Help me pick my vanguard investment

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detroitdiablo
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Help me pick my vanguard investment

Post by detroitdiablo » Wed Jun 06, 2018 9:51 pm

I can ONLY invest in these 4 funds:

Vanguard 500 Index Admiral VFIAX 33.14% expense ratio 0.04%
Vanguard Mid Cap Index Admiral VIMAX 16.75% expense ratio 0.06%
Vanguard Small Cap Index Admiral VSMAX 16.72% expense ratio 0.06%
Vanguard International Growth Admiral VWILX 17.73% expense ratio 0.32%

Give me your best allocation percentage advice. I want the most aggressive portfolio using these funds. From what i have found the mid cap stocks are in both the 500 and small cap, but the mid cap index has done very well over the life of the fund, I believe even better than the 500. I will not be retiring for 30 plus years and this is a tax deferred account. Thank You.

BVRFC
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Re: Help me pick my vanguard investment

Post by BVRFC » Wed Jun 06, 2018 10:12 pm

If it were me, I would put it all in VFIAX. I value simplicity.

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David Jay
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Re: Help me pick my vanguard investment

Post by David Jay » Wed Jun 06, 2018 10:26 pm

Hard to go wrong with almost any mix. Since it is tax-deferred, you can change at a later date with no tax consequences so don’t get stressed out about your allocation.

Here is where I would start:

SP500 50%
Mid Cap 10%
Sm Cap 10%
International 30%
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 2:07 am

On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?

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David Jay
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Re: Help me pick my vanguard investment

Post by David Jay » Thu Jun 07, 2018 7:51 am

detroitdiablo wrote:
Thu Jun 07, 2018 2:07 am
On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?
You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

dbr
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Re: Help me pick my vanguard investment

Post by dbr » Thu Jun 07, 2018 8:58 am

The standing theory is that the most aggressive portfolio would be 100% small cap value. Those Vanguard funds are not particularly pure representative of those labels, however. Many people who want tilts to small cap value try to blend a total market holding and a small cap holding.

Most people here would probably be happy with matching the total US market with S&P 500, midcap, and small cap. In fact it is hard to argue that one would not be just a well off with the S&P 500 alone.

Any 100% stock holding is already highly aggressive as investing goes, so the question is exactly what the objective really is.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 9:29 am

David Jay wrote:
Thu Jun 07, 2018 7:51 am
detroitdiablo wrote:
Thu Jun 07, 2018 2:07 am
On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?
You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 9:38 am

dbr wrote:
Thu Jun 07, 2018 8:58 am
The standing theory is that the most aggressive portfolio would be 100% small cap value. Those Vanguard funds are not particularly pure representative of those labels, however. Many people who want tilts to small cap value try to blend a total market holding and a small cap holding.

Most people here would probably be happy with matching the total US market with S&P 500, midcap, and small cap. In fact it is hard to argue that one would not be just a well off with the S&P 500 alone.

Any 100% stock holding is already highly aggressive as investing goes, so the question is exactly what the objective really is.
The objective is to get the best return using any combination of the 4 funds listed. It doesn't have to be all the 4, but only picked from the 4. I know 100%stock is highly aggressive and with many years to go that's what I'm going for, however I think 100% in S&P500 is even too safe. I'm willing to roll the bones with a higher risk by choosing higher % in the bottom 3. Is it worth more % in small than mid or maybe even more in small and skip mid since they are already in large and small? I don't know that's why I'm asking. Small/mid or just small tilt is what I'm going for. Is 50% 500 and 50% small crazy?

dbr
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Re: Help me pick my vanguard investment

Post by dbr » Thu Jun 07, 2018 9:49 am

detroitdiablo wrote:
Thu Jun 07, 2018 9:38 am
dbr wrote:
Thu Jun 07, 2018 8:58 am
The standing theory is that the most aggressive portfolio would be 100% small cap value. Those Vanguard funds are not particularly pure representative of those labels, however. Many people who want tilts to small cap value try to blend a total market holding and a small cap holding.

