Rick Ferri's Portfolio
Re: Rick Ferri's Portfolio
Rick
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Is there a time when you won't carry this in your portfolio or maybe switch to VUSTX?
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Is there a time when you won't carry this in your portfolio or maybe switch to VUSTX?
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
That is a VERY good question. Not VUSTX, but perhaps intermediate-term investment grade. The answer is perhaps...but not yet. Spreads are still attractive relative to investment grade corporate. I consider the ratio of yields rather than just the spread, and also the fees of the fund relative to yield. That's how I made a decision on emerging market debt a few years ago. Right now, I'm holding my position and rebalancing as HY has gained or lost. This had added extra return to the bond side in addition to higher yield. So, to muddy the water more, my answer is a definite maybe.
Rick Ferri
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
-
- Posts: 1552
- Joined: Fri Sep 07, 2012 12:18 am
Re: Rick Ferri's Portfolio
Rick, let me preface my question by stating that I have one of your book's and Bernstein's 4 Pillars books on my table and am going through them regarding this question. Nevertheless, the thread is open so here's goes:Rick Ferri wrote:I wrote a blog that explains this concept:
The Total Economy Portfolio
I also wrote a similar article on this concept for the Forbes Investing Guide (print) and on their website:
Forbes Investment Guide -The Total Economy Portfolio.
Rick Ferri
In your Economic Tilt example, why not just use large cap instead of TSM? You might save .07 on the ER. And, I thought I read somewhere (F & F?) That the mid cap stocks were pretty irrelevant assuming had already large cap. My investing thesis had been. - as a percentage of equity - 40pct large cap, 30 pct small cap, and 30 pct international. And that TSM vs S&P500 was largely indistinguishable as far as ris or return were concerned due to relative weightings.
In practice, I just realized that my own allocation is not what I thought. Instead of small cap, I realize I have had small/mid cap, which tracks the Russell 3000(ex SP500), NOT the Russell 2000 as I thought. I guess 14 years ago when I set it up, I must have figured the large and separate small/mid-cap was approximating the market sufficiently. I don't think the Wilshire 5000 was in vogue quite yet. To make things slightly more confusing, my wife's 401k has TSM and the small/mid in the rough percentages I described.
So now, I'm trying to rejigger the allocations to be more elegant. I'm thinking of either something very similar to your economic tilt, but trying to figure out if it matters whether to use TSM or Large Cap as that US Stock anchor.
Thoughts? I may need to top post with a new full port format as I also have some bomnd allocation questions....
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
I prefer to start all portfolios with four legs of a stool:
1) Total US stock Market
2) Total Developed International Markets
3) Total Emerging Markets
4) Total Bond Market
From here, a portfolio can be sliced and diced as desired or needed. I add small-value exposure to each equity position (US, Developed, Emerging) and I add REITs to US. This provides the economic tilt as written on the article. I also divide equally between Pacific and Europe developed markets for better currency diversification. On the bond side, I add TIPS and high yield to make a total total market bond portfolio.
These are strategy considerations. It doesn't change philosophy. We both have the same philosophy, but your strategy is yours and mine is mine. There is no right or wrong answer as long as you have good reason to do something and have the discipline to stay the course.
Rick Ferri
1) Total US stock Market
2) Total Developed International Markets
3) Total Emerging Markets
4) Total Bond Market
From here, a portfolio can be sliced and diced as desired or needed. I add small-value exposure to each equity position (US, Developed, Emerging) and I add REITs to US. This provides the economic tilt as written on the article. I also divide equally between Pacific and Europe developed markets for better currency diversification. On the bond side, I add TIPS and high yield to make a total total market bond portfolio.
These are strategy considerations. It doesn't change philosophy. We both have the same philosophy, but your strategy is yours and mine is mine. There is no right or wrong answer as long as you have good reason to do something and have the discipline to stay the course.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
-
- Posts: 1552
- Joined: Fri Sep 07, 2012 12:18 am
Re: Rick Ferri's Portfolio
Thanks for the inputs and insight on our common philosophy. Good times.Rick Ferri wrote:I prefer to start all portfolios with four legs of a stool:
1) Total US stock Market
2) Total Developed International Markets
3) Total Emerging Markets
4) Total Bond Market
From here, a portfolio can be sliced and diced as desired or needed. I add small-value exposure to each equity position (US, Developed, Emerging) and I add REITs to US. This provides the economic tilt as written on the article. I also divide equally between Pacific and Europe developed markets for better currency diversification. On the bond side, I add TIPS and high yield to make a total total market bond portfolio.
