2BCruising wrote:The following is a diversified growth-oriented portfolio with 24 ETF holdings. It's split roughly 30%/50%/20% between bonds/equities/other (real estate + commodities).
For those of you who espouse the simple/lazy approach to AA, can you recommend a similar portfolio with fewer ETF holdings? BTW, this portfolio is based on a very elaborate modeling of economic/market data, and every holding was selected for a very targeted reason. Thanks much.
There isn't much point in holding multiple holdings in the same asset class. You can have three asset classes (which makes for a very simple portfolio) or 11 (which is what I have in my slice-and-dice portfolio), but either way, you can simplify. I'll arrange the portfolio by asset class. Also, tiny holdings probably aren't worthwhile even if they are in theoretically separate classes (such as high-yield bonds); they won't make enough difference to be worth the trouble.
Is this a taxable or tax-deferred portfolio? You might need to keep some tax-efficient ETFs that would be expensive to sell in a taxable account, such as SPY, IWM, VEA, and VWO. If you do, don't buy any more, and just treat them appropriately in your portfolio (SPY+IWM is close to Total Stock Market, and VEA+VWO is close to Total International). I would still recommend selling any ETF which is expensive
BND Vanguard Total Bond 13%
SCPB Barclays ST Corp Bond 5%
TIP iShares TIPS Bond 3%
IEF iShares 7-10 yr Treasury 3%
ALD WisdTree Asia Local Debt 3%
HYS Pimco 0-5 Hi-Yield 2%
QLTA iShares AAACorp Bond 2%
Replace these with BND and TIP. QLTA, SCPB, and IEF combined are essentially the same as BND, and the other two are tiny.
VIG Vanguard Divd Appre 7%
QQQ PowerShares QQQ 6%
SPLV PowerShares Low Volatility 4%
VTI Vanguard Total stock 3%
IWM iShares Russell 2000 3%
SPY SPDR S&P 500 3%
Again, this looks like a random mix; you have Total Stock Market, large-cap, small-cap, growth, and value. If you are trying to get a generally diversified portfolio, just use VTI; if you are deliberately trying to tilt it in some way (say by overweighting small-caps), use VTI and one more fund to do that.
DXJ WisdTree Japan Hedged Eq 6%
EWH iShares MSCI HK 6%
EWG iShares Germany 3%
VEA Vanguard International 3%
ECON EGShares Emerg Mkts 2%
VWO Vanguard Emerg Mkts 1%
You are greatly overweighting Asia here. I don't think this is a deliberate decision, so you could replace the whole thing with VXUS.
IFGL iShares FSE NAREIT 6%
VNQ Vanguard REIT 6%
No simplification is needed here, but you might switch from IFGL to Vanguard's VNQI for lower expenses. (And these should not be held at all in a taxable account.) This REIT allocation also looks a bit high.
DBC PowerShares Commodity 4%
IAU iShares Gold Trust 4%
GLD Gold 1%
I don't happen to like commodities or gold, but if you do have them, there is no point in holding both IAU and GLD unless you have GLD that you don't want to sell for tax reasons.
Making all these changes, you can keep about the same allocation with:
and I would recommend dropping the last two for 10% more VTI.
I'm paying an advisor 1% to manage this portfolio (which consists of periodic rebalancing) - the portfolio is designed to protect on the downside.
It wouldn't have done this (in either the old or new form); any portfolio which is 60% stock would have lost about 20% of its value in 2000-2002 and 30% of its value in 2007-2009.