Originally posted January 1st, 2010. See end of thread for any updates.
The number of index funds and ETFs these days is amazing. The expense ratios are lower than actively managed funds and they save you a lot of commissions if you tried to achieve the same diversification with individual holdings. With a little initial research, you can really invest more of your time into things you enjoy more than watching the markets.
Here are my selections for different asset classes and a conservative asset allocation for the portion of the portfolio that is not cash or a cash equivalent. Suffice it to say, you will want a good portion cash for regular expenses, emergencies, re-balancing, etc.
Expense Dividend
Class Fund Ticker Ratio Yield % Allocation %Stocks
US Stocks Schwab US Broad Market SCHB 0.08% 2% 10%
Intl Stocks Schwab Intl Market SCHF 0.15% 2.75% 10%
Healthcare stocks SPDR Healthcare sector fund XLV 0.21% 1.75% 5%
Other stocks ---- --- --- --- 5%
Real estate
US REITs Vanguard US REITs VNQ 0.11% 5.5% 10% (preferably retirement acct)
Intl REITs iShares Developed Natn REITs IFGL 0.48% 5.5% 10% (preferably retirement acct)
Bonds
TIPS Bonds SPDR Barclays TIPS bonds IPE 0.19% 4.5% 20%
US Bonds Vanguard Total Bond Market BND 0.10% 4% 10%
Intl Bonds iShares Intl Treasury Bonds IGOV 0.35% 2% 5%
Tax-free muni bonds iShares Natl AMT-Free Bonds MUB 0.25% 3.7% 5% (preferably taxable cash acct)
Emerging Mkt Bonds JPMorgan Emerging Mkt Bonds EMB 0.60% 5.5% 2.5%
High yield bonds SPDR Barclays High Yield Bonds JNK 0.45% 12.5% 2.5%
Other
Preferred stocks SPDR Wells Fargo Preferreds PSK 0.45% 8% 2.5%
Energy / MLPs JPMorgan Alerian MLP Index AMJ 0.85% 5.5% 2.5%
Commission-free at Schwab: SCHB, SCHF Commission-free at Fidelity: MUB, EMB, IPE (as TIP) Commission-free at Vanguard: VNQ, SCHB (as VTI) Commission-free at TD Ameritrade: JNK, IFGL (as RWO), MUB, BND, IPE (as TIP), VNQ, SCHB (as VTI)
I put equivalent index funds in parenthesis (similar market coverage and similar expense ratio).
Totals: 30% Stocks 20% Real estate 45% Bonds 5% Other
72.5% US 27.5% International
Weighted average expense ratio: 0.23% Weighted average dividend yield: 4%
Notes: 1) Dividend yields are approximated / estimated. Information from 1/1/09.
2) If you have a lot of taxable income, you will probably want to re-allocate to have more of the MUB.
3) The allocation really stands to benefit from inflation, which I consider very likely. Between the TIPS and international holdings, almost half the portfolio will benefit from inflation.
4) The healthcare index may seem like a strange pick, but I like JNJ, MRK, and PFE and it's just easier to buy the healthcare index than buy them separately. While you get some diversification with the other stocks, it's not all that meaningful. Plus the dividend yields are diluted. You can use the 5% for just another 5% of "other stocks."
5) It seems kind of weird to have other stocks when using strategy that is basically admitting that you can't beat the market. I think it's more for self-indulgence than anything else. If you try to cut yourself off completely, you might go on a binge. It's better to put realistic limits. 10% allocated to trying to play the market seems reasonable.
6) Just for fun, stocks I like for the other are Wellpoint Insurance (WLP), Northstar Realty Finance (NRF), PayChex Systems (PAYX), Berkshire Hathaway (BRKB).
7) I am not a professional. None of the above is investment advice. See a financial advisor before making any decisions.
larrytrain said: ETFs should be banned. Period. They cause more damage than benefit. Particularly leveraged ETFs.
Leveraged ETFs and straight ETFs are two ENTIRELY different beasts. I agree that, overall, ETFs tend to induce investors to trade more actively than they should, but SPY and an S&P 500 index fund are pretty darn similar. Leveraged ETFs, though, are a radically different breed (value leakage).
