bilperk wrote:Hi LH:
I think you are reading the first post too literally. It only shows 3 asset classes because that is what the poster wanted to discuss; the domestic equity part of the portfolio.
The total portfolio is 70% equities. it contained 8 equity classes/sub-classes and 4 bond sub-classes.
25% US Core
10% Sm Val
5% each pacific rim-large, Europe-large, international small, and EM
10% investment Gr
10% High Yield
5% Inflation protected
5% EM bonds
Nah, the 3 was just a number I pulled out of the air, did not refer to the original post, sorry to not be more specific. I was responding to Rick stating that he could get exposure to all USA market caps with TSM and only use small cap (maybe a micro but he said that really is not neccessary), instead of slicing and dicing amongst 4 USA different categories.
This confused me because I thought that was part of the point, the rebalancing effect, and I wanted to know if my portfolio based on reading Ferri's books more or less was based on a misunderstanding of what he meant, as I split up euro and pacific to gain a therorectical rebalancing advantage, versus just using EAFE, at the expense of a definite extra cost of rebalancing them yearly, ie commissions. Rick has seemingly already answered this above in stating that he still thinks euro+pacific is better than EAFE because of rebalancing (I think thats what he is saying at least).
I think I have heard others say, in regards to my somewhat arbitrary choice of SPY and VBR only for US stock representation, that its actually sufficent, and that I do not need to add a mid cap, or anything else to it for rebalancing purposes. It does seem pretty close close to Ricks TSM + small anyway statistically?
In terms of efficiencies versus costs of rebalancing, do all those bond funds(now I am refering to the example) really have any rebalancing benefit? It would seem they would usually be highly correlated with each other to me, but I really do not know much.
Thanks for the reply,