VGTSX and VEMAX a good pair?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
bg5
Posts: 19
Joined: Mon Jan 15, 2018 11:07 am

VGTSX and VEMAX a good pair?

Post by bg5 » Mon Jan 29, 2018 1:21 pm

Wife is 35 and has recently changed her portfolio. Wont need this money for 25-30 years and wants to be a little aggressive and has added VEMAX to her portfolio. Currently has the following

80% Vanguard Total Stock Market -VTSMX

15%Vanguard Total International - VGTSX

5% Vanguard Emerging Markets -VEMAX

We both have read some investing books and created our portfolios around the 3 fund theory but did not want bonds as we wanted to be as aggressive as possible. She now wants more exposure to Asia and feels that VEMAX paired with VGTSX is a good pairing. Any thoughts on this?

User avatar
Taylor Larimore
Advisory Board
Posts: 26901
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Importance of bonds

Post by Taylor Larimore » Mon Jan 29, 2018 1:29 pm

Wont need this money for 25-30 years and wants to be a little aggressive
bg5:

Your wife's all-stock portfolio is VERY "aggressive" (the industry's euphemism for "risky"). In the next bad bear market she should expect her portfolio to plunge at least 50% (1/2 the portfolio's stock allocation). She should add a bond fund -- if for no other reason than to learn about bonds and their importance in a portfolio.

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

User avatar
saltycaper
Posts: 2650
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: VGTSX and VEMAX a good pair?

Post by saltycaper » Mon Jan 29, 2018 1:44 pm

Well does she want to be "a little aggressive" or "as aggressive as possible"? :D

If the portfolio is not leveraged, it's probably not as aggressive as possible.

Adding small-cap and small-cap value funds probably would be more aggressive.

Adding small-cap and small-cap value funds and turning down the overall stock allocation (adding some bonds) might be similarly aggressive.

(I do use both Total Int'l and Emerging Markets, and VSS, small-cap ex-US, for my ex-US holdings.)

I would not go without fixed income of some sort (cash, CDs, bonds).

Is there an emergency fund of significant size? Sometimes people do that and then say they are 100% equities.
Quod vitae sectabor iter?

bg5
Posts: 19
Joined: Mon Jan 15, 2018 11:07 am

Re: VGTSX and VEMAX a good pair?

Post by bg5 » Mon Jan 29, 2018 2:48 pm

We have 6 months savings in place and very stable jobs. I do value everyones opinion and I do think we need to look more at bonds in the future. The one thing we have going for us is 2 pensions when we retire that we can live off of completely. These pensions go up 3% a year for life and if my wife or I die then the other still gets the spouses pension for life so we are willing to take extra risks although it may not be necessary. Maybe we should not be so greedy.

Swansea
Posts: 543
Joined: Sat Feb 13, 2016 5:16 am

Re: VGTSX and VEMAX a good pair?

Post by Swansea » Mon Jan 29, 2018 2:54 pm

I was 100% stock until age 50, when I gradually moved into bonds. Now at a 60 stock 40 bond allocation at 70. My job was stable and my pension was secure, so I was comfortable with the risk I took early on.

User avatar
saltycaper
Posts: 2650
Joined: Thu Apr 24, 2014 8:47 pm
Location: The Tower

Re: VGTSX and VEMAX a good pair?

Post by saltycaper » Mon Jan 29, 2018 3:02 pm

Using need, ability, willingness to take risks, it sounds like you probably don't have the need but you probably do have the ability. You think you have the willingness, but that's hard to measure and might change with portfolio size and whatever else is going on in your life. Things don't always go as planned, and that should be accounted for in some way.

Once portfolio size gets in the 5-10 times yearly income range, I think it's imprudent to not have any fixed income, but some investors seem to go that way.

I have limits to our equity position. It will never be less than 30%, and it will never be more than 70%.
Quod vitae sectabor iter?

Larry2623
Posts: 36
Joined: Sat Jul 15, 2017 9:23 pm

Re: VGTSX and VEMAX a good pair?

