The Core Four

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Postby woof755 » Sat Sep 05, 2009 8:11 am

Here's the link to the returns for VTSMX: http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?symbol=VTSMX&country=USA

The numbers Taylor quoted are located in the column labeled "% rank in category."

That said, I wouldn't look too much into those numbers--especially, don't expect index funds to be in the top %iles for any given time period. Occasionally it happens.

What I like is the assurance that over the long-haul, my fund will do what the market does, and in doing so will beat 2/3 of its peers. The trick is, there's no way to predict who will make up the 1/3 that do better. So, I'll take my sure thing.
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Postby EvelynTroy » Sat Sep 05, 2009 8:53 am

Thank you Woof.
You noted:
That said, I wouldn't look too much into those numbers--especially, don't expect index funds to be in the top %iles for any given time period.


When I saw the category rankings which was a response to the "thrifty-three" being valid - I thought I didn't think these category performance numbers were particularly important.

Why not just give the annualized return for each of the Funds, i.e. VTSMX = currently:
3 yr. = -5.58%
5 yr. = 1.01%
10 yr. = 0.18
Investor Return being even poorer.

I guess I don't understand how using the category performance rankings makes the thrifty-three portfolio valid?
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Postby woof755 » Sat Sep 05, 2009 11:49 am

Annual % returns mean even less--you need to see them compared to the benchmark. It's not VTSMX's fault that it's down over the past 3 years--the benchmark it tracks tightly is down that much.

Past returns actually mean nothing at all. That's the beauty of index funds. Either you want to invest in the total stock market, in which case VTSMX is the best fund out there (Fidelity's spartan fund also great), or you don't.

One should not pick an equity fund based on past performance alone.
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Thank you

Postby maxrogers » Thu Sep 10, 2009 2:03 pm

I just wanted to say thanks to Rick and the others who have contributed to this thread/idea. It really helps those of us a ton who are just picking up on these concepts. Thank you for taking the time to share! :D
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Postby Lbill » Wed Jan 20, 2010 11:00 pm

This thread is worth a bump, and particular thanks to SmallHi for presenting a dynamic counterpoint to the Core 4. I learned a lot and need to learn a lot more.
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Some of the best Investing Advice.

Postby LazyNihilist » Sat Feb 19, 2011 11:11 pm

I am a newbie and starting out to invest. This has to be one of the most useful threads about investment I have ever read.

Thanks to all contributors.
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Postby Bradley » Sun Apr 17, 2011 2:11 pm

Valuethinker wrote:Real estate is an asset that gives you some inflation protection (good),.................. and long run lower returns than equities.



I just happen to come across this statement while revisiting this classic thread. Can I ask what you used as a reference or basis to make your claim? Below is a snippet and reference which seems to be in conflict with your statement.


“equity REITs outperformed the S&P 500 over the past 1-, 3-, 5-, 10-, 15-, 20-, 25-, 30- and 35-year”. (( http://www.advisorone.com/article/us-re ... ly-28-2010 )) Article included data through the end of 2010.

Thanks,
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Re: The Core Four

Postby abuss368 » Sun Aug 19, 2012 3:59 pm

Rick Ferri wrote:.
A simple way to construct a portfolio is through core holdings and extended holdings. The core holdings account for a majority of a portfolio’s risk and return characteristics. The extended holdings provide the finishing touches.

This post introduces the “Core Four” funds, and provides a brief framework for selecting extended holdings. Core funds are the cornerstones of a portfolio. They are the base from which the rest of a portfolio sits.

The “Core Four” are:

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX – fee 0.19%)
Vanguard FTSE All-World ex-US Index Fund (VFWIX – fee 0.40%)
Vanguard REIT Index Fund Investor Shares (VGSIX – fee 0.21%)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX – fee 0.20%)

An example of a 60% stock and 40% bond portfolio with the Core Four is:

36% VTSMX
18% VFWIX
06% VGSIX
40% VBMFX

The above assumes 60% of the equity in VTSMX, 30% in VFWIX, and 10% in VGSIX. Is that optimal? No one knows or can know. And quite frankly, it does not make much difference is you can add a percent here or subtract a percent or two there. It will not make much difference. For example, to keep things simple by using factors of 5%:

35% VTSMX
15% VFWIX
10% VGSIX
40% VBMFX

As Andy Rooney would say, “Close enough”.

