap

19% Metropolitan West Total Return Bond

2019 Return (through June 30): 14.15%

Conservative Mutual Fund Saver Portfolio

10% Primecap Odyssey Growth

10% Oakmark Fund

10% Vanguard Dividend Appreciation Index

7% Vanguard Extended Market Index

10% Vanguard Total International Stock Index

4% Oakmark International Small Cap

30% Metropolitan West Total Return Bond

7% Fidelity Short-Term Bond FSHBX 12% Vanguard Short-Term Inflation-Protected Securities Index VTAPX

2019 Return (through June 30): 10.79%

Although the Mutual Fund Saver Portfolios feature several active funds, not one of those holdings could touch pure equity index exposure during the year's first half. Vanguard Total International Stock Index, Vanguard Dividend Appreciation Index, and Vanguard Extended Market Index logged the best gains of any of the holdings during the period.

Oakmark Fund and Oakmark International Small Cap hindered the portfolios' performance in 2018, but they enjoyed a solid recovery in 2019's first half. The underperformance of value strategies persisted into the first half. But Oakmark Fund got a boost from its exposure to market darlings like Alphabet GOOG and Netflix NFLX, while Oakmark International Small Cap benefited from unsexy holdings like MITIE Group MTO and Element Fleet Management EFN.

One (relatively) weak link in the portfolio was Primecap Odyssey Growth, which occupied an unfamiliar position near its Morningstar Category's cellar for the year's first six months. While it notched a perfectly respectable 13.25% return, top holding Abiomed ABMD, which makes heart pumps, tumbled during the period. (The stock has been in the portfolio for more than a decade and has contributed tremendous gains over that long stretch.) And needless to say, the portfolios' bond holdings underperformed their equity positions. Fidelity Short-Term Bond, which appears in the Conservative Mutual Fund Saver Portfolio, logged the smallest gain of any holding in the portfolios, but that's to be expected given its very mild risk profile.

Aggressive ETF Saver Portfolio 50% Vanguard Total Stock Market ETF VTI 10% Vanguard Small-Cap Value ETF VBR 30% Vanguard FTSE Developed Markets ETF VEA 5% Vanguard FTSE Emerging Markets ETF VWO 5% iShares Core Total USD Bond Market ETF IUSB

2019 Return (through June 30): 16.10%

Moderate ETF Saver Portfolio

47% Vanguard Total Stock Market ETF

8% Vanguard Small-Cap Value ETF

20% Vanguard FTSE Developed Markets ETF

5% Vanguard FTSE Emerging Markets ETF

20% iShares Core Total USD Bond Market Index ETF

2019 Return (through June 30): 14.77%

Conservative ETF Saver Portfolio

33% Vanguard Total Stock Market ETF

5% Vanguard Small-Cap Value ETF

10% Vanguard FTSE Developed Markets ETF

4% Vanguard FTSE Emerging Markets ETF

30% iShares Core Total USD Bond Market Index ETF

11% Vanguard Short-Term Inflation-Protected Securities ETF VTIP 7% Vanguard Short-Term Bond ETF BSV

2019 Return (through June 30): 11.38%

As noted above, the Aggressive and Moderate ETF Saver Portfolios logged exceptionally strong gains. That owed largely to very robust performance from Vanguard Total Stock Market ETF, which was the portfolios' best performer and constitutes anywhere from 50% (Aggressive portfolio) to a third of assets (Conservative portfolio). The small-value and emerging-markets ETFs occupy smaller slots in the portfolios to facilitate periodic rebalancing, but they haven't added to returns over the life of the portfolios. As with the mutual fund portfolios, the short-term bond positions that appear in the Conservative portfolio were the worst performers in the risk-on market of 2019's first half.

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