These are strategy considerations. It doesn't change philosophy. We both have the same philosophy, but your strategy is yours and mine is mine. There is no right or wrong answer as long as you have good reason to do something and have the discipline to stay the course.
Rick Ferri
- abuss368
- Posts: 27850
- Joined: Mon Aug 03, 2009 2:33 pm
- Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
- Contact:
Re: Rick Ferri's Portfolio
Rick,
In terms of the Intermediate Term TIPS fund in your portfolio, are you planning to stay with this fund or are you considering changing to the Short Term TIPS Index fund considering Vanguard's recent change to the Target and Life funds?
In terms of the Intermediate Term TIPS fund in your portfolio, are you planning to stay with this fund or are you considering changing to the Short Term TIPS Index fund considering Vanguard's recent change to the Target and Life funds?
John C. Bogle: “Simplicity is the master key to financial success."
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
I could not care less what Vanguard does in their balanced funds.
Rick Ferri
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Rick Ferri's Portfolio
Mr Ferri,Rick Ferri wrote:I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.
Rick Ferri
Is VBR an acceptable alternative to IJS In your opinion? Thank you.
https://personal.vanguard.com/us/FundsS ... IntExt=INT
Thanks
Last edited by xram on Sun Mar 10, 2013 3:55 pm, edited 1 time in total.
VTI, VBR, VTWV, SCHH, VXUS, VEA, VWO, VSS, FM, VNQI, VBTLX, VFITX, SCHP, VWITX, IBONDS, EEBONDS, EF(EverBank), UTAH-529
Re: Rick Ferri's Portfolio
Since VWEHX is closed to new investors, do you have a second choice?fishdrzig wrote:Rick
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Is there a time when you won't carry this in your portfolio or maybe switch to VUSTX?
This should be held in tax-advantaged space?
Roth IRA versus 401k, make a difference?
Thank you very much,
Xram
VTI, VBR, VTWV, SCHH, VXUS, VEA, VWO, VSS, FM, VNQI, VBTLX, VFITX, SCHP, VWITX, IBONDS, EEBONDS, EF(EverBank), UTAH-529
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
Yes, but you probably can't buy it. It's the TIAA-CREF High Yield Fund institutional share class. iShares High Yield Corporate Bond ETF (HYG) is OK if you absolutely must have HY. The 0.50% fee is a killer and the fund can develop large discounts to NAV on volatile days.
HY would go in a tax-sheltered account if you're in a high tax bracket. The type doesn't matter.
Rick Ferri
HY would go in a tax-sheltered account if you're in a high tax bracket. The type doesn't matter.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
- Mel Lindauer
- Moderator
- Posts: 35782
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: Rick Ferri's Portfolio
If you're a Flagship Client willing to invest $50,000 or more, you still can get in via VWEAX.xram wrote:Since VWEHX is closed to new investors, do you have a second choice?fishdrzig wrote:Rick
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Is there a time when you won't carry this in your portfolio or maybe switch to VUSTX?
This should be held in tax-advantaged space?
Roth IRA versus 401k, make a difference?
Thank you very much,
Xram
Best Regards - Mel |
|
Semper Fi
Re: Rick Ferri's Portfolio
"And remember that I spent the first 8 years out of college serving in the Marines."
Thanks so much Rick for serving our country.
Thanks so much Rick for serving our country.
Re: Rick Ferri's Portfolio
Mel,
Can you elaborate on VWEAX being available for $50K+ if a Flagship client. If I search on the VG website it shows as being closed. Is it open under some special situation or condition? Thanks.
Oops! While not on the VG site under the fund listing, the closure announcement of 5/24/2012 does state it remains available to the clients of Vanguard Flagship Services, so I suspect that is what your mean.
Can you elaborate on VWEAX being available for $50K+ if a Flagship client. If I search on the VG website it shows as being closed. Is it open under some special situation or condition? Thanks.
Oops! While not on the VG site under the fund listing, the closure announcement of 5/24/2012 does state it remains available to the clients of Vanguard Flagship Services, so I suspect that is what your mean.
Tom D.