SegaRob said: 3) The allocation really stands to benefit from inflation, which I consider very likely. Between the TIPS and international holdings, almost half the portfolio will benefit from inflation. You can't benefit from inflation: your foreign holdings will go up in dollar terms, but they'll be the same in real terms.
You can't even tread water: even though you have no real gain, the dollar gain will still be taxed. If you pay 15% on LT gains and the dollar goes to zero, say hello to a 15% wealth tax.
vickh said: best brokerage to buy ETFs? (low fees, signup promos etc..)
If you are embarking on the passive trading strategy then the best bet would be to go to a brokerage that offers a cash bonus and no inactivity fees. The actual cost per trade would be less relevant. At various times throughout the year, Tradeking, Optionshouse, Sogotrade, Sharebuilder, and Fidelity, among others, have offered cash or miles for opening accounts. For active traders cost per trade and execution are more important, which leaves Interactive Brokers, eOption, or Optionshouse as my choices.
As far as ETFs, they are a tool, and investors receive tons of information about the risks of ETFs, including inverse and leveraged ETFs, in the prospectus. If the investors don't read the disclosures, that is their problem. Leveraged ETFs are absolutely not suitable for long term time horizons. When shorting financial stocks was banned in late 2008, including the closure of inverse financial ETFs, it propped up the prices of those shares temporarily, but once the ban was lifted financial stocks continued their nosedive into early 2009.
just want to point out that if you own a house you already have exposure to real estate. in contrast your portfolio doesn't have much exposure to commodities, which are a better inflation hedge that your heavy weighting toward TIPS
RedLenses
Loyal Member
posted: Jan. 2, 2010 @ 5:47a
vickh said: best brokerage to buy ETFs? (low fees, signup promos etc..)
Wells Fargo - 100 free trades a year if you have a qualifying balance.
Thanks SegaRob. I like the allocation you described and all the low expense ratios. However, as someone who has almost all their portfolio at Vanguard, it is a little harder to implement (though I'm sure I could find similar offerings there). One problem I have with ETFs in general is that I like to have automatic dividend reinvestment and with ETFs you have to do it yourself and pay a commission for the trade. At Vanguard, that can become expensive. The free trades as wells fargo looks like it will cover you for the year for reinvesting dividends but I feel like there is no guarantee that will continue forever.
Thanks for the detailed post and data provided. Are these your holdings?
abugarcias
Thrifty Member
posted: Jan. 2, 2010 @ 11:36a
Schwab has no fee ETFs on their brokerage account. You can trade their new ETFs for free and they are still coming out with some new ones. Also their ETFs have really low expense ratios.
Thanks SegaRob. I like the allocation you described and all the low expense ratios. However, as someone who has almost all their portfolio at Vanguard, it is a little harder to implement (though I'm sure I could find similar offerings there). One problem I have with ETFs in general is that I like to have automatic dividend reinvestment and with ETFs you have to do it yourself and pay a commission for the trade. At Vanguard, that can become expensive. The free trades as wells fargo looks like it will cover you for the year for reinvesting dividends but I feel like there is no guarantee that will continue forever.
Both Schwab and Fidelity allow for free dividend re-investement on all securities including ETFs. I already had my Schwab ETFs mentioned here re-invested for free and fractional shares.
IWantPrivacy
New Member
posted: Jan. 2, 2010 @ 12:54p
I am a semi-regular poster on these forums, but given the sensitive nature of the information included here, I have chosen to create a new account to post my asset allocation in order to protect my privacy.
In response to OP's post, if other people are to chime in, I think it would be useful to list the poster's age, as asset allocations should shift a greater portion of assets to less-risky classes (e.g., bonds) each year a person gets closer to retirement. As a rule of thumb, I've read that the percentage of your assets allocated to bonds should be your age minus ten. For example, because I'm 26, 16% of my assets "should" be allocated to bonds. Because I have a graduate degree and a good income, I am willing to take on some more risk and decided to only allocate 10% of my assets to bonds. However, each year from now on, I will shift roughly one additional percentage point of my assets to bonds.