The inclusion of extension funds can expand a portfolio beyond the core markets. Extension funds can explore new markets that are not included in the Core Four, or introduce investment strategies into a portfolio that attempt to add “Alpha”. Remember that it is not necessary to add extension funds because the Core Four drive a majority of investment performance. Extending the portfolio may earn you a slightly higher return, or lower the risk, or both. However, nothing is guaranteed.

Extension funds can explore other market that that are not included in the Core Four. For example, Treasury Inflation Protected Securities (TIPS) are not in the Vanguard Total Bond Market Index fund. Adding a TIPS fund hedges a portfolio against an unexpected increase in the inflation rate.

Extension funds are also used to tilt a portfolio to one style or another. For example, the inclusion of a value fund will overweight the style of a portfolio to value stocks in hope that a value premium will be earned for the extra risk taken.

Finally, extension funds may replace a core fund if the strategy behind the extension has the potential for higher risk adjusted returns. For example, rather than using the Vanguard FTSE All-World ex-US Index Fund, I prefer to use a 40% fixed weight in the Vanguard Pacific Stock Index Fund (VPACX – fee 0.22%), 40% in the Vanguard European Stock Index Fund (VEURX - fee 0.22%), and 20% in the Vanguard Emerging Markets Stock Index Fund (VEIEX – fee 0.37%). The slice and dice strategy has returned slightly higher returns than an All-World ex-US without adding more risk.

In summary, the Core Four is your starting point from which to expand. IMO, it can also be an ending point because those four funds explain a vast majority of investor risk and return. For people who want to explore more, you can add markets that are not in the core funds, add strategies such as overweighting value stocks, and create your own strategies by slicing and dicing.

Going into 2008, remember Von Clausewitz' epigram, "The greatest enemy of a good plan is the dream of a perfect plan."

Happy New Year ~ Stay the Course!

Rick Ferri



Hi Bogleheads,

I reread this thread and felt this is one of the better threads on the forum worth rereading and repeating. Both Rick Ferri and Taylor Larimore have provided alot of excellent information on these pages.

For many years I followed the "Core Four" and "Three Fund Portfolio" options. In addition, I met David Swensen and followed his portfolio in Unconventional Success. While I think that is also a nice portfolio to recommend, the "problem" as I see it is if an investor does not have enough tax advantaged space, the alternative is to place Treasuires, TIPS, and REITs in taxable accounts. David Swensen also recommends the highest allocation to REITs that I have seen yet. 20% or 30% of equity depending on Unconventional Success, the meeting I attended with him, or the revised portfolio.

The Core Four and Three Fund Portfolio solve this. There are less funds resulting in more simplicity and effectiveness. I have no more interest in any add on or extension funds.

I have a some family members and clients that "are on" the Core Four and Three Fund Portfolio, and I have to tell you the results have been very nice and worthwhile. At first, it just "feels strange" not having all the extra funds and complexity. Can it really be this simple?

Everything comes full circle. While I like all three of the portfolio's noted above, I really hold the Three Fund and the Core Four at the top of the list.

Presently I am following the Core Four with a slight modification in asset allocation (a little more in REITs):

Total Stock Market - 50% of equity
Total International Market - 30% of equity
REIT Index - 20% of equity

Total Bond Market/Intermediate Term Tax Exempt - 100% of bonds

Most Bogleheads would do well with the Core Four or the Three Fund Portfolio.
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Re: The Core Four

Postby SpringMan » Sun Aug 19, 2012 5:31 pm

As recently as February 2012 Mr. Bogle has recommended corporate bond funds rather than Total Bond which over weights treasuries.
http://www.indexuniverse.com/sections/f ... ield-.html
I think we ought to be thinking more about corporates in a very-low-interest environment than we should about the total bond market. I love the Total Bond Market Index Fund. I started it. But it's not the answer to all things for everybody. If people are pinched for yield, I'd recommend they have a higher weighting in a corporate bond index fund.