- Mel Lindauer
- Moderator
- Posts: 35782
- Joined: Mon Feb 19, 2007 7:49 pm
- Location: Daytona Beach Shores, Florida
- Contact:
Re: Rick Ferri's Portfolio
Just go to your account and attempt to make an exchange into the fund. If you qualify, the exchange will go through.tomd37 wrote:Mel,
Can you elaborate on VWEAX being available for $50K+ if a Flagship client. If I search on the VG website it shows as being closed. Is it open under some special situation or condition? Thanks.
Oops! While not on the VG site under the fund listing, the closure announcement of 5/24/2012 does state it remains available to the clients of Vanguard Flagship Services, so I suspect that is what your mean.
Best Regards - Mel |
|
Semper Fi
Re: Rick Ferri's Portfolio
Thank you..Rick Ferri wrote:Yes, but you probably can't buy it. It's the TIAA-CREF High Yield Fund institutional share class. iShares High Yield Corporate Bond ETF (HYG) is OK if you absolutely must have HY. The 0.50% fee is a killer and the fund can develop large discounts to NAV on volatile days.
HY would go in a tax-sheltered account if you're in a high tax bracket. The type doesn't matter.
Rick Ferri
http://etfdb.com/index/iboxx--liquid-hi ... sortdir/a/
Anybody else have any suggestions. See link above.
Thanks
VTI, VBR, VTWV, SCHH, VXUS, VEA, VWO, VSS, FM, VNQI, VBTLX, VFITX, SCHP, VWITX, IBONDS, EEBONDS, EF(EverBank), UTAH-529
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: Rick Ferri's Portfolio
xram:
Best wishes.
Taylor
Portfolios can get along very nicely without a Hi-Yield bond fund.Anybody else have any suggestions.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Rick Ferri's Portfolio
Thanks. I'm sure you are correct. Mr. Swedroe doesn't recommend one. Mr. Ferri has one in his portfolio. Right now corporates only make up 3.9% of my bond side (added up all the little bits in my other funds but no free standing high yield corporate fund). I decided to adjust my bond side to the following. Betting on all the horses! (the swedroe horse and the ferri horse )Taylor Larimore wrote:xram:Portfolios can get along very nicely without a Hi-Yield bond fund.Anybody else have any suggestions.
Best wishes.
Taylor
Fixed Income.....................35%
Total U.S. Bond Market..........10%
Intermediate Treasury Fund....9%
International Bond Fund........4%
TIPS.................................4%
National MUNI Fund..............4%...... <----- plus more muni when I run out of tax advantaged space
High Yield Corporate............4%
+...I-BONDS ....................$25,500
+...EE-BONDS ....................$10,000
VTI, VBR, VTWV, SCHH, VXUS, VEA, VWO, VSS, FM, VNQI, VBTLX, VFITX, SCHP, VWITX, IBONDS, EEBONDS, EF(EverBank), UTAH-529
Re: Rick Ferri's Portfolio
Mr Ferri,
Is VBR an acceptable alternative to IJS In your opinion? Thank you.
https://personal.vanguard.com/us/FundsS ... IntExt=INT
Thanks
Is VBR an acceptable alternative to IJS In your opinion? Thank you.
https://personal.vanguard.com/us/FundsS ... IntExt=INT
Thanks
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
Other product swaps are also acceptable providing the low-fee and broad diversification philosophy remains in tact.
Rick
Rick
Last edited by Rick Ferri on Thu Mar 14, 2013 6:00 pm, edited 1 time in total.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
-
- Posts: 844
- Joined: Sat Apr 10, 2010 6:02 pm
Re: Rick Ferri's Portfolio
Thank you, Rick, for sharing this!
Couple of questions:
- would you say VXUS is a good substitute for VPL and VGK? I realize VXUS also includes small caps but just as well on US side, you have VTI (which includes small caps) + separate small cap fund. Or are there some advantages (rebalancing?) for keeping VPL and VGK separate?
- since you use REITs on US side, does it make sense to use a REIT fund on international side as well? (Or would it be too small of a size to matter given that you have Int'l as a smaller part of overall break-down?)
Thanks again
Couple of questions:
- would you say VXUS is a good substitute for VPL and VGK? I realize VXUS also includes small caps but just as well on US side, you have VTI (which includes small caps) + separate small cap fund. Or are there some advantages (rebalancing?) for keeping VPL and VGK separate?