Age: 26
Expense SEC
Class Fund Ticker Ratio Yield % Allocation %US Stocks
Total Market Vanguard Total Stock Market VTI 0.09% 1.79% 15.50%
Large Cap PowerShares S&P 500 BuyWrite PBP 0.75% 1.26% 6.00%
Large Cap Value iShares Morningstar Lrg Value JKF 0.25% 2.64% 2.50%
Mid Cap iShares Russell Midcap IWR 0.21% 1.53% 3.00%
Small Cap iShares S&P SmallCap 600 IJR 0.20% 1.27% 13.00%
Small Cap Value iShares Morningstar Sm Value JKL 0.30% 2.69% 5.00%
(Note 1: These seemingly arbitrary percentages are approximates to conform to OP's excellent table format. I use Morningstar's Portfolio X-Ray tool, which analyzes the underlying holdings of each ETF to tell you which percentage of the ETF's assets are in each of the nine Morningstar style boxes. There are few "pure plays" in ETFs largely because of differing definitions of what consitutes large, mid, and small cap holdings; and what constitutes value, core, and growth holdings. For example, an ETF that considers itself a "large cap" ETF may well have significant mid-cap and even some small-cap assets according to Morningstar's calculations; similarly, an ETF that considers itself a "value" ETF may well have significant core holdings and some growth holdings. My actual goal is to have 45% of my portfolio allocated to US stocks. In the stylebox, on the vertical axis, my plan is to have 40% Large Cap, 20% Mid Cap, 40% Small Cap. On the horizontal axis, my plan is to have 40% Value Stocks, 30% Core Stocks, 30% Growth Stocks. The allocations listed above approximately represent this style box allocation.)
(Note 2: When I initially got into PBP, I thought it was a great idea. I still do, but I don't think it is appropriate for my allocation strategy anymore, as I can decrease overall risk in other, less-costly ways, such as by shifting assets to bonds or other asset classes. The ETF owns the S&P 500 index and sells covered call options against it. The effect of this is that in a declining or stagnant market, the ETF will outperform the index because of the premiums collected from selling covered calls; however, in a rising market, the ETF will underperform its index because the call options sold will limit the upside of the ETF).
International Stocks
Emerging Mkts Large Cap Vanguard Emerging Markets VWO 0.27% 2.94% 10.00%
Emerging Mkts Small Cap SPDR S&P Emerging Mkts Sm Cap EWX 0.65% 0.60% 5.00%
Developed Large Cap Vanguard Europe Pacific VEA 0.16% 2.70% 5.00%
Developed Small Cap SPDR S&P Int'l Small Cap GWX 0.59% 2.05% 5.00%
Bonds
US Bonds Vanguard Total Bond Market BND 0.14% 3.45% 7.50% (Held in Nontaxable Account)
High Yield Bonds SPDR Barclays Hi-Yield Bonds JNK 0.40% 9.01% 2.50% (Held in Nontaxable Account)
(Note 3: I believe that I need more assets in this asset class, particularly municipal bonds. Because of my tax bracket, I think I would benefit from holding municipal bonds in my taxable account.)
Real Estate
US Real Estate Vanguard REIT VNQ 0.15% 3.68% 3.75% (SEC Yield is approximate) (Held in Nontaxable Account)
Int'l Real Estate SPDR DJ Int'l Real Estate RWX 0.59% 4.38% 3.75% (SEC Yield not available) (Held in Nontaxable Account)
Other
Gold & Silver Central Fund of Canada CEF 0.35% N/A 7.5% (note: a Closed-End Fund instead of an Exchange-Traded Fund)
Commodities PowerShares DB Commodity Idx DBC 0.85% N/A 5.0%
Totals:
70.00% Stocks
10.00% Bonds
7.50% Real Estate
7.50% Precious Metals
5.00% Commodities
67.14% US
32.86% International
(Note: These percentages are those of my portfolio when excluding my allocation to commodities and precious metals.)