Most people here would probably be happy with matching the total US market with S&P 500, midcap, and small cap. In fact it is hard to argue that one would not be just a well off with the S&P 500 alone.

Any 100% stock holding is already highly aggressive as investing goes, so the question is exactly what the objective really is.
The objective is to get the best return using any combination of the 4 funds listed. It doesn't have to be all the 4, but only picked from the 4. I know 100%stock is highly aggressive and with many years to go that's what I'm going for, however I think 100% in S&P500 is even too safe. I'm willing to roll the bones with a higher risk by choosing higher % in the bottom 3. Is it worth more % in small than mid or maybe even more in small and skip mid since they are already in large and small? I don't know that's why I'm asking. Small/mid or just small tilt is what I'm going for. Is 50% 500 and 50% small crazy?
As far as we know the highest expected return would come from 100% small cap value. The people who doubt that do not think there is another choice that has higher expected return; they just don't believe that the Fama-French results for investment returns will still apply into the future.

My understanding, or opinion if one must, is that the simple answer to your question is 100% SCV. As posed there is no other answer to what you asked. Whether or not what you say you intend is a good idea is another discussion.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 10:11 am

dbr wrote:
Thu Jun 07, 2018 9:49 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:38 am
dbr wrote:
Thu Jun 07, 2018 8:58 am
The standing theory is that the most aggressive portfolio would be 100% small cap value. Those Vanguard funds are not particularly pure representative of those labels, however. Many people who want tilts to small cap value try to blend a total market holding and a small cap holding.

Most people here would probably be happy with matching the total US market with S&P 500, midcap, and small cap. In fact it is hard to argue that one would not be just a well off with the S&P 500 alone.

Any 100% stock holding is already highly aggressive as investing goes, so the question is exactly what the objective really is.
The objective is to get the best return using any combination of the 4 funds listed. It doesn't have to be all the 4, but only picked from the 4. I know 100%stock is highly aggressive and with many years to go that's what I'm going for, however I think 100% in S&P500 is even too safe. I'm willing to roll the bones with a higher risk by choosing higher % in the bottom 3. Is it worth more % in small than mid or maybe even more in small and skip mid since they are already in large and small? I don't know that's why I'm asking. Small/mid or just small tilt is what I'm going for. Is 50% 500 and 50% small crazy?
As far as we know the highest expected return would come from 100% small cap value. The people who doubt that do not think there is another choice that has higher expected return; they just don't believe that the Fama-French results for investment returns will still apply into the future.

My understanding, or opinion if one must, is that the simple answer to your question is 100% SCV. As posed there is no other answer to what you asked. Whether or not what you say you intend is a good idea is another discussion.
That answers a question, but SCV is not a choice for me. The 4 funds listed are the choice so if you had to pick the most aggressive package using only the 4 funds what would it be? I know this is only an educated opinion, not gospel. Is 100% small cap index close enough to value?

CantPassAgain
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Re: Help me pick my vanguard investment

Post by CantPassAgain » Thu Jun 07, 2018 10:18 am

detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
No. Starting points and end points matter just as much, if not more, than just number of years. What if a particular fund did terribly for 17 years and then in the last 3 years had spectacular gains that made the 20 year return look good? Or vice versa? Or you shift your beginning and end points 1 year before or after and you get an entirely different answer? There is so much randomness involved in investing in stocks that questions like "what is likely to make me the most money" are impossible to answer.

DBR is absolutely correct about SCV, but translating that into an expected return over a specific time horizon in comparison with funds that focus on other factors is a waste of time, unless you just like geeking out about numbers (nothing wrong with that).