- since you use REITs on US side, does it make sense to use a REIT fund on international side as well? (Or would it be too small of a size to matter given that you have Int'l as a smaller part of overall break-down?)
Thanks again
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
Your strategy may differ from others in the funds you select to represent asset classes. It will make little difference in return. It's the philosophy that matters. Philosophy makes a big difference in returns.
Rick Ferri
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Rick Ferri's Portfolio
Is anyone aware of international SCV funds or ETFs that cover both developed and emerging markets for non DFA accounts?
International SCV seems like the one area non-DFA investors have few good choices.
I know Rick mentioned a few years back that Russell was looking to enter this area with a new entry but I haven't seen any additional updates since.
TIA...
International SCV seems like the one area non-DFA investors have few good choices.
I know Rick mentioned a few years back that Russell was looking to enter this area with a new entry but I haven't seen any additional updates since.
TIA...
-
- Posts: 844
- Joined: Sat Apr 10, 2010 6:02 pm
Re: Rick Ferri's Portfolio
Hi Rick, based on your book (All about Asset Allocation), BRSIX's advantage is that it covers different market segment with average market cap of less than 200M (currently 156M per M*), while I see that funds like IJS and VBR have average market cap of its companies at 1.1B and 1.4B. Again, according to M*, IJS has 30% of its portfolio in Micro-caps, VBR has 20%, BRSIX - 99.8%.Rick Ferri wrote:I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.
Rick Ferri
So, could you elaborate on why this switch makes sense - even with less number of stocks, they seem to cover different market segments?
If you are saying that while in the past you thought the cost difference was not enough to deter from this asset class but now you think it is, I think that's reasonable. But if there is another reason, I'd like to understand it. Were VBR/IJS having even less of micro-cap coverage in the past than now and 20-30% is enough to compensate for cost difference? Or is BRSIX now more into growth part of the market (which I think it is vs VBR/IJS), which may cancel its usefulness? Or was there more research showing that diversification effect of micro vs small is not large enough as once thought?
Thanks!
-
- Posts: 38
- Joined: Sun Feb 24, 2013 4:33 pm
Re: Rick Ferri's Portfolio
Curious how Rick or others sugest tilting international to SCV when DFA funds aren't available? What funds do people use? For example, there's no international equivalent to Vanguard Small-Cap Value Index Fund in Vanguard's offerings, I don't think.
Or, do people just tilt U.S. equities only? If so, should they be tilted even more to compensate for international equities not being tilted? Or am I over-complicating this...
Or, do people just tilt U.S. equities only? If so, should they be tilted even more to compensate for international equities not being tilted? Or am I over-complicating this...
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
There are MANY ways to tilt to small value in the US and internationally. I happen to think RAFI and Wisdom Tree ETF products are a good place to look. There are numerous others. DFA is option that's only open to advisers and some 401(k) plans, but don't let that stop you from exploring everything else out there. There was value and small cap investing long before there was DFA.
Rick Ferri
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
-
- Posts: 38
- Joined: Sun Feb 24, 2013 4:33 pm
Re: Rick Ferri's Portfolio
Thanks Rick.
I was mostly referring to the fact that it's relatively easy to tilt to small-value in the US with a two-fund approach using TSM plus a small-value fund, like VBR (Vanguard Small-Cap Value) or what you have, IJS. There are a fair amount of US funds like these which are heavily weighted towards small-value.
But a two fund approach on the international side seems more challenging. DFA seems to have the only fund actually targeting foreign small value. Other foreign "small cap" funds have lots of mid caps - e.g. Wisdom Tree DLS has 55% mid cap vs. something on the US side like IJS which has only 4%. There doesn't seem to be much consensus on this board on which funds to use to tilt foreign equities to small value, or at least the puzzle isn't as easy as it is on the US side.
I was mostly referring to the fact that it's relatively easy to tilt to small-value in the US with a two-fund approach using TSM plus a small-value fund, like VBR (Vanguard Small-Cap Value) or what you have, IJS. There are a fair amount of US funds like these which are heavily weighted towards small-value.
But a two fund approach on the international side seems more challenging. DFA seems to have the only fund actually targeting foreign small value. Other foreign "small cap" funds have lots of mid caps - e.g. Wisdom Tree DLS has 55% mid cap vs. something on the US side like IJS which has only 4%. There doesn't seem to be much consensus on this board on which funds to use to tilt foreign equities to small value, or at least the puzzle isn't as easy as it is on the US side.
