Equity portfolio with 4 VG funds instead of 2

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Equity portfolio with 4 VG funds instead of 2

Postby BornInCA » Tue Feb 19, 2013 11:42 am

I am curious on people's thoughts on evenly divided portfolio of 4 Vanguard funds. I know the popular one is "only 2 Vanguard funds are needed for the equity side of the portfolio: Vanguard Total Stock Market Index (VTSMX/VTSAX/VTI) and Vanguard Total International Stock Index (VGTSX/VTIAX/VXUS)". In addition to the 2 funds, how about another 2 Vanguard Funds: Vanguard Small Cap Value Index (VISVX/VSIAX/VBR) and Vanguard FTSE All-World ex-US Small Cap (VSS)?

An even split would lead to:
25% VTSAX
25% VTIAX
25% VSIAX
25% VSS

A morningstar Portfolio X-ray yielded the 9-box result:
13-13-13
11-11-8
16-11-5

I noticed that VSIAX is different than other small cap value funds and ETFs. In order to keep turnover low and trade less frequently, it owns stocks that are in the categories of small-cap blend, small-cap growth, mid-cap value, and mid-cap blend. I believe (though not sure) that all the stocks that VSIAX purchased were classified as small-cap value at the time of purchase. Thus, I view VSIAX as a small-cap U.S. stock fund that tries to be as small-cap-valuey as possible while striving to keep turnover low.

VSS is well-diversified at 3000+ stocks.

Thus, I wonder if anyone else has considered this 4-Vanguard-fund allocation for the equity side of their portfolio. Does this give the small-cap tilt and the value-tilt that one desires all while maintaining broad diversification and keeping costs low?
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Re: Equity portfolio with 4 VG funds instead of 2

Postby Random Musings » Tue Feb 19, 2013 11:49 am

I'd probably use an ETF on the domestic side if you want more small-value loading (plus some don't have REIT's in them). I can't recall which one Larry S now utilizes (I don't think it's DFA anymore). Internationally, you can attempt to do the same.

Nothing wrong with utilizing this approach on the equity side; however you have to stick with your written investment plan for the long run.

Has anyone else considered this approach? The simple answer is yet - the gamut runs from the capitalized market approach to the small-value loading only approach. And as ZZ top once said, "and all points in between."

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Re: Equity portfolio with 4 VG funds instead of 2

Postby grayfox » Tue Feb 19, 2013 11:51 am

BornInCA wrote:I am curious on people's thoughts on evenly divided portfolio of 4 Vanguard funds. I know the popular one is "only 2 Vanguard funds are needed for the equity side of the portfolio: Vanguard Total Stock Market Index (VTSMX/VTSAX/VTI) and Vanguard Total International Stock Index (VGTSX/VTIAX/VXUS)". In addition to the 2 funds, how about another 2 Vanguard Funds: Vanguard Small Cap Value Index (VISVX/VSIAX/VBR) and Vanguard FTSE All-World ex-US Small Cap (VSS)?

An even split would lead to:
25% VTSAX
25% VTIAX
25% VSIAX
25% VSS


Sounds interesting. I don't have time now, but I''ll look at it later.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby BBL » Tue Feb 19, 2013 11:52 am

That's close to the 'Trev H' simplified UBH port if my memory serves. Have you read any of his threads?

Trev H wrote:
The exact Vanguard Funds that could be used to setup the Simplified Ultimate Buy and Hold LB,SV,ILV,IS combo..

LB = Large Cap Index or 500 Index
SV = Small Cap Value Index
ILV = International Value
ISB = FTSE X-US Intl Small Cap (or International Explorer).

If you wanted to stick with all Index funds then could sub FTSE X-US Intl Large Cap fund for International Value.

On the Bond allocation side, I would suggest InterTerm Treasury Bonds and TIPS.


Not an unpopular port based on past threads.

EDIT: Let me add that my quote grab is from 2011 so there may be a newer tweek or two. You can forum search him for more recent info if interested.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby mike_slc » Tue Feb 19, 2013 12:01 pm

I do:

40% TSM
30% SCV
20% TISM
10% VSS

Not an even split but still simple and easy to manage across multiple taxable and tax-advantaged accounts. An even split is too much tilt and too much international for me.
Last edited by mike_slc on Tue Feb 19, 2013 3:22 pm, edited 1 time in total.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby retiredjg » Tue Feb 19, 2013 12:45 pm

BornInCA wrote:Thus, I wonder if anyone else has considered this 4-Vanguard-fund allocation for the equity side of their portfolio.

I use these 4 funds. Not in an even split, but more like small overweights of the 2 small cap funds.