IMO

CantPassAgain
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Re: Help me pick my vanguard investment

Post by CantPassAgain » Thu Jun 07, 2018 10:35 am

detroitdiablo wrote:
Thu Jun 07, 2018 10:11 am
That answers a question, but SCV is not a choice for me. The 4 funds listed are the choice so if you had to pick the most aggressive package using only the 4 funds what would it be? I know this is only an educated opinion, not gospel. Is 100% small cap index close enough to value?
Probably. Just know that the word "aggressive" means a very wide range of possible outcomes.

A lot of folks go with either market weight or market weight with a tilt to small cap.

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David Jay
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Re: Help me pick my vanguard investment

Post by David Jay » Thu Jun 07, 2018 10:39 am

detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
David Jay wrote:
Thu Jun 07, 2018 7:51 am
detroitdiablo wrote:
Thu Jun 07, 2018 2:07 am
On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?
You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
Two items:
1. I missed your request for the most aggressive portfolio. That is 100% small cap. Most aggressive, but also most volatile.
2. International is a diversifier. It is assumed that international will not move in lock-step with US. I withdraw the recommendation if you are after the most aggressive. If you want a well-diversified portfolio I would recommend including international.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 10:45 am

David Jay wrote:
Thu Jun 07, 2018 10:39 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
David Jay wrote:
Thu Jun 07, 2018 7:51 am
detroitdiablo wrote:
Thu Jun 07, 2018 2:07 am
On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?
You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
Two items:
1. I missed your request for the most aggressive portfolio. That is 100% small cap. Most aggressive, but also most volatile.
2. International is a diversifier. It is assumed that international will not move in lock-step with US. I withdraw the recommendation if you are after the most aggressive. If you want a well-diversified portfolio I would recommend including international.
So would that still be your choice if you wanted most aggressive yet we'll diversified? 10% in both small and mid or would you bump them up higher and take away some from 500?

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 10:52 am

CantPassAgain wrote:
Thu Jun 07, 2018 10:35 am
detroitdiablo wrote:
Thu Jun 07, 2018 10:11 am
That answers a question, but SCV is not a choice for me. The 4 funds listed are the choice so if you had to pick the most aggressive package using only the 4 funds what would it be? I know this is only an educated opinion, not gospel. Is 100% small cap index close enough to value?
Probably. Just know that the word "aggressive" means a very wide range of possible outcomes.

A lot of folks go with either market weight or market weight with a tilt to small cap.
Thanks can't pass, so what would your choice be? Of the 4 with most aggressive and a stomach for high risk yet the main objective looking for the highest return?

onourway
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Re: Help me pick my vanguard investment

Post by onourway » Thu Jun 07, 2018 10:52 am

detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
This is a fundamental (and very common) error of the inexperienced investor. You are saying that you 'know' that past performance can't predict the future but then immediately justify why it should.

Understanding that, really understanding that is an important part of your education as an investor. We truly do not know what will happen in the future. Small cap may turn out to be the best choice for the next 10 years. Or international. We don't know. That's why the safest bet is to own the total market. You will not get the absolute highest return, but you won't suffer if you choose the wrong sector or class to tilt towards either.

We can't answer your question regarding which one of these is 'best' without knowing your full picture as per the sticky at the top of this forum. Absent that, choosing the Total Market is best.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 10:57 am

onourway wrote:
Thu Jun 07, 2018 10:52 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
This is a fundamental (and very common) error of the inexperienced investor. You are saying that you 'know' that past performance can't predict the future but then immediately justify why it should.

Understanding that, really understanding that is an important part of your education as an investor. We truly do not know what will happen in the future. Small cap may turn out to be the best choice for the next 10 years. Or international. We don't know. That's why the safest bet is to own the total market. You will not get the absolute highest return, but you won't suffer if you choose the wrong sector or class to tilt towards either.