-
- Posts: 38
- Joined: Sun Feb 24, 2013 4:33 pm
Re: Rick Ferri's Portfolio
Another question for you Rick.
In this blog post of yours you advocate 2/3 in a TSM fund and 1/3 in a SCV fund.
http://www.rickferri.com/blog/strategy/ ... ue-stocks/
But there are so many different SCV funds, and a 1/3 position in each results in different style boxes.
For example, 2/3 in TSM and 1/3 in VBR (Vanguard Small Cap Value) results in:
16 16 16
7 7 5
17 11 5
But replacing VBR with RZV (S&P SmallCap 600 Pure Value) which lots of people use changes this to:
16 16 16
4 4 4
22 12 5
Are those differences significant to you? That's an extra 5% in SCV. Do you still recommend 1/3 in SCV regardless of which SCV fund you use?
In this blog post of yours you advocate 2/3 in a TSM fund and 1/3 in a SCV fund.
http://www.rickferri.com/blog/strategy/ ... ue-stocks/
But there are so many different SCV funds, and a 1/3 position in each results in different style boxes.
For example, 2/3 in TSM and 1/3 in VBR (Vanguard Small Cap Value) results in:
16 16 16
7 7 5
17 11 5
But replacing VBR with RZV (S&P SmallCap 600 Pure Value) which lots of people use changes this to:
16 16 16
4 4 4
22 12 5
Are those differences significant to you? That's an extra 5% in SCV. Do you still recommend 1/3 in SCV regardless of which SCV fund you use?
-
- Posts: 844
- Joined: Sat Apr 10, 2010 6:02 pm
Re: Rick Ferri's Portfolio
Hi Rick, I think you might have missed my question above (Indexer replied right after with another one and you might have thought this thread was revived by his post). Would love to hear you response here as I am trying to understand this better. Thanks!
learning_head wrote:Hi Rick, based on your book (All about Asset Allocation), BRSIX's advantage is that it covers different market segment with average market cap of less than 200M (currently 156M per M*), while I see that funds like IJS and VBR have average market cap of its companies at 1.1B and 1.4B. Again, according to M*, IJS has 30% of its portfolio in Micro-caps, VBR has 20%, BRSIX - 99.8%.Rick Ferri wrote:I no longer own the Bridgeway Ultra-Small Company Fund (BRSIX). The proceeds are now divided between IJS and VTI. The number of stocks on US exchanges has dimished down to about 3,600 from 7,000 in the 1990s. A small value fund and a total market fund covers them all equitably and at less cost than including BRSIX.
Rick Ferri
So, could you elaborate on why this switch makes sense - even with less number of stocks, they seem to cover different market segments?
If you are saying that while in the past you thought the cost difference was not enough to deter from this asset class but now you think it is, I think that's reasonable. But if there is another reason, I'd like to understand it. Were VBR/IJS having even less of micro-cap coverage in the past than now and 20-30% is enough to compensate for cost difference? Or is BRSIX now more into growth part of the market (which I think it is vs VBR/IJS), which may cancel its usefulness? Or was there more research showing that diversification effect of micro vs small is not large enough as once thought?
Thanks!
- backofbeyond
- Posts: 480
- Joined: Tue Apr 01, 2008 1:07 pm
Re: Rick Ferri's Portfolio
For those of us with access to TSP, how would you compare the G and F funds to Rick's bond allocations? That is, if you were attempting to as closely mirror Rick's allocation to Bonds: What would G & F replace and what would be left on the plate that you'd have to go outside of TSP to replicate?
Thanks!
Thanks!
The question isn't at what age I want to retire, it is at what income. - George Foreman
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
The number of stocks on the US equity market has shrunk from about 7600 in 1996 to about 3600 today. Consequently, small cap stocks and micro cap stocks are overlapping in many index funds. Also, BRSIX is not a cheap fund. The fee was about 0.65%. The weighted average cost of all other funds in the portfolio was about 0.17%.learning_head wrote:Hi Rick, I think you might have missed my question above (Indexer replied right after with another one and you might have thought this thread was revived by his post). Would love to hear you response here as I am trying to understand this better. Thanks!