I have followed this advice and added VG Intermediate Investment Grade fund, though it is not an index fund.
Best Wishes, SpringMan
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Re: The Core Four

Postby abuss368 » Sun Aug 19, 2012 7:57 pm

SpringMan wrote:As recently as February 2012 Mr. Bogle has recommended corporate bond funds rather than Total Bond which over weights treasuries.
http://www.indexuniverse.com/sections/f ... ield-.html
I think we ought to be thinking more about corporates in a very-low-interest environment than we should about the total bond market. I love the Total Bond Market Index Fund. I started it. But it's not the answer to all things for everybody. If people are pinched for yield, I'd recommend they have a higher weighting in a corporate bond index fund.

I have followed this advice and added VG Intermediate Investment Grade fund, though it is not an index fund.


Hi SpringMan,

Mr. Bogle wrote this in his latest book "The Clash of the Cultures".

With David Swensen recommending Treasuries in the book Unconventional Success, I am not so sure anyone could live from this income. Perhaps Unconventional Success, which was published in 2005 when rates were higher, needs to be revised?
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Re: The Core Four

Postby G-Money » Sun Aug 19, 2012 8:39 pm

abuss368 wrote:With David Swensen recommending Treasuries in the book Unconventional Success, I am not so sure anyone could live from this income. Perhaps Unconventional Success, which was published in 2005 when rates were higher, needs to be revised?

I disagree. Swensen didn't recommend Treasuries for their yield. Treasuries have ALWAYS yielded less than corporates, agency bonds, and MBS. He (and Larry Swedroe, among many others) recommends Treasuries for their diversifying power. They have exhibited lower correlations with equities, particularly during market downturns. Look at the returns for various bond funds in Q4 2008 and Q1 2009 for the most recent example. Swensen went into great detail in his book about his reasons for recommending investors stay away from corporates and MBS. Nothing has changed from that standpoint. You just attended a lecture at which Swensen participated, so you ought to know.

What often seems to be ignored in this low interest rate environment is that expected returns for nearly ALL asset classes is lower. Corporates are yielding much less than they were 5 or 10 years ago. The expected returns of equities is also likely much lower. Is the spread between corporates and Treasuries appreciably different from 5 years ago? If not, then whatever reasons you had to choose TBM or Treasuries or whatever should likely be the same. The relative risk and the relative expected return are the same.

Remember, total return is what really matters, not yield. Otherwise we should all load up on junk bonds and call it a day.
Don't assume I know what I'm talking about.
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Re: The Core Four

Postby abuss368 » Sun Aug 19, 2012 9:40 pm

G-Money wrote:
abuss368 wrote:With David Swensen recommending Treasuries in the book Unconventional Success, I am not so sure anyone could live from this income. Perhaps Unconventional Success, which was published in 2005 when rates were higher, needs to be revised?

I disagree. Swensen didn't recommend Treasuries for their yield. Treasuries have ALWAYS yielded less than corporates, agency bonds, and MBS. He (and Larry Swedroe, among many others) recommends Treasuries for their diversifying power. They have exhibited lower correlations with equities, particularly during market downturns. Look at the returns for various bond funds in Q4 2008 and Q1 2009 for the most recent example. Swensen went into great detail in his book about his reasons for recommending investors stay away from corporates and MBS. Nothing has changed from that standpoint. You just attended a lecture at which Swensen participated, so you ought to know.

Total return is what really matters, not yield. Otherwise we should all load up on junk bonds and call it a day.



Hi G-Money,

The lecture was awesome to say the least. You are correct in your response. I was thinking out loud from an income standpoint.

The interesting thing was Dr. Swensen recommended the portfolio in Unconventional Success without exception or change (i.e. the "revised" portfolio from the Yale University Alumni Magazine - March/April 2009 - Reduce REITS 5% and increase Emerging Markets 5%).

Kind regards.
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Re: The Core Four

Postby abuss368 » Wed Aug 29, 2012 8:32 pm

Hi Bogleheads,

Any other feedback on the Core Four?

Thanks.
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Re: The Core Four

Postby dkturner » Thu Aug 30, 2012 10:12 am

G-Money wrote:
abuss368 wrote:

What often seems to be ignored in this low interest rate environment is that expected returns for nearly ALL asset classes is lower. Corporates are yielding much less than they were 5 or 10 years ago. The expected returns of equities is also likely much lower. Is the spread between corporates and Treasuries appreciably different from 5 years ago? If not, then whatever reasons you had to choose TBM or Treasuries or whatever should likely be the same. The relative risk and the relative expected return are the same.