We can't answer your question regarding which one of these is 'best' without knowing your full picture as per the sticky at the top of this forum. Absent that, choosing the Total Market is best.
So what is an aggressive portfolio using a combination of only these 4 funds? Diversified yet high risk vs. safe

megabad
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Re: Help me pick my vanguard investment

Post by megabad » Thu Jun 07, 2018 11:16 am

detroitdiablo wrote:
Wed Jun 06, 2018 9:51 pm
I can ONLY invest in these 4 funds:

Vanguard 500 Index Admiral VFIAX 33.14% expense ratio 0.04%
Vanguard Mid Cap Index Admiral VIMAX 16.75% expense ratio 0.06%
Vanguard Small Cap Index Admiral VSMAX 16.72% expense ratio 0.06%
Vanguard International Growth Admiral VWILX 17.73% expense ratio 0.32%

Give me your best allocation percentage advice. I want the most aggressive portfolio using these funds. From what i have found the mid cap stocks are in both the 500 and small cap, but the mid cap index has done very well over the life of the fund, I believe even better than the 500. I will not be retiring for 30 plus years and this is a tax deferred account. Thank You.
I generally try to mimic the market (domestically), and my "aggressiveness" is solely determined by my allocation to bonds. If you use this logic, per the wiki you are looking at an 81%, 4%, 15% split between 500 Ind, Mid Cap, and Small Cap respectively to mimic Total Market. I do not like your choice of an active international growth fund personally so I personally would not go there.

That said, you have created an artificial situation so my real answer because I color outside the lines would be something like this:

Assuming this is a 401k and that is why you are locked into these funds but I really don't know:

401k:
Vanguard 500 Index Admiral (VFIAX) (60%)

Roth IRA:
Ext Market Index (VEXAX) (10%)

Taxable:
Total Int Index (VTIAX) (30%)

No fund overlap, no active management, and tax efficiency (depending on your situation). I didn't include bonds because you said aggressive. This is aggressive.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 11:31 am

megabad wrote:
Thu Jun 07, 2018 11:16 am
detroitdiablo wrote:
Wed Jun 06, 2018 9:51 pm
I can ONLY invest in these 4 funds:

Vanguard 500 Index Admiral VFIAX 33.14% expense ratio 0.04%
Vanguard Mid Cap Index Admiral VIMAX 16.75% expense ratio 0.06%
Vanguard Small Cap Index Admiral VSMAX 16.72% expense ratio 0.06%
Vanguard International Growth Admiral VWILX 17.73% expense ratio 0.32%

Give me your best allocation percentage advice. I want the most aggressive portfolio using these funds. From what i have found the mid cap stocks are in both the 500 and small cap, but the mid cap index has done very well over the life of the fund, I believe even better than the 500. I will not be retiring for 30 plus years and this is a tax deferred account. Thank You.
I generally try to mimic the market (domestically), and my "aggressiveness" is solely determined by my allocation to bonds. If you use this logic, per the wiki you are looking at an 81%, 4%, 15% split between 500 Ind, Mid Cap, and Small Cap respectively to mimic Total Market. I do not like your choice of an active international growth fund personally so I personally would not go there.

That said, you have created an artificial situation so my real answer because I color outside the lines would be something like this:

Assuming this is a 401k and that is why you are locked into these funds but I really don't know:

401k:
Vanguard 500 Index Admiral (VFIAX) (60%)

Roth IRA:
Ext Market Index (VEXAX) (10%)

Taxable:
Total Int Index (VTIAX) (30%)

No fund overlap, no active management, and tax efficiency (depending on your situation). I didn't include bonds because you said aggressive. This is aggressive.
Mega, appreciate the response but I don't have the option of the 2 funds in your response.

boglewill34
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Re: Help me pick my vanguard investment

Post by boglewill34 » Thu Jun 07, 2018 11:55 am

detroitdiablo wrote:
Thu Jun 07, 2018 10:57 am
So what is an aggressive portfolio using a combination of only these 4 funds? Diversified yet high risk vs. safe
You're kind of asking for diametrically opposing things, with "diversified yet high risk."