I had to decide if it was still worth keeping BRSIX and accepting lower unique exposure to micro-cap over time, or to forgo the higher cost and use only al low-cost small-cap value. My decision was to sell BRSIX, restructure the amount in small-cap value and gain whatever exposure to micro-cap the total market fund provided (there is more now that Vanguard has switched to CRSP).
Was this the right choice? I let you know in 20 years.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
I use IJS, although RZV is a valid choice also. I don't think the fund you select matters as much as understanding how that fund fits into the portfolio. Several funds require a different allocation to get the same SV tilt, as you show in your post. The question becomes one of cost. How much are you paying per unit of SV risk? What are you paying for RZV and what are you paying for a little bit more of VBR to achieve the same result?TheIndexer wrote:Another question for you Rick.
In this blog post of yours you advocate 2/3 in a TSM fund and 1/3 in a SCV fund.
http://www.rickferri.com/blog/strategy/ ... ue-stocks/
But there are so many different SCV funds, and a 1/3 position in each results in different style boxes.
For example, 2/3 in TSM and 1/3 in VBR (Vanguard Small Cap Value) results in:
16 16 16
7 7 5
17 11 5
But replacing VBR with RZV (S&P SmallCap 600 Pure Value) which lots of people use changes this to:
16 16 16
4 4 4
22 12 5
Are those differences significant to you? That's an extra 5% in SCV. Do you still recommend 1/3 in SCV regardless of which SCV fund you use?
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Rick Ferri's Portfolio
TSP F fund = Total Bond marketbackofbeyond wrote:For those of us with access to TSP, how would you compare the G and F funds to Rick's bond allocations? That is, if you were attempting to as closely mirror Rick's allocation to Bonds: What would G & F replace and what would be left on the plate that you'd have to go outside of TSP to replicate?
Thanks!
TSP G fund = Similar in some aspects but not exactly a TIPS fund.
There is no High Yield fund available to TSP investors. If you want that you would need to have an IRA account outside of TSP like Vanguard.
Re: Rick Ferri's Portfolio
Just read this thread. What an excellent read.
Rick, something I was wondering - any particular reason you didn't go with Total International Market for the international exposure?Rick Ferri wrote:I prefer to start all portfolios with four legs of a stool:
1) Total US stock Market
2) Total Developed International Markets
3) Total Emerging Markets
4) Total Bond Market
From here, a portfolio can be sliced and diced as desired or needed. I add small-value exposure to each equity position (US, Developed, Emerging) and I add REITs to US. This provides the economic tilt as written on the article. I also divide equally between Pacific and Europe developed markets for better currency diversification. On the bond side, I add TIPS and high yield to make a total total market bond portfolio.
These are strategy considerations. It doesn't change philosophy. We both have the same philosophy, but your strategy is yours and mine is mine. There is no right or wrong answer as long as you have good reason to do something and have the discipline to stay the course.
Rick Ferri
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
I prefer a fixed allocation to developed and emerging markets and rebalance occasionally, but having one fund for both works well also.
Rick Ferri
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
-
- Posts: 451
- Joined: Thu May 16, 2013 4:38 pm
Re: Rick Ferri's Portfolio
Learning a lot from books and on these boards. I read about 'Tobin separation theorem'. I do not get it!
It states that you assess own target risk level, assign appropriate ratio of stocks vs bonds in the portfolio to achieve that riskiness of the portfolio; but the sub-assets within stocks and bond sections are not critical.
- I see that BH's adhere to the appropriate percentage of bonds, but elect to have more or less small cap or international stocks within their portfolios. How can this not change the riskiness of the portfolios?
- For an exaggerated example, how could a portfolio of (50% Total Stock Market fund ad 50% Total Bond Market fund) have comparable risk as a portfolio of (10% Total Stock Market fund + 40% small cap index or Emerging Mkt fund)+(10% Total Bond Mkt fund+40% High-Yield or Foreign Bonds)?
- I guess the underlying assumption is that stock and bond segments are 'well-diversified'. But how does one decide whether the individual's mix of stocks or bonds is diversified enough?
- In that regards, is it possible to calculate expected (long-term) standard deviation of a portfolio allocation (its numerical risk) and compare it with numbers of other alternate target portfolios to determine how much off one is getting by selecting a particular asset mix? I think such a calculation can be done for expected long-term return of a asset mix using historical returns data. Are standard deviations amenable to this?
