Thoughts on this potential portfolio?

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SpartanBull
Posts: 127
Joined: Fri Jun 06, 2014 12:31 am

Thoughts on this potential portfolio?

Postby SpartanBull » Mon Jan 02, 2017 5:53 pm

My equity portfolio currently consists of Total Stock market and Total International, both in admiral shares, with a 2/3 tilt towards US. Pretty boring, and probably somewhere in the middle as far as most people on this forum, at least from what I've found. In my quest to land on a portfolio I'm comfortable sticking with long term, I do feel that I want to have a SCV tilt aspect to the portfolio. I'm curious how people feel about this Portfolio as far as the equity portion goes
1/3 Total Stock Market, VTSAX
1/3 Total international, VTIAX
1/3 SCV IJS (IJS was the fund I had found based on doing research on this forum).
Is this a pretty good portfolio? I fully understand the risks/reward elements of the SCV, and that the premium is not guaranteed. I'm only 25 and have a probably a 30-35 year time Horizon, so I think that makes me an OK candidate to tilt in this way. Just curious what peoples thoughts are on this portfolio, assuming of course that I would stay the course with it. Thanks.

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Toons
Posts: 11503
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: Thoughts on this potential portfolio?

Postby Toons » Mon Jan 02, 2017 5:57 pm

35 years?
Stick with what you have.
Plenty of time between now and then for asset allocation shifts.
By the way,
It is great that you recognize investing as boring.
It is supposed to be,,,,kinda like watching paint dry.
Tend to it like you would a cactus.
For entertainment go to
Disney World.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

SpartanBull
Posts: 127
Joined: Fri Jun 06, 2014 12:31 am

Re: Thoughts on this potential portfolio?

Postby SpartanBull » Mon Jan 02, 2017 6:04 pm

It seemed that because my horizon is long, you advised that I stick with what I have. For the record, I would not exactly consider this a change, as I'm only 25 and haven't been investing very long. So really, I want to find an allocation...and then I'll definitely stick what allocation and "do nothing" indefinitely". Is your belief that tilting is overrated, and thus I should stick with the 70/30, not tilt portfolio? I was slightly attracted to the idea of SCV, not SOLELY due to the idea of potentially higher long term returns, but really because I like the idea of having something that may perform a bit differently then VTSAX, and VTIAX, and therefore provide a form of diversification in that regard.

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RyeWhiskey
Posts: 856
Joined: Thu Jan 12, 2012 10:04 pm

Re: Thoughts on this potential portfolio?

Postby RyeWhiskey » Mon Jan 02, 2017 6:12 pm

SpartanBull wrote:It seemed that because my horizon is long, you advised that I stick with what I have. For the record, I would not exactly consider this a change, as I'm only 25 and haven't been investing very long. So really, I want to find an allocation...and then I'll definitely stick what allocation and "do nothing" indefinitely". Is your belief that tilting is overrated, and thus I should stick with the 70/30, not tilt portfolio? I was slightly attracted to the idea of SCV, not SOLELY due to the idea of potentially higher long term returns, but really because I like the idea of having something that may perform a bit differently then VTSAX, and VTIAX, and therefore provide a form of diversification in that regard.


SCV is included in TSM. Titling does not "provide diversification" but, on the contrary, over-exposes you to certain segments of the market in hopes of higher expected return. Diversification would be adding alternate asset classes like bonds, cash, commodities, etc. I think you should have a very good reason to tilt in any fashion, be it according to size, value, momentum, or region. I, personally, can find no good reason to do so and thus I end up with a Total World Index. At 30 years of age, such a simple fund is perfect for me when it comes to a "do nothing indefinitely" holding and I encourage you to focus on simplicity (savings, lifestyle drift, etc) and let the compounding do the work for you. :beer
This post was brought to you by Vanguard Total World Stock Index (VTWSX/VT).

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RyeWhiskey
Posts: 856
Joined: Thu Jan 12, 2012 10:04 pm

Re: Thoughts on this potential portfolio?

Postby RyeWhiskey » Mon Jan 02, 2017 6:14 pm

Also, there's an active thread on this forum right now addressing small cap value tilting that may be of interest: viewtopic.php?f=10&t=206993&newpost=3175008
This post was brought to you by Vanguard Total World Stock Index (VTWSX/VT).

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Taylor Larimore
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Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: Thoughts on this potential portfolio?

Postby Taylor Larimore » Mon Jan 02, 2017 6:19 pm

SpartanBull wrote:My equity portfolio currently consists of Total Stock market and Total International, both in admiral shares, with a 2/3 tilt towards US. Pretty boring, and probably somewhere in the middle as far as most people on this forum, at least from what I've found. In my quest to land on a portfolio I'm comfortable sticking with long term, I do feel that I want to have a SCV tilt aspect to the portfolio. I'm curious how people feel about this Portfolio as far as the equity portion goes
1/3 Total Stock Market, VTSAX
1/3 Total international, VTIAX
1/3 SCV IJS (IJS was the fund I had found based on doing research on this forum).
Is this a pretty good portfolio? I fully understand the risks/reward elements of the SCV, and that the premium is not guaranteed. I'm only 25 and have a probably a 30-35 year time Horizon, so I think that makes me an OK candidate to tilt in this way. Just curious what peoples thoughts are on this portfolio, assuming of course that I would stay the course with it. Thanks.

SpartanBull:

Your most important decision is your stock/bond allocation. This determines your expected risk and expected return more than anything else.

I have been investing for many years. Whenever an asset-class is outperforming, I see investors being lured into that asset-class. It takes fortitude to stay-the-course. In 2000, when Morningstar published these figures, few investors wanted anything to do with small-cap value funds:

Below are Morningstar percentage returns for various periods ending 6-30-00:

Style.......1 Yr....3 Yr......5Yr....10 Yr...15 Yrs.
LCG......27.19...27.04...24.98..17.85....17.15
LCB........8.93...17.29...20.35..15.60....15.23
LCV......-5.21.....8.74...15.16..13.36....13.45

MCG.....57.24...31.09...24.81..18.14....16.82
MCB.....11.87...12.36...16.09..14.12....14.23
MCV.....-2.56.....7.23...13.20..12.77....12.64

SCG......55.14...24.42...20.86..17.12....15.64
SCB......17.77...10.08...15.30..13.03....12.02
SCV.......3.29....3.55....12.58..11.80....11.34

Don't look for the needle. Buy the haystack. -- Jack Bogle


Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle


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