Actually, now that you bring the subject up, the spread between corporate bonds and treasuries is appreciably different today than it was 5 years ago. The yield on 10 year Baa corporates has declined 27%, while the yield on 10 year Treasuries has declined 67%. It would seem that Mr. Bogle is more astute than your comments imply.
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Re:

Postby Ryan_in_Chi » Sat Oct 13, 2012 2:36 pm

Rick Ferri wrote:
Why not use Vanguard Total International Stock Index Fund
VGTSX


In a tax-exempt account it is "six of one, half dozen of the other." However, in a taxable account, the Vanguard FTSE All-World ex-US Index Fund is a fund of stocks and has pass through of foreign tax credits. The Vanguard Total International Stock Index fund does not because it is a fund-of-funds. Why not? Ask the IRS.

Rick Ferri


I'm sorry if this has been answered before. But, is this still correct? And, once the new index goes into effect, these will be identical, right?
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Re: Re:

Postby Taylor Larimore » Sat Oct 13, 2012 2:42 pm

Ryan_in_Chi wrote:
Rick Ferri wrote:
Why not use Vanguard Total International Stock Index Fund
VGTSX


In a tax-exempt account it is "six of one, half dozen of the other." However, in a taxable account, the Vanguard FTSE All-World ex-US Index Fund is a fund of stocks and has pass through of foreign tax credits. The Vanguard Total International Stock Index fund does not because it is a fund-of-funds. Why not? Ask the IRS.

Rick Ferri


I'm sorry if this has been answered before. But, is this still correct? And, once the new index goes into effect, these will be identical, right?


Ryan:

It is no longer correct. Vanguard Total International is no longer a fund-of-funds and is therefore now eligible for the Foreign Tax Credit.

Best wishes.
Taylor
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Re: The Core Four

Postby Ryan_in_Chi » Sat Oct 13, 2012 2:55 pm

Thanks for the quick response. I stumbled across this post in my research, and thought it was outdated, but wanted to make sure.
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 8:48 am

Wanted to ask this to all experts - what do you think about Vanguard Health Care fund (VGHCX) replacing the REIT fund in this core fund portfolio? I am pretty sure that I will be following the core four portfolio but cannot decide between REIT or HC fund. Your thoughts? Thanks.
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Re: The Core Four

Postby abuss368 » Thu Mar 14, 2013 10:31 am

jay22 wrote:Wanted to ask this to all experts - what do you think about Vanguard Health Care fund (VGHCX) replacing the REIT fund in this core fund portfolio? I am pretty sure that I will be following the core four portfolio but cannot decide between REIT or HC fund. Your thoughts? Thanks.


I would not go with Healthcare which has had a nice run.

Stocks, bonds, real estate, and cash. Everything else is a spin off of one of these assets.
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 10:34 am

abuss368 wrote:
jay22 wrote:Wanted to ask this to all experts - what do you think about Vanguard Health Care fund (VGHCX) replacing the REIT fund in this core fund portfolio? I am pretty sure that I will be following the core four portfolio but cannot decide between REIT or HC fund. Your thoughts? Thanks.


I would not go with Healthcare which has had a nice run.

Stocks, bonds, real estate, and cash. Everything else is a spin off of one of these assets.

Reasons?
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Adding REIT & Health Care funds?

Postby Taylor Larimore » Thu Mar 14, 2013 11:13 am

Jay:

Total Stock Market Index Fund already holds the market weight in both the REIT and Health Care funds. Adding these funds/stocks (which should be in tax-advantaged accounts) simply overweights the Total Stock Market Index Fund.

Best wishes
Taylor
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Re: Adding REIT & Health Care funds?

Postby jay22 » Thu Mar 14, 2013 11:15 am

Taylor Larimore wrote:Jay:

Total Stock Market Index Fund already holds the market weight in both the REIT and Health Care funds. Adding these funds/stocks (which should be in tax-advantaged accounts) simply overweights the Total Stock Market Index Fund.

Best wishes
Taylor

Yes, I understand that. But I do see value in adding the REIT/Healthcare funds as well. These would go in the IRA account and not in my taxable one.
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Re: Adding REIT & Health Care funds?