The even split idea does have a lot in common with Trev H's portfolio, but this idea is not as "valuey".
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Re: Equity portfolio with 4 VG funds instead of 2

Postby BornInCA » Sun Feb 24, 2013 4:39 pm

I looked at some of Trev H's messages. They're old and were posted I believe before VSS was available, Vanguard improved its Total International Index fund, Vanguard offered Admiral shares for Small Cap Value index fund, and before Vanguard changed index providers for its index funds across the board. I'd need a new update from Trev H. ;)
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Re: Equity portfolio with 4 VG funds instead of 2

Postby grayfox » Sat Mar 16, 2013 12:16 pm

grayfox wrote:
BornInCA wrote:I am curious on people's thoughts on evenly divided portfolio of 4 Vanguard funds. I know the popular one is "only 2 Vanguard funds are needed for the equity side of the portfolio: Vanguard Total Stock Market Index (VTSMX/VTSAX/VTI) and Vanguard Total International Stock Index (VGTSX/VTIAX/VXUS)". In addition to the 2 funds, how about another 2 Vanguard Funds: Vanguard Small Cap Value Index (VISVX/VSIAX/VBR) and Vanguard FTSE All-World ex-US Small Cap (VSS)?

An even split would lead to:
25% VTSAX
25% VTIAX
25% VSIAX
25% VSS


Sounds interesting. I don't have time now, but I''ll look at it later.


VTSMX 4/27/1992
VGTSX 4/29/1996
VISVX 5/21/1998
VSS 4/2/2009

I tried analyzing that portfolio, but I notice that VSS doesn't have much of a history. It started on 4/2/2009. Is there some other similar fund that goes back further, like to 1999? Would Vanguard International Explorer Fund (VINEX), started on 11/4/1996, be similar to VSS?
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Re: Equity portfolio with 4 VG funds instead of 2

Postby BornInCA » Sat Mar 16, 2013 1:28 pm

grayfox wrote:
grayfox wrote:
BornInCA wrote:I am curious on people's thoughts on evenly divided portfolio of 4 Vanguard funds. I know the popular one is "only 2 Vanguard funds are needed for the equity side of the portfolio: Vanguard Total Stock Market Index (VTSMX/VTSAX/VTI) and Vanguard Total International Stock Index (VGTSX/VTIAX/VXUS)". In addition to the 2 funds, how about another 2 Vanguard Funds: Vanguard Small Cap Value Index (VISVX/VSIAX/VBR) and Vanguard FTSE All-World ex-US Small Cap (VSS)?

An even split would lead to:
25% VTSAX
25% VTIAX
25% VSIAX
25% VSS


Sounds interesting. I don't have time now, but I''ll look at it later.


VTSMX 4/27/1992
VGTSX 4/29/1996
VISVX 5/21/1998
VSS 4/2/2009

I tried analyzing that portfolio, but I notice that VSS doesn't have much of a history. It started on 4/2/2009. Is there some other similar fund that goes back further, like to 1999? Would Vanguard International Explorer Fund (VINEX), started on 11/4/1996, be similar to VSS?


I don't think so because VINEX is far less diversified than VSS. Maybe the best think to look at is the history of it's benchmark minus fees.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby grayfox » Sat Mar 16, 2013 1:37 pm

BornInCA wrote:
VTSMX 4/27/1992
VGTSX 4/29/1996
VISVX 5/21/1998
VSS 4/2/2009

I tried analyzing that portfolio, but I notice that VSS doesn't have much of a history. It started on 4/2/2009. Is there some other similar fund that goes back further, like to 1999? Would Vanguard International Explorer Fund (VINEX), started on 11/4/1996, be similar to VSS?


I don't think so because VINEX is far less diversified than VSS. Maybe the best think to look at is the history of it's benchmark minus fees.


I would need a fund or a symbol so that I can get data from Yahoo.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby retiredjg » Sat Mar 16, 2013 3:55 pm

You might see if the mutual fund version has more history. VFSVX. However I don't think this will help for more than an extra a year or so, if any. There just was not much happening in small cap international index funds at Vanguard until recently. I don't know if other companies had them or not.
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Re: Equity portfolio with 4 VG funds instead of 2

Postby grayfox » Sat Mar 16, 2013 4:23 pm

It looks like VFSVX started same time as VSS, 2009. I want to use data that include the last couple of cycles, so back to 1990s.

For analysis, I'm just gonna use Vanguard International Explorer Fund (VINEX) as proxy for International Small-cap. It's been around since 11/04/1996.

Product summary
This aggressive fund invests in smaller companies that are expected to grow at a faster pace than the overall market. The fund primarily invests in the developed European and Pacific markets, with about 10% of assets invested in emerging markets. The fund invests in more than 350 stocks in over 20 countries. In addition to stock market risk, the fund is also subject to currency risk and country risk. The fund may also experience heightened volatility because of its focus on small-cap stocks, which tend to be more volatile than larger stocks. Long-term investors looking to complement an already diversified international portfolio may wish to consider this fund


Edit: I found another DFA International Small Cap Value Portfolio (DISVX) that goes back to the 1990s. Over past 10 years, DISVX and VINEX look similar, but VINEX outperformed DISVX by a wide margin in the late 1990s.

VINEX vs. DISVX since 2003
Click Maximum to see back to 1996

However, DIY investors can't invest in DISVX so I'm going to use VINEX for analysis.
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