- If it is possible, would the effort be worthwhile in constructing a portfolio?
Thank you in anticipation of helpful comments!
It states that you assess own target risk level, assign appropriate ratio of stocks vs bonds in the portfolio to achieve that riskiness of the portfolio; but the sub-assets within stocks and bond sections are not critical.
- I see that BH's adhere to the appropriate percentage of bonds, but elect to have more or less small cap or international stocks within their portfolios. How can this not change the riskiness of the portfolios?
- For an exaggerated example, how could a portfolio of (50% Total Stock Market fund ad 50% Total Bond Market fund) have comparable risk as a portfolio of (10% Total Stock Market fund + 40% small cap index or Emerging Mkt fund)+(10% Total Bond Mkt fund+40% High-Yield or Foreign Bonds)?
- I guess the underlying assumption is that stock and bond segments are 'well-diversified'. But how does one decide whether the individual's mix of stocks or bonds is diversified enough?
- In that regards, is it possible to calculate expected (long-term) standard deviation of a portfolio allocation (its numerical risk) and compare it with numbers of other alternate target portfolios to determine how much off one is getting by selecting a particular asset mix? I think such a calculation can be done for expected long-term return of a asset mix using historical returns data. Are standard deviations amenable to this?
- If it is possible, would the effort be worthwhile in constructing a portfolio?
Thank you in anticipation of helpful comments!
Re: Rick Ferri's Portfolio
Not sure how you get TIAA-CREF High Yield institutional class. I work at a large university and even we seem to only have the retail (0.64 ER) version of TIAA HY. That seems just too expensive.Rick Ferri wrote:Yes, but you probably can't buy it. It's the TIAA-CREF High Yield Fund institutional share class. iShares High Yield Corporate Bond ETF (HYG) is OK if you absolutely must have HY. The 0.50% fee is a killer and the fund can develop large discounts to NAV on volatile days.
Re: Rick Ferri's Portfolio
Yes - Wisdom Tree's DLS (International Smcallcap) is about half midcap and half smallcap but personally I'm not worried about that minor difference because midcaps have done well and besides - DLS has a decent value tilt, decent dividends and fairly diversified with 850 stocks.TheIndexer wrote:Thanks Rick.
I was mostly referring to the fact that it's relatively easy to tilt to small-value in the US with a two-fund approach using TSM plus a small-value fund, like VBR (Vanguard Small-Cap Value) or what you have, IJS. There are a fair amount of US funds like these which are heavily weighted towards small-value.
But a two fund approach on the international side seems more challenging. DFA seems to have the only fund actually targeting foreign small value. Other foreign "small cap" funds have lots of mid caps - e.g. Wisdom Tree DLS has 55% mid cap vs. something on the US side like IJS which has only 4%. There doesn't seem to be much consensus on this board on which funds to use to tilt foreign equities to small value, or at least the puzzle isn't as easy as it is on the US side.
According to Wisdom Tree - 78% of the index that DLS tracks is in companies with marketcap less than $2B. How small do you want to go with international smallcaps?
Other options include PDN (Powershares RAFI Dev Markets ex-US Small-Midcap ETF) is another option. Holds close to 1,500 stocks and of course is based on the RAFI Fundamental weighted index.
Personally I don't think you need Emerging Markets Smallcap Value exposure - I know that some people are looking for International Smallcap Value to cover both Dev and EM but personally I'd just inch up a bit on the International SCV exposure to compensate having no EM SCV exposure.
iShares also just launched this year an International Smallcap Multi-factor ETF (ISCF) - problem is that it still has a very tiny asset base and very low trading volume so far. The ETF focuses on the following factors: value, quality, momentum, and low size.
https://www.ishares.com/us/products/272823/ISCF
SURGEON GENERAL'S WARNING: Any overconfidence in your investing ability, willingness and need to take risk may be hazardous to your health.
-
- Posts: 2327
- Joined: Mon Oct 31, 2011 8:36 pm
Re: Rick Ferri's Portfolio
Someone on BH mentioned recently that Rick has gone from 80% to 100% stocks. He expects to have two pensions plus SS.