Postby STC » Thu Mar 14, 2013 11:23 am

jay22 wrote:
Taylor Larimore wrote:Jay:

Total Stock Market Index Fund already holds the market weight in both the REIT and Health Care funds. Adding these funds/stocks (which should be in tax-advantaged accounts) simply overweights the Total Stock Market Index Fund.

Best wishes
Taylor

Yes, I understand that. But I do see value in adding the REIT/Healthcare funds as well. These would go in the IRA account and not in my taxable one.


REIT you can easily justify because as a % of the economy, it is MASSIVELY under-represented in TSM.

Heathcare on the other hand is a sector bet. Do you know something about that sector that no one else on the planet knows? If not, I would shy away from making sector bets...
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 11:27 am

No, I don't know something that no one knows, but the fund is doing really well since it started - of course there is no guarantee that it will continue like that in the future, but that's one main consideration. Also, I work in the healthcare industry (payer & provider), so I understand the business better than I understand REIT and I feel I can make better decisions with that fund rather than REIT.

That said, I am open to both while I am finalizing the 4th fund in the core four portfolio.
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Re: The Core Four

Postby BBL » Thu Mar 14, 2013 11:30 am

Many proponents of REIT inclusion subscribe to the theory that REIT is a separate asset class [equity/FI/real estate, etc.] rather than just a sector fund [a subset of the equity asset class]. That’s part of the rationale many use for including REIT in a portfolio. Not everyone agrees that REIT is an asset class rather than just another sector. I’m not aware of any similar argument that health care is an asset class rather than just a sector. If you want to overweight the health care sector then fine but other than past performance or speculation about the future as pertains to the sector then I can’t see why you would want to.

Just my non-expert $.02
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Re: The Core Four

Postby STC » Thu Mar 14, 2013 11:30 am

jay22 wrote:No, I don't know something that no one knows, but the fund is doing really well since it started - of course there is no guarantee that it will continue like that in the future, but that's one main consideration. Also, I work in the healthcare industry (payer & provider), so I understand the business better than I understand REIT and I feel I can make better decisions with that fund rather than REIT.

That said, I am open to both while I am finalizing the 4th fund in the core four portfolio.


- Past performance has 0 correlation with future returns
- Knowledge of how an industry works has 0 correlation with future returns
- Over investing in the same company or sector you work in adds much risk - losing your job and seeing the sector/company plummet at the same time, due to the same causality, could very well wipe a person out.
- Sector rotation strategies have been proven to underperform TSM

Good luck.
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 11:42 am

STC wrote:
jay22 wrote:No, I don't know something that no one knows, but the fund is doing really well since it started - of course there is no guarantee that it will continue like that in the future, but that's one main consideration. Also, I work in the healthcare industry (payer & provider), so I understand the business better than I understand REIT and I feel I can make better decisions with that fund rather than REIT.

That said, I am open to both while I am finalizing the 4th fund in the core four portfolio.


- Past performance has 0 correlation with future returns
- Knowledge of how an industry works has 0 correlation with future returns
- Over investing in the same company or sector you work in adds much risk - losing your job and seeing the sector/company plummet at the same time, due to the same causality, could very well wipe a person out.
- Sector rotation strategies have been proven to underperform TSM

Good luck.

-Never said past performance has any correlation with future returns but then again, I am yet to meet/know anyone who invests in the market and does not consider the past performance of the fund.
-You would be foolish to invest in something if you don't even understand the basic business. Will it help me predict what will happen in the future? Of course not. But then again, you got to have some sense of what the sector does to make a better and informed decision.
-I won't be over investing in it, it's not like I will be allocating 50% of my portfolio to it. It'll be not more than 10-12%.
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Re: The Core Four

Postby STC » Thu Mar 14, 2013 11:46 am

jay22 wrote:-Never said past performance has any correlation with future returns but then again, I am yet to meet/know anyone who invests in the market and does not consider the past performance of the fund.
-You would be foolish to invest in something if you don't even understand the basic business. Will it help me predict what will happen in the future? Of course not. But then again, you got to have some sense of what the sector does to make a better and informed decision.
-I won't be over investing in it, it's not like I will be allocating 50% of my portfolio to it. It'll be not more than 10-12%.