Post by Larry2623 » Mon Jan 29, 2018 3:09 pm

Not all bear markets go down 50%

jalbert
Posts: 2878
Joined: Fri Apr 10, 2015 12:29 am

Re: VGTSX and VEMAX a good pair?

Post by jalbert » Mon Jan 29, 2018 3:17 pm

Leaving aside the question of whether 100% stocks is a good idea, most people would consider that adding int’l exposure to the equities is a good idea (Warren Buffett and Jack Bogle are a couple of prominent people who advocate for a US only equity portfolio).

About 80% developed markets and 20% emerging markets is a neutral cap-weighted mix of these assets. The above portfolio thus represents a slight tilt to emerging markets. One benefit of setting the allocation at market cap weight instead of a fixed constant weighting is that you never have to rebalance that. I think bumping up to 25% international would offer an adequate diversification benefit per Vanguard, who recommends 40% but considers 95% of the benefit to be achieved at 25%. If you were:

75% vtsax
20% vgtsx/vtmgx
5% vemax

the int’l holdings would be roughly cap-weighted and you would have 25% of equities in int’l.

Wanting to increase exposure to Asia because you believe equities in that region will outperform is not the right reason to add vemax to the mix. You want a globally diversified portfolio because nobody knows which region will perform best.
Risk is not a guarantor of return.

User avatar
Taylor Larimore
Advisory Board
Posts: 26901
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Re: VGTSX and VEMAX a good pair?

Post by Taylor Larimore » Mon Jan 29, 2018 4:10 pm

Larry2623 wrote:
Mon Jan 29, 2018 3:09 pm
Not all bear markets go down 50%
True. I was in a bear market that went down 89%.

https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

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

User avatar
nisiprius
Advisory Board
Posts: 35718
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: VGTSX and VEMAX a good pair?

Post by nisiprius » Mon Jan 29, 2018 5:54 pm

If the idea is to "increase exposure to Asia," then it would seem to me that the Vanguard Pacific Index Fund, VPADX, would be the first thing to look at. It is 99.2% in Asian countries:

Japan 58.4%
Australia 16.3%
Korea 12.7%
Hong Kong 8.6%
Singapore 3.2%
New Zealand 0.8%

VEMAX is certainly 73% Asian, but also has holdings in South America, Africa, North America (Mexico), and Europe. Maybe negligible, but a little off-center for "Asia."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

The Wizard
Posts: 11640
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: VGTSX and VEMAX a good pair?

Post by The Wizard » Mon Jan 29, 2018 5:57 pm

Taylor Larimore wrote:
Mon Jan 29, 2018 4:10 pm
Larry2623 wrote:
Mon Jan 29, 2018 3:09 pm
Not all bear markets go down 50%
True. I was in a bear market that went down 89%.

https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929

Best wishes.
Taylor
Touche!!!
Attempted new signature...

Investment101
Posts: 63
Joined: Sat Jul 05, 2014 5:09 am

Re: VGTSX and VEMAX a good pair?

Post by Investment101 » Tue Feb 13, 2018 4:53 am

Got VTIAX but haven't check on it in a long time, saw that it's 3 stars in morning star now. Used to be 4 or 5 I think.

Still good fund right? saw the dip thinking about buying more.

Any other newer/similar/better funds out?

TwstdSista
Posts: 765
Joined: Thu Nov 16, 2017 4:03 am

Re: VGTSX and VEMAX a good pair?

Post by TwstdSista » Tue Feb 13, 2018 5:11 am

Investment101 wrote:
Tue Feb 13, 2018 4:53 am
Got VTIAX but haven't check on it in a long time, saw that it's 3 stars in morning star now. Used to be 4 or 5 I think.

Still good fund right? saw the dip thinking about buying more.

Any other newer/similar/better funds out?
VTIAX is a great fund. Passively managed funds tend to get a lower M* rating. Nothing to worry about.

Investment101
Posts: 63
Joined: Sat Jul 05, 2014 5:09 am

Re: VGTSX and VEMAX a good pair?

Post by Investment101 » Tue Feb 13, 2018 5:12 am

awesome thanks so much

Post Reply