How to do 50:50 split with LifeStrategy Funds

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How to do 50:50 split with LifeStrategy Funds

Postby Gort » Thu Dec 20, 2012 10:22 pm

Friends,
If I wanted a 50/50 (equity/bonds) allocation in a tax-deferred account by just using two LifeStrategy balanced funds, what would be the difference between using equal amounts of a 60/40 fund combined with a 40/60 fund versus equal amounts of an 80/20 fund combined with a 20/80 fund?
Thanks,
Gort
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Re: How to do 50:50 split with LifeStrategy Funds

Postby joe8d » Thu Dec 20, 2012 10:35 pm

Why not just use a single LS fund ( LS Growth/LS Moderate ) and dilute down with a separate bond fund like STIG, TIPS or just TBM ?
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Re: How to do 50:50 split with LifeStrategy Funds

Postby LadyGeek » Thu Dec 20, 2012 10:49 pm

See this wiki article: Vanguard LifeStrategy Funds. Why are you focused on these funds?

If you want to hit 50/50, why not just go for one of the Lazy Portfolios, or perhaps a Three-fund portfolio?

I think the answer to your question is the composition of the asset allocations. If you want to deep dive, put your fund choices into Morningstar's Instant X-Ray, but I think it will be easier to use one of the lazy / three-fund portfolio choices.
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Re: How to do 50:50 split with LifeStrategy Funds

Postby YDNAL » Fri Dec 21, 2012 8:01 am

Gort wrote:Friends,
If I wanted a 50/50 (equity/bonds) allocation in a tax-deferred account by just using two LifeStrategy balanced funds, what would be the difference between using equal amounts of a 60/40 fund combined with a 40/60 fund versus equal amounts of an 80/20 fund combined with a 20/80 fund?
Thanks,
Gort

Gort,

LS Funds do NOT have TIPS.
  • If unexpected inflation is a concern for your personal circumstances, the easiest thing is a more aggressive LS Fund combined with TIPS fund.
  • The more TIPS you want, the more aggressive the LS Fund has to be.
Landy
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Re: How to do 50:50 split with LifeStrategy Funds

Postby Sunny Sarkar » Fri Dec 21, 2012 10:03 am

I'd simply start with the Moderate 60/40 LS fund and add TIPS to the portfolio to bring it to 50/50. This way the additional fund (TIPS) will provide some additional functional diversification as well. LS + TIPS makes a fantastic diversified portfolio.
“Our life is frittered away by detail. Simplify, simplify.” ― Henry David Thoreau
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Sunny offers an excellent suggestion.

Postby Taylor Larimore » Fri Dec 21, 2012 10:09 am

Sunny Sarkar wrote:I'd simply start with the Moderate 60/40 LS fund and add TIPS to the portfolio to bring it to 50/50. This way the additional fund (TIPS) will provide some additional functional diversification as well. LS + TIPS makes a fantastic diversified portfolio.


Sunny:

Excellent suggestion. Both funds should be in a tax-advantaged account.

Best wishes and Happy Holiday!
Taylor
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Re: How to do 50:50 split with LifeStrategy Funds

Postby RYD » Fri Dec 21, 2012 10:16 am

Gort

Thank you for posting this question I have been looking at a way to do this.

My objective was to simplify my investments and not require yearly re balancing. The LS 60/40 with 10% TIPS is spot on

Thanks to all and Happy Holidays

RYD
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Re: How to do 50:50 split with LifeStrategy Funds

Postby lks » Fri Dec 21, 2012 1:11 pm

I went from the traditional 4 fund 40% stocks/60% bonds portfolio, all Admiral Shares, to 67% lifeStrategy Moderate Growth and 33% Tips/Admiral shares, which retained my desired 40% stocks. I did this to get 67% of my portfolio automatically rebalanced because, why I didn't sell anything during the last crash, I didn't have the courage to rebalance when my target asset allocation changed significantly. The only downside to this change, is 67% of my portfolio is no longer in Admiral shares. But this 2 fund portfolio more than offset this additional cost, compared to the 4 portfolio, over the last 5 years.
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Re: How to do 50:50 split with LifeStrategy Funds

Postby JupiterJones » Fri Dec 21, 2012 3:04 pm

RYD wrote:My objective was to simplify my investments and not require yearly re balancing. The LS 60/40 with 10% TIPS is spot on


Just to be precise, holding 10% in TIPs and the remainder in LifeStrategy 60/40 will not give you a 50/50 mix. It will actually be 54/46.

You'd need to have 16 2/3% in TIPs and 83 1/3% in the LS fund in order to get an overall 50/50.

Or round it to 17% and 83% to get 49.8/50.2. :D

JJ
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Re: How to do 50:50 split with LifeStrategy Funds

Postby LadyGeek » Fri Dec 21, 2012 3:25 pm

To simplify, you only need to adjust your asset allocations to the nearest 5%.

For example, (16.667% TIPS / 83.333 % LS) is better as (15% TIPS / 85% LS).
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Re: How to do 50:50 split with LifeStrategy Funds

Postby Gort » Wed Dec 26, 2012 10:43 pm

An 85% LifeStrategy Moderate Growth fund (60/40) combined with 15% TIPS Fund results in the following portfolio:
36% TSM
15% Total International
34% Total Bond
15% TIPS.
Nice. Super easy to rebalance. Well diversified. Low ER.
Thanks for the great suggestion. You all are very helpful!!!
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Re: How to do 50:50 split with LifeStrategy Funds

Postby Gort » Thu Dec 27, 2012 9:44 pm

Gort wrote:An 85% LifeStrategy Moderate Growth fund (60/40) combined with 15% TIPS Fund results in the following portfolio:
36% TSM
15% Total International
34% Total Bond
15% TIPS.
Nice. Super easy to rebalance. Well diversified. Low ER.
Thanks for the great suggestion. You all are very helpful!!!