- Performance chasing doesn't work
- Do you understand every business model in the entire TSM? If not, how can you possibly be investing in it?!?! Or do you simply rely on semi-effecient markets to set the price, and broadly diversify as a strategy - thereby not needing to care about the business model? Hmm..
- Tilt all you want. Just recognize, you are increasing your concentration risk because of your job, and empirical evidence suggests that you will underperform TSM by "sector picking." So if you want MORE risk with LESS expected return, have at it!
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 11:49 am

STC wrote:
jay22 wrote:-Never said past performance has any correlation with future returns but then again, I am yet to meet/know anyone who invests in the market and does not consider the past performance of the fund.
-You would be foolish to invest in something if you don't even understand the basic business. Will it help me predict what will happen in the future? Of course not. But then again, you got to have some sense of what the sector does to make a better and informed decision.
-I won't be over investing in it, it's not like I will be allocating 50% of my portfolio to it. It'll be not more than 10-12%.


- Performance chasing doesn't work
- Do you understand every business model in the entire TSM? If not, how can you possibly be investing in it?!?! Or do you simply rely on semi-effecient markets to set the price, and broadly diversify as a strategy - thereby not needing to care about the business model? Hmm..
- Tilt all you want. Just recognize, you are increasing your concentration risk because of your job, and empirical evidence suggests that you will underperform TSM by "sector picking." So if you want MORE risk with LESS expected return, have at it!

- Performance chasing doesn't work - I very well know that, thank you. But again, have you invested in a fund which didn't do well in the past?
- No, I don't understand every business model in the entire TSM, but I understand how well it's diversified and how it captures the entire market, so that alone is good enough reason for me to apply in it.
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Re: The Core Four

Postby STC » Thu Mar 14, 2013 11:53 am

jay22 wrote:- Performance chasing doesn't work - I very well know that, thank you. But again, have you invested in a fund which didn't do well in the past?
- No, I don't understand every business model in the entire TSM, but I understand how well it's diversified and how it captures the entire market, so that alone is good enough reason for me to apply in it.


- Yes. Many times. I keep my AA consistent. Meaning that I am always contributing to funds who's recent performance has been poor relative to my other holdings. Thats the buy low, sell high thing. Performance chasing is the buy high, hope to sell higher thing. Hence the empirical data has shown it to be a poor strategy.
- Great. We agree.
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Re: The Core Four

Postby abuss368 » Thu Mar 14, 2013 12:27 pm

Jay22,

A couple of things:

1). If you would not mind, could you please start a separate thread on this question, as this one relates to Rick's excellent Core 4 portfolio. In addition, you might receive better responses.

2). I believe you have already made up your mind to invest in the healthcare fund but are looking to fellow Bogleheads to agree with your reasoning. If investing in the Healthcare fund lets you sleep well at night, as Warren Buffett so often notes, then you have found your answer.

Best.
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Re: The Core Four

Postby jay22 » Thu Mar 14, 2013 12:45 pm

abuss368 wrote:Jay22,

A couple of things:

1). If you would not mind, could you please start a separate thread on this question, as this one relates to Rick's excellent Core 4 portfolio. In addition, you might receive better responses.

2). I believe you have already made up your mind to invest in the healthcare fund but are looking to fellow Bogleheads to agree with your reasoning. If investing in the Healthcare fund lets you sleep well at night, as Warren Buffett so often notes, then you have found your answer.

Best.

No, haven't made my mind. I am no expert by any means, but I want to know what other people think of it, I don't mean to make everyone else agree with it, not at all. I just wanted to know what other people think of it, is all.

Sorry, I didn't mean to spoil this thread and you're right. This thread should pertain to the core 4.
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Re: The Core Four Disapearing funds

Postby debrunsky » Thu Apr 04, 2013 1:27 pm

Rick,

Just came upon this site after looking for the correct mix of funds, my question is does the same mix you have work for someone my age. I am 72 years old, been retired for 7 years, and want to make my money last, can you show me a mix please for someone my age and with diwindling funds.

Thank you,
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Re: The Core Four Disapearing funds

Postby Rick Ferri » Thu Apr 04, 2013 2:55 pm

debrunsky wrote:Rick,

Just came upon this site after looking for the correct mix of funds, my question is does the same mix you have work for someone my age. I am 72 years old, been retired for 7 years, and want to make my money last, can you show me a mix please for someone my age and with diwindling funds.

Thank you,


Welcome to the Forum!