Weighted average expense ratio: 0.3265%
Weighted average dividend yield: 2.11%
I am not a professional. None of the above is investment advice. See a financial advisor before making any decisions.
What's the need to have all of these separate accounts with amounts totaling 2.5% or 5% of your total? Will you still continue to maintain that tiny allocation if your holdings go up to $100k? What about $200k? $500k? $1M?
IMHO, pare down your holdings into a few broad-based indices - try S&P500, something international, and total bond fund. Voila - diversified, low-cost, and infinitely easier to rebalance and manage.
I would be interested in hearing the rationale for slicing and dicing this finely if you all are willing to share.
TheDragonn said: What's the need to have all of these separate accounts with amounts totaling 2.5% or 5% of your total? Will you still continue to maintain that tiny allocation if your holdings go up to $100k? What about $200k? $500k? $1M?
IMHO, pare down your holdings into a few broad-based indices - try S&P500, something international, and total bond fund. Voila - diversified, low-cost, and infinitely easier to rebalance and manage.
I would be interested in hearing the rationale for slicing and dicing this finely if you all are willing to share. Well, pick by pick: SCHB - standard US equity fund SCHF - standard intl equity fund VHT - as I said, JNJ MRK & PFE are all undervalued IMO. It's easier to buy VHT than buy the stocks separately. Other stocks - as mentioned in OP. VNQ - real estate exposure without headache of being a landlord. IFGL - value correlates with VNQ so somewhat redundant. But by splitting the 20% real estate with 10% intl, it's a hedge against inflation. There is a global REIT fund but the expense ratio was higher than the average of buying these two. BND - standard total bond fund. IPE - strong inflation hedge. Not enough weight in BND. IGOV - intl bond fund, another hedge against inflation. EMB - similar to IGOV, better yield but less safe. You could probably do without this. MUB - less safe than US treasuries, but tax free. Useful for a taxable acct. JNK - some exposure to high yield bonds. The yield is really tempting and the risk is split across so many bonds. You could probably do without this. PSK - a unique asset class not covered by any other holding. You could do without this, but like JNK has a high yield with risk spread out across many holdings. AMJ - a relatively safe holdling with good yield. The nice thing about this fund is that you avoid the usual PITA that MLPs have with regard to taxation. It might be better to have some natural resource fund or commodities instead, but I'm drawn to the reliable yield whereas gold & silver are more unpredictable. If someone likes a natural resource fund, please advise.
I don't own any of these holdings yet. Just helping an elder family member with some planning.
IWantPrivacy
New Member
posted: Jan. 2, 2010 @ 1:33p
They're not separate accounts--they're all held in my single brokerage account. I recognize that trading costs make the maintenance of an exact allocation of the smaller amounts more difficult, but I think it is still worthwhile. I continually add funds to my account, but I don't buy every asset class each time I add money to my account. I look at my account and see what class is furthest away from the ideal allocation and buy shares of that ETF. Because of the small allocation to the 2.5%/3% categories, I only wind up allocating dollars to these classes a few times per year, after I've already bought substantial shares in other classes. Management is actually pretty easy to me after I've spent time developing an Excel spreadsheet to keep up with my allocation. It pulls stock quotes from MSN and tells me what asset classes need more/less allocation based on my ideal allocation. I'll try to post this soon.
The broad-based indices are just that--broad. For someone just starting out with investing, they're great for instant diversification. For me, they're not fine-grained enough. The S&P 500 only captures the large cap portion of the market--what about mid-cap and small-cap stocks? "Something international" ignores the distinctions between frontier, emerging, and developed markets. Frontier and emerging markets have much more potential for growth than developed markets, but in turn, tend to be riskier. Just buying "something international" will probably get you large-cap developed markets, which I have through VEA. Most people will be happy with this. The broad-based funds (e.g., VWO, VEA) are actually large cap funds that mostly ignore the mid cap and small cap segments of these international markets. Why ignore them? I want exposure to these, as well, hence my holdings in EWX and GWX.
vickh said: best brokerage to buy ETFs? (low fees, signup promos etc..)I have an account at many firms for various reasons (Schwab, Fidelity, Scottrade, Ameritrade, optionsexpress, sharebuilder). Assuming you have retirement accounts (which you should), you want a full fledged brokerage like Schwab or Fidelity to handle those accounts. A discount broker like Scottrade will just screw things up and cost you money and aggravation.