The foreign fund has a huge large cap growth tilt, so it's not high risk.

Among all, the highest alpha potential will probably be either the small or mid cap (mid cap outperformed among some backtests within the last decade or two), because the theory is that they have more room to run. The diversification within that high risk pool could be justified by there being many equities within those funds.

This is all a bad idea though. In my mind, if I can't figure out why I'm diverging from a total market weighting overall, I probably shouldn't be doing it. The allocation posted in the 3rd post almost nails weighting for the domestic market, that would be my starting point, imo.

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Phineas J. Whoopee
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Re: Help me pick my vanguard investment

Post by Phineas J. Whoopee » Thu Jun 07, 2018 11:57 am

detroitdiablo wrote:
Thu Jun 07, 2018 10:52 am
...
Thanks can't pass, so what would your choice be? Of the 4 with most aggressive and a stomach for high risk yet the main objective looking for the highest return?
The requirements you list contradict themselves over any finite time period, so no answer is possible.

PJW

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David Jay
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Re: Help me pick my vanguard investment

Post by David Jay » Thu Jun 07, 2018 12:14 pm

detroitdiablo wrote:
Thu Jun 07, 2018 10:45 am
David Jay wrote:
Thu Jun 07, 2018 10:39 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
David Jay wrote:
Thu Jun 07, 2018 7:51 am
detroitdiablo wrote:
Thu Jun 07, 2018 2:07 am
On portfolio visualizer the best combo that makes the most money from 2002 to present is 50% vimax and 50% vsmax. Why shouldn't I just go with that? Actually when you throw in any combination with vwilx it's never as good, why buy international then?
You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
Two items:
1. I missed your request for the most aggressive portfolio. That is 100% small cap. Most aggressive, but also most volatile.
2. International is a diversifier. It is assumed that international will not move in lock-step with US. I withdraw the recommendation if you are after the most aggressive. If you want a well-diversified portfolio I would recommend including international.
So would that still be your choice if you wanted most aggressive yet we'll diversified? 10% in both small and mid or would you bump them up higher and take away some from 500?
"aggressive" and "diversified" is a "pick one" choice.

The way you get aggressive is to narrow your focus to high return, leaving out the diversification. That is most likely to be 100% small cap.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 12:17 pm

boglewill34 wrote:
Thu Jun 07, 2018 11:55 am
detroitdiablo wrote:
Thu Jun 07, 2018 10:57 am
So what is an aggressive portfolio using a combination of only these 4 funds? Diversified yet high risk vs. safe
You're kind of asking for diametrically opposing things, with "diversified yet high risk."

The foreign fund has a huge large cap growth tilt, so it's not high risk.

Among all, the highest alpha potential will probably be either the small or mid cap (mid cap outperformed among some backtests within the last decade or two), because the theory is that they have more room to run. The diversification within that high risk pool could be justified by there being many equities within those funds.

This is all a bad idea though. In my mind, if I can't figure out why I'm diverging from a total market weighting overall, I probably shouldn't be doing it. The allocation posted in the 3rd post almost nails weighting for the domestic market, that would be my starting point, imo.
So 20% 500, 20% mid and 20% small with 30%international doesn't make sense. Higher risk but 40% in small and mid is too much even though in your explanation it sounded like you wanted to lean more towards the small and mid?

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 12:20 pm

David Jay wrote:
Thu Jun 07, 2018 12:14 pm
detroitdiablo wrote:
Thu Jun 07, 2018 10:45 am
David Jay wrote:
Thu Jun 07, 2018 10:39 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:29 am
David Jay wrote:
Thu Jun 07, 2018 7:51 am

You are making a fundamental error - using (recent) past performance to predict future performance.