The Core-4 is simple diversified mix of equity and bond funds (or ETFs). An investor would allocate to stocks and to bonds based on their desire for growth, income and security. No one can say which mix of equity and fixed income is going to make your money last because we don't know anything about you or what the markets will do in the long-term. I suggest starting a post to help answer your questions following this format:

Asking Portfolio Questions

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Re: The Core Four

Postby abuss368 » Thu Apr 04, 2013 3:52 pm

Let me add that the Core-4 just rocks!
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Re: The Core Four

Postby rustymutt » Thu Apr 04, 2013 4:01 pm

Rick, I'm certain this has been ask, but here goes. Wouldn't one save about 50% in expense ratio fees with ETF's that index, rather than the more expensive ER's of the mutual funds? Looking at this as a pure long term investment, and not as a market timer.
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Re: The Core Four

Postby abuss368 » Thu Apr 04, 2013 4:03 pm

rustymutt wrote:Rick, I'm certain this has been ask, but here goes. Wouldn't one save about 50% in expense ratio fees with ETF's that index, rather than the more expensive ER's of the mutual funds? Looking at this as a pure long term investment, and not as a market timer.


Many of the Vanguard mutual funds with admiral shares have the lower expense ratio.
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Re: The Core Four

Postby Rick Ferri » Thu Apr 04, 2013 4:13 pm

rustymutt wrote:Rick, I'm certain this has been ask, but here goes. Wouldn't one save about 50% in expense ratio fees with ETF's that index, rather than the more expensive ER's of the mutual funds? Looking at this as a pure long term investment, and not as a market timer.


That's certainly the best option if your money is at Schwab or another broker because the cost to trade Vanguard ETFs is lower than Vanguard open-end funds.

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Re: The Core Four

Postby SnapShots » Thu Apr 04, 2013 6:48 pm

Save...
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Re: The Core Four

Postby ColinRWC » Fri Apr 05, 2013 2:16 am

If moving a tax-deferred portfolio into Core Four holdings now (2Q2013) with a ~20 year retirement timeline, should shorter-term bonds be considered?
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Re: The Core Four

Postby fidelio » Fri Apr 05, 2013 2:22 am

i have something pretty close in a roth at fido:

- spartan s/t treas bd fid advantage class (fsbax) 15%

- spartan extended mkt index fid adv class (fsevx) 10

- spartan real estate index fid adv class (fsrvx) 10

- sprtn total mkt indx fid advantage class (fstvx) 40

- fidelity inter bond (fthrx) 25
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Re: The Core Four

Postby Rick Ferri » Fri Apr 05, 2013 9:20 am

ColinRWC wrote:If moving a tax-deferred portfolio into Core Four holdings now (2Q2013) with a ~20 year retirement timeline, should shorter-term bonds be considered?


There's been a lot of discussion about that lately. My opinion is no. With a 20 year time horizon, you should stay in intermediate-term bonds.

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Re: The Core Four

Postby Kuckie » Fri Apr 05, 2013 4:56 pm

Why not use Vanguard Total International Stock Index Fund VGTSX

In a tax-exempt account it is "six of one, half dozen of the other." However, in a taxable account, the Vanguard FTSE All-World ex-US Index Fund is a fund of stocks and has pass through of foreign tax credits.


According to Vanguard, the Total International Stock Index Fund is a fund of stocks and does pass through all foreign tax credits. (change was made in 2009). However it does not really matter which fund is held as they both have similar expense ratios.
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Re: The Core Four

Postby retiredjg » Fri Apr 05, 2013 6:43 pm

Kuckie wrote:
Why not use Vanguard Total International Stock Index Fund VGTSX

In a tax-exempt account it is "six of one, half dozen of the other." However, in a taxable account, the Vanguard FTSE All-World ex-US Index Fund is a fund of stocks and has pass through of foreign tax credits.


According to Vanguard, the Total International Stock Index Fund is a fund of stocks and does pass through all foreign tax credits. (change was made in 2009). However it does not really matter which fund is held as they both have similar expense ratios.