For more active trading, interactive brokers seems incredibly cheap but I have yet to use them.
For a free $100 bonus, optionsexpress has a promotion. PM me for link.
P.S. I'm hoping to consolidate my accounts to fewer places. It's really not ideal to have the money split across so many accounts.
IWantPrivacy said: Management is actually pretty easy to me after I've spent time developing an Excel spreadsheet to keep up with my allocation. It pulls stock quotes from MSN and tells me what asset classes need more/less allocation based on my ideal allocation. I'll try to post this soon.how did you do that?
Here is my Excel portfolio tracker. I'd imagine there will be some questions, so post here and I'll try to answer them. This requires the MSN Money Add-In for Excel, posted above; or, alternatively, you can enter in the stock quotes yourself.
This file is posted for information purposes only. Do not make investment decisions based on this file or rely on any calculations made herein.
Not bad. Not bad at all. And one of the very few times I've been impressed by a FW portfolio that makes sense for the average investor. Of course, as mentioned, a lot would depend on the investor's age and risk tolerance.
My only suggestions--and this would depend on several variables every investor would have to determine--I'd probably lighten up on the real estate portion and substitute ~5% precious metals (as strictly insurance) and another stock equivalent for "other." Perhaps also lighten up a tiny bit on the bonds. But this would be fine tuning.
Some people (Ramit Sethi for one) seem to suggest the "target date" funds Any second thoughts about the use of them for someone who would rather focus on working than investing? Just Cuorious
Not bad. Not bad at all. And one of the very few times I've been impressed by a FW portfolio that makes sense for the average investor. Of course, as mentioned, a lot would depend on the investor's age and risk tolerance.
My only suggestions--and this would depend on several variables every investor would have to determine--I'd probably lighten up on the real estate portion and substitute ~5% precious metals (as strictly insurance) and another stock equivalent for "other." Perhaps also lighten up a tiny bit on the bonds. But this would be fine tuning.
Once again, very nice. Thanks so much for the compliments. The goal of this portfolio was to be very low risk. While, it's probably a little unorthodox to put this much in real estate, historically real estate has done very well. VNQ's biggest holding is SPG which has beaten all the Dow, Nasdaq & S&P 500 over the last 16 years. Considering it's also a hedge against inflation and unlike gold real estate has more predictable demand because people always need a place to stay, it's seems like a safer bet than stocks and gold. In the past, it wasn't as easy to own real estate but with the advent of REITs and now REIT ETFs, it has become headache-free. Maybe I'm a bit overzealous, but I'm actually comfortable having 20% in REITs. If you don't own a home, I might even go up to 30%.
For someone who is clueless about investing and chooses not to spend a few hours educating themselves, target date funds probably are a good choice. I believe that investments should be tailored to individuals similarly situated, and I believe that there is a lot more involved in an individual's situation that bears on investment allocation than just years to retirement. A retiring corporate executive with substantial assets can take on more risk than a retiring unskilled laborer who will be have to lead a simple life in retirement. My problem with these funds is that they may not have an appropriate allocation for each individual. However, I think that these target date funds probably are a better choice than just blindly investing without understanding anything about appropriate allocations and investment risk.
SegaRob said: Considering it's also a hedge against inflation and unlike gold real estate has more predictable demand because people always need a place to stay, it's seems like a safer bet than stocks and gold. In the past, it wasn't as easy to own real estate but with the advent of REITs and now REIT ETFs, it has become headache-free. Maybe I'm a bit overzealous, but I'm actually comfortable having 20% in REITs. If you don't own a home, I might even go up to 30%. I also think your real estate allocation is a little heavy. Are you aware what VNQ actually holds? Per Vanguard, residential real estate only represents 15.2% of VNQ's holdings. Residential and commercial real estate don't perform equivalently. Most of the fund holds retail and office buildings and industrial properties. See https://personal.vanguard.com/us/funds/holdings?FundId=0986&Fund... Part of the sectors listed as "specialized" or "diversified" might actually hold residential property, though.