VT 60% / VFSUX 20% / TIPS 20%
- abuss368
- Posts: 27850
- Joined: Mon Aug 03, 2009 2:33 pm
- Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
- Contact:
Re: Rick Ferri's Portfolio
I read this as well but I am not sure if this is indeed correct. Perhaps Rick may be willing to provide an update or some clarification.pascalwager wrote:Someone on BH mentioned recently that Rick has gone from 80% to 100% stocks. He expects to have two pensions plus SS.
Best.
John C. Bogle: “Simplicity is the master key to financial success."
-
- Posts: 928
- Joined: Fri Jul 10, 2015 1:28 am
Re: Rick Ferri's Portfolio
From here:abuss368 wrote:I read this as well but I am not sure if this is indeed correct.pascalwager wrote:Someone on BH mentioned recently that Rick has gone from 80% to 100% stocks. He expects to have two pensions plus SS.
viewtopic.php?f=10&t=178513
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
I went to 100% equity in my retirement savings a few years ago after I calculated that all the income I need at age 67 should be covered by my military pension, Social Security, two small corporate pensions, and 2% dividends on savings.
I'll let you know if anything changes.
Rick Ferri
I'll let you know if anything changes.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: Rick Ferri's Portfolio
I expect to have a pension too, but that's 14 years from now. Not sure Rick's approach here, but I don't give a lot of weight to two birds in a bush. Not that I expect to be fired, but I'm just conservative like that.
Even social security, I'd value it from the perspective of if i quit today, and never worked again. Again, conservative.
So at 44, the value of both of those end up being small deferred annuities that start at 62, and small because if i quit now, neither would amount to that much.
Even social security, I'd value it from the perspective of if i quit today, and never worked again. Again, conservative.
So at 44, the value of both of those end up being small deferred annuities that start at 62, and small because if i quit now, neither would amount to that much.
Re: Rick Ferri's Portfolio
That reminds me of a Michael kitces article i read not too long ago. Strictly speaking, this is completely rational. In practice, the question becomes can you live day-to-day with the volatility of a 100% equity portfolio, even if you don't need the money. I'm not sure how much easier that'll make losing a lot of money in a short period of time, in practice. I'm thinking that's going to sting emotionally, regardless.Rick Ferri wrote:I went to 100% equity in my retirement savings a few years ago after I calculated that all the income I need at age 67 should be covered by my military pension, Social Security, two small corporate pensions, and 2% dividends on savings.
I'll let you know if anything changes.
Rick Ferri
- LiveSimple
- Posts: 2312
- Joined: Thu Jan 03, 2013 6:55 am
Re: Rick Ferri's Portfolio
Rick, appreciate your willingness to share your personal portfolio and also the candidness to share the "change in thoughts", as it progresses.Rick Ferri wrote:I went to 100% equity in my retirement savings a few years ago after I calculated that all the income I need at age 67 should be covered by my military pension, Social Security, two small corporate pensions, and 2% dividends on savings.
I'll let you know if anything changes.
Rick Ferri
For all the "newbie Bogleheads", read \ understand your favorite authors; develop \ adapt a plan for yourselves, that suits your situation !
Last edited by LiveSimple on Wed Dec 02, 2015 8:59 am, edited 1 time in total.
Invest when you have the money, sell when you need the money, for real life expenses...
Re: Rick Ferri's Portfolio
All things equal, I wonder if Rick will stay at 100% equities into retirement. In other words, when he reaches age 69 and beyond (I turn 69 next week so I am interested)? I would think so.
- Rick Ferri
- Posts: 9707
- Joined: Mon Feb 26, 2007 10:40 am
- Location: Georgetown, TX. Twitter: @Rick_Ferri
- Contact:
Re: Rick Ferri's Portfolio
When you only need the dividend income from stocks, owning stocks becomes a lot less emotional. Dividends do go down at times, but they are not nearly as volatile as the stocks that produce them. And, dividends increase over time, which is a nice inflation hedge.Prudence wrote:All things equal, I wonder if Rick will stay at 100% equities into retirement. In other words, when he reaches age 69 and beyond (I turn 69 next week so I am interested)? I would think so.
So, I don't know if I'll be 100% stocks forever. That being said, should I die at a young retirement age, my wife may need to become more conservative because she will only get 1/2 my military pay and will lose her (lower) Social Security benefit. But then, I won't be around to help spend the money, so she'll likely need less income.
Seems to me staying 100% in equity would be the best thing for our heirs also.
Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.