No comments? I think I found my perfect plan :happy
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Re: How to do 50:50 split with LifeStrategy Funds

Postby LadyGeek » Thu Dec 27, 2012 10:03 pm

Happy New Year? :)
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Re: How to do 50:50 split with LifeStrategy Funds

Postby joe8d » Thu Dec 27, 2012 10:52 pm

Gort wrote:
Gort wrote:An 85% LifeStrategy Moderate Growth fund (60/40) combined with 15% TIPS Fund results in the following portfolio:
36% TSM
15% Total International
34% Total Bond
15% TIPS.
Nice. Super easy to rebalance. Well diversified. Low ER.
Thanks for the great suggestion. You all are very helpful!!!


No comments? I think I found my perfect plan :happy


77% Life Strategy Growth ( 80/20)
15% Short Term Investment Grade
8% TIPS

Gives you "Approximately", but check my math :happy .
50% Stock ( TSM/TInt )
20% TBM
20% STIG
10% TIPS
All the Best,
Joe
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Adding more short-term bonds?

Postby Taylor Larimore » Thu Dec 27, 2012 11:33 pm

Joe:
77% Life Strategy Growth ( 80/20)
16% Short Term Investment Grade

Total Bond Market in Life Strategy Growth ALREADY holds nearly 30% in Short Term Investment Grade Bonds. I doubt if 16% more S.T. bonds are worth the additional complexity of another overlapping bond fund.

Happy Holiday!
Taylor
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Re: How to do 50:50 split with LifeStrategy Funds

Postby joe8d » Thu Dec 27, 2012 11:47 pm

Hi Taylor,
I believe that the short bonds in TBM are primarily Treasuries. STIG would give more exposure to corporate as per Mr Bogles current thinking.Increased Short Term Allocation is also a better inflation hedge.
All the Best,
Joe
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Re: How to do 50:50 split with LifeStrategy Funds

Postby Taylor Larimore » Fri Dec 28, 2012 8:37 am

joe8d wrote:Hi Taylor,
I believe that the short bonds in TBM are primarily Treasuries. STIG would give more exposure to corporate as per Mr Bogles current thinking.Increased Short Term Allocation is also a better inflation hedge.


Joe:

You are probably right. Why do you believe "the short bonds in TBM are primarily Treasuries?"

Happy Holidays
Taylor
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Re: How to do 50:50 split with LifeStrategy Funds

Postby englishgirl » Fri Dec 28, 2012 11:28 am

Gort wrote:
Gort wrote:An 85% LifeStrategy Moderate Growth fund (60/40) combined with 15% TIPS Fund results in the following portfolio:
36% TSM
15% Total International
34% Total Bond
15% TIPS.
Nice. Super easy to rebalance. Well diversified. Low ER.
Thanks for the great suggestion. You all are very helpful!!!


No comments? I think I found my perfect plan :happy


Gort, I think that's a very nice plan, and I'm thinking of doing something somewhat similar myself when I roll my 401k over. Enjoy.
Sarah
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Re: How to do 50:50 split with LifeStrategy Funds

Postby RYD » Fri Dec 28, 2012 6:42 pm

I am very seriously looking at doing this as well.

Just to be sure Lady Geek are you are referring to 15% of the bond allocation invested in TIPS versus 15% of the entire amount?
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Re: How to do 50:50 split with LifeStrategy Funds

Postby LadyGeek » Fri Dec 28, 2012 7:01 pm

RYD wrote:I am very seriously looking at doing this as well.

Just to be sure Lady Geek are you are referring to 15% of the bond allocation invested in TIPS versus 15% of the entire amount?

I was referring to JupiterJones' play on the accuracy of the allocation, as stated below. The idea is to round to the nearest 5%.

"(16 2/3% in TIPs and 83 1/3%)" converting from fraction to decimal is (16.667% TIPS / 83.333 % LS); which is better rounded to (15% TIPS / 85% LS)." - adding 15% + 85% is 100% of the portfolio. It's 15% of the entire amount.

JupiterJones wrote:Just to be precise, holding 10% in TIPs and the remainder in LifeStrategy 60/40 will not give you a 50/50 mix. It will actually be 54/46.

You'd need to have 16 2/3% in TIPs and 83 1/3% in the LS fund in order to get an overall 50/50.

Or round it to 17% and 83% to get 49.8/50.2. :D

JJ
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Re: How to do 50:50 split with LifeStrategy Funds

Postby KyleAAA » Fri Dec 28, 2012 8:12 pm

I would actually contend there's little difference between a 60/40 and 50/50 allocation so I'd just go with the 60/40 fund. If you're going to use more than one fund anyway, why not just go ahead and use the three individual funds so you can take advantage of the lower expenses that come with admiral shares?

Putting 25% each in the total stock market, total international stock market, total bond, and TIPS bond fund is no more difficult than using 2 different Lifestrategy funds and your costs will be lower.
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Re: How to do 50:50 split with LifeStrategy Funds

Postby RYD » Sat Dec 29, 2012 10:15 am

Lady Geek

Thanks for the clarification.


KyleAAA

I think one of my motivations is to have some exposure to TIPS which are not in the LS offering. You can use a Target fund but that puts you on the glide path which over time alters the AA from your original choice.

Googling AA I ran across a Taylor post that has an excellent link to a Vanguard overview of various AA and there performance. Vanguard Model Portfolio Allocations


John
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