When this thread was started, the Vanguard Total International Stock Index fund was a fund of funds - no foreign tax credit. The FTSE was considered a better choice for taxable back then. Now, the Total International Index has changed (twice) and is the preferred fund. In addition, it contains foreign small caps which are missing in the FTSE fund.
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Re: The Core Four

Postby ColinRWC » Fri Apr 05, 2013 9:38 pm

retiredjg wrote:When this thread was started, the Vanguard Total International Stock Index fund was a fund of funds - no foreign tax credit. The FTSE was considered a better choice for taxable back then. Now, the Total International Index has changed (twice) and is the preferred fund. In addition, it contains foreign small caps which are missing in the FTSE fund.


Might be helpful to update the OP to show Total Int'l rather than FTSE. I spent some time wrestling with the differences too, and things have changed since 2007...
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Re: The Core Four

Postby Rick Ferri » Fri Apr 05, 2013 10:32 pm

ColinRWC wrote:Might be helpful to update the OP to show Total Int'l rather than FTSE. I spent some time wrestling with the differences too, and things have changed since 2007...


OK, the NEW...

Core-4 Investor Class share funds are:

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX – fee 0.18%)
Vanguard Total International Stock Index Fund Investor Shares (VGTSX – fee 0.22%)
Vanguard REIT Index Fund Investor Shares (VGSIX – fee 0.24%)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX – fee 0.22%)


Core-4 Admiral Class share funds are:

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX - fee 0.06%)
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX - fee 0.16%)
Vanguard REIT Index Fund Admiral Shares (VGSLX - fee 0.10%)
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX - fee 0.10%)

Core-4 Investor ETF Class share funds are:

Vanguard Total Stock Market ETF (VTI - fee 0.06%)
Vanguard Total International Stock ETF (VXUS - fee 0.16%)
Vanguard REIT ETF (VNQ - fee 0.10%)
Vanguard Total Bond Market ETF (BND - fee 0.10%)

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Re: The Core Four

Postby moneytalksloud » Mon Mar 10, 2014 3:04 pm

Rick Ferri wrote:
ColinRWC wrote:Might be helpful to update the OP to show Total Int'l rather than FTSE. I spent some time wrestling with the differences too, and things have changed since 2007...


OK, the NEW...

Core-4 Investor Class share funds are:

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX – fee 0.18%)
Vanguard Total International Stock Index Fund Investor Shares (VGTSX – fee 0.22%)
Vanguard REIT Index Fund Investor Shares (VGSIX – fee 0.24%)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX – fee 0.22%)


Core-4 Admiral Class share funds are:

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX - fee 0.06%)
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX - fee 0.16%)
Vanguard REIT Index Fund Admiral Shares (VGSLX - fee 0.10%)
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX - fee 0.10%)

Core-4 Investor ETF Class share funds are:

Vanguard Total Stock Market ETF (VTI - fee 0.06%)
Vanguard Total International Stock ETF (VXUS - fee 0.16%)
Vanguard REIT ETF (VNQ - fee 0.10%)
Vanguard Total Bond Market ETF (BND - fee 0.10%)

Rick Ferri


Thank you all for this advice.
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Re: The Core Four

Postby genefl » Tue Jun 10, 2014 11:27 pm

This has been a great thread to read through.

I have been sitting on a large sum of cash for quite a while and am very interested in the Core Four.

Is it better to buy in increments over the next 6-12 months or buy in over a shorter period of time with larger increments?

Also, I read the post that owning real estate rentals may obviate the need for a REIT. My father feels that his rental properties act as bonds and so he is 100% in equities. Thoughts on this approach?

Thanks,

Gene
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Re: The Core Four

Postby EmergDoc » Wed Jun 11, 2014 12:20 am

Real estate isn't bonds.

Nice to see a thread on something besides the 3 fund though.
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Answer to questions

Postby Taylor Larimore » Wed Jun 11, 2014 8:45 am

Gene:
Is it better to buy in increments over the next 6-12 months or buy in over a shorter period of time with larger increments?

It depends mostly on your risk-tolerance. If you would have 'buyer's regret' to see the markets plunge immediately after buying, it would be better to invest in longer increments.
Also, I read the post that owning real estate rentals may obviate the need for a REIT. My father feels that his rental properties act as bonds and so he is 100% in equities. Thoughts on this approach?

Stocks can be expected to decline at least 50% in a bad bear market. If your father can handle such a loss without selling, losing sleep, or changing his lifestyle, I think 100% equity is acceptable.

Best wishes.
Taylor
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