The US stocks have done better than international in recent years. Some take the position that International stocks will likely outperform US in future years because it is difficult to see the US market sustaining the amazing growth of recent years.
I get that but I used almost 20 years of growth, during that time all 4 of these funds have had their ups and downs but since inception the small and mid cap index have done better than the 500 and international. I know using past performance to predict the future is almost a no no but doesn't 20 years worth of data have to count for something? It's not like a new fund is made 2 years ago and makes large amounts of interest in that time on a hot sector fund and you jump on it when the money is already been made and you see those scewed returns. Right? 20 years of data albeit can't predict the future returns but shouldn't it give you a really good read that it will keep that course?
Two items:
1. I missed your request for the most aggressive portfolio. That is 100% small cap. Most aggressive, but also most volatile.
2. International is a diversifier. It is assumed that international will not move in lock-step with US. I withdraw the recommendation if you are after the most aggressive. If you want a well-diversified portfolio I would recommend including international.
So would that still be your choice if you wanted most aggressive yet we'll diversified? 10% in both small and mid or would you bump them up higher and take away some from 500?
"aggressive" and "diversified" is a "pick one" choice.

The way you get aggressive is to narrow your focus to high return, leaving out the diversification. That is most likely to be 100% small cap.
Agressive is the answer. Would it be crazy to stick 1400 bucks a month into just small cap index for let's say the next 20 years without making any changes?

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ruralavalon
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Re: Help me pick my vanguard investment

Post by ruralavalon » Thu Jun 07, 2018 12:25 pm

detroitdiablo wrote:
Wed Jun 06, 2018 9:51 pm
I can ONLY invest in these 4 funds:

Vanguard 500 Index Admiral VFIAX 33.14% expense ratio 0.04%
Vanguard Mid Cap Index Admiral VIMAX 16.75% expense ratio 0.06%
Vanguard Small Cap Index Admiral VSMAX 16.72% expense ratio 0.06%
Vanguard International Growth Admiral VWILX 17.73% expense ratio 0.32%

Give me your best allocation percentage advice. I want the most aggressive portfolio using these funds. From what i have found the mid cap stocks are in both the 500 and small cap, but the mid cap index has done very well over the life of the fund, I believe even better than the 500. I will not be retiring for 30 plus years and this is a tax deferred account. Thank You.
Are there really no bond funds or other fixed income investments (like a stable value fund, money market fund) available in this tax-deferred account? I find that very hard to believe. Perhaps you mean that you just don't want a fixed income allocation?

Among those four funds I suggest either
Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04% by itself

OR this combination:
75%, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%; and
25%, Vanguard International Growth Admiral Shares (VWILX) ER 0.32%.

My personal choice would be the combination of the two stock funds, to cover both domestic and international stocks.

. . . . .

Past performance is not a good predictor of future performance. Wiki article, "Callan periodic table of investment returns".That table shows annual returns for nine fund types ranked best to worst over the years 1999-2018 (20 years). There is no pattern, it is random.

Historically small-cap has had similar long-term total return to large-cap. Over the 42 years since the creation of the first S&P 500 index fund the total return has been very similar, at times small-cap has done better, at times small-cap has done worse. Morningstar, "Growth of $10k", VFINX vs NAESX. Vanguard Small-cap Index Fund (NAESX) has not always been an index fund, it began as an actively managed fund.


Here is a comparison of S&P 500 versus mid-cap index funds. over the period entire period that both funds have coexisted, 1998-2018 (20 years). Notice that the better performance of mid-cap came in the first 10 years, in the last 10 years the performance has been almost identical. Morningstar, "Growth of $10k", VIMSX VS VFINX


An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

. . . . .

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page).

Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.
Last edited by ruralavalon on Thu Jun 07, 2018 12:29 pm, edited 1 time in total.
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boglewill34
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Re: Help me pick my vanguard investment

Post by boglewill34 » Thu Jun 07, 2018 12:29 pm

detroitdiablo wrote:
Thu Jun 07, 2018 12:17 pm
boglewill34 wrote:
Thu Jun 07, 2018 11:55 am
detroitdiablo wrote:
Thu