Thanks, OP. While you focused on expense ratios, have you considered trading fees?
How much money do you need to have invested in order to make such a diverse portfolio worthwhile? For example, if you every month you were to contribute $750, the trading fees alone would eat up a large portion of the investment. 14 investment types * 12 months = 168 purchases at say $8 a trade a year. 168 * $8 = $1344 a year on $9,000 of new investment. Of course you can find some brokerages with X many free trades per year, or you can buy some of these ETF's from Schwab with no transaction fee, but...
The idea would be starting with a large initial investment and making minor adjustments with market swings. You are right that commissions can be costly, so it only makes sense to rebalance if the allocation becomes way out of whack.
If you're starting a small initial investment and trying to build up, then you may want a less conservative portfolio. Secondly, you could buy up the core funds like SCHB, SCHF, VNQ, BND, IPE and then as your investment grows add in some of the others. So if the allocation % comes out to $1-2k, just hold off until the value of your portfolio rises. As someone said before, I think every individual has to allocate his portfolio to fit with his investment goals and risk tolerance.
At the very least, hopefully everyone can find my compilation of ETFs as a good resource for the cheapest (by expense ratio) ETF in each particular class. It took a substantial amount of time to research. If someone find a ETF with a lower expense ratio for a fund covering the same or similar index, I'd be happy to hear it.
SegaRob said: Is there evidence for residential REITs or real estate outperforming commercial over the long term? Here's a WSJ article on the subject-- http://online.wsj.com/article/SB120511166583823441.html?mod=todays_us_page_one.
And here's some hard data-- http://www.reit.com/portals/0/files/nareit/htdocs/library/performance/Prop.pdf.
Sorry, I don't really have anything addressing long-term.
REZ is a residential REIT ETF and has done a few percentage points better than VNQ over the last few years. IMO, the two charts correlate pretty close and have a similar dividend. The expense ratio for VNQ is much cheaper though (0.11 vs 0.48) so I'll stick with it. If you can recommend a residential REIT that has an expense ratio closer to VNQ and better historical performance, I'd be interested to hear it. But right now it's doesn't seem worth chasing a questionable 1% increase in annual return vs a guaranteed saving of 0.37%.
MaddHatter
Senior Member
posted: Jan. 2, 2010 @ 11:30p
Future Alloc, Current Alloc, Expense Ratio. Working on building bond portion up.
His 401k: Market (Company) Stock 0.43% 2.87% 0.00% Vanguard Total Bond 5.56% 5.95% 0.22% Equity Index Trust 27.78% 20.16% 0.06% SmallCap Completeness 8.12% 12.13% 0.07% Vanguard Intl Growth .00% 0.98% 0.31% ING SmallCap Opps .85% 3.44% 0.93%
Her 403b: Dodge&Cox Intl .00% 5.95% 0.64% Pimco Total Return 35.24% 8.05% 0.71%
His Roth: Vanguard REIT 4.41% 8.40% 0.22% Total Intl 6.61% 11.39% 0.34%
Her Roth: Emerging Mkts 0.00% 8.01% 0.39% Total Stock Mkt 0.00% 8.39% 0.18% Total Intl 11.01% 4.28% 0.34%
IWantPrivacy
New Member
posted: Jan. 3, 2010 @ 12:34a
MaddHatter said: Future Alloc Kudos on the selection of low-fee funds, but the ING SmallCap Opportunities Fund sticks out like a sore thumb. Consider replacing this with a lower-cost smallcap index or just putting all of this money in the SmallCap completeness index. Also, I'm not familiar with the "Equity Index Trust," but I'm guessing that this is a large-cap holding; if so, consider devoting more of your US allocation to MidCap and SmallCap. Of my US allocation, my goal is 40% Largecap, 20% Midcap, 40% Smallcap.
With respect to the international component, it looks like you've shifted out of emerging markets? I don't know if the emerging markets class represents any of the assets of the funds you've listed, but if it doesn't, consider getting back into emerging markets. Also, most of your international funds probably focus on large/mega-cap international stocks. Have you considered devoting some of your international allocation to the smallcap sector like you do in the US?
As for bonds, depending on your spouse's age/risk tolerance, your bond allocation might be high. Based on the 'age minus ten' rule of thumb, that bond allocation (40.8%=5.56%+35.24%) would be appropriate for a couple roughly 50 years old. If you're younger than that, consider allocating more to equities.
Your real estate allocation seems reasonable, but consider adding some international real estate exposure.
Some other asset classes to consider might be commodities and precious metals.
TJtv
Senior Member
posted: Jan. 3, 2010 @ 12:36a
Vanguard has target date retirement funds with expense ratios in the 0.20% range. These should be good for 99.9% of all "passive investors".
Elbryn
Thrifty Member
posted: Jan. 3, 2010 @ 9:15a
IWantPrivacy said: MaddHatter said: Future Alloc Kudos on the selection of low-fee funds, but the ING SmallCap Opportunities Fund sticks out like a sore thumb. Consider replacing this with a lower-cost smallcap index or just putting all of this money in the SmallCap completeness index. Also, I'm not familiar with the "Equity Index Trust," but I'm guessing that this is a large-cap holding; if so, consider devoting more of your US allocation to MidCap and SmallCap. Of my US allocation, my goal is 40% Largecap, 20% Midcap, 40% Smallcap.
With respect to the international component, it looks like you've shifted out of emerging markets? I don't know if the emerging markets class represents any of the assets of the funds you've listed, but if it doesn't, consider getting back into emerging markets. Also, most of your international funds probably focus on large/mega-cap international stocks. Have you considered devoting some of your international allocation to the smallcap sector like you do in the US?
As for bonds, depending on your spouse's age/risk tolerance, your bond allocation might be high. Based on the 'age minus ten' rule of thumb, that bond allocation (40.8%=5.56%+35.24%) would be appropriate for a couple roughly 50 years old. If you're younger than that, consider allocating more to equities.
Your real estate allocation seems reasonable, but consider adding some international real estate exposure.
Some other asset classes to consider might be commodities and precious metals.
the vanguard total international is partially comprised of emerging markets. we also dont know his particular condition, the rule of thumb for bonds isnt always true. they could be conservative or have recently come into a bunch of money. hopefully, they dont think the recent run up on bonds this year equates to high returns at a lower risk. bogleheads.org forums is a good place for anyone who is interested in this stuff. forum varies from simple guidelines to theory as well.
I recall reading on bogleheads that tilts below 5% have minimal impacts on your overall portfolio performance. Rebalancing that stack of etfs will be a pain though unless you have free trading through accounts mentioned in previous posts.
Minor nit-pickings though - you have an interesting mix but I like my portfolios lazy
Swivelguy
Senior Member
posted: Jan. 3, 2010 @ 12:01p
30% US stock market 20% int'l stock market 20% long U.S. treasury bonds 20% short bonds/cash/CDs 10% gold
Corporate debt has equity risk and is not, in my opinion, a suitable diversifier for stocks.
centrifuge41 said: Schwab's SCHB contains 1507 holdings and costs 0.08%. May I recommend Vanguard's VTI. This total US stock market ETF costs 0.07% and it contains 3389 holdings. The additional diversification should improve the risk/expected return ratio.When SCHB was added to the table, VTI's expense ratio was higher, 0.09%. VTI later changed to 0.07%. But SCHB is actually cheaper again now, at 0.06%.
I just read about a new competitor to VTI/SCHB that has an even lower expense ratio, 0.05%: FMU, Focus Morningstar US Market Index ETF, from FocusShares, which is commission-free at Scottrade.
Maybe VTI's higher number of holdings and higher volume make it still a good choice though.
Lately I've been thinking about equal weighted ETFs such as RSP, though its expense ratio of 0.40% is high compared to VTI/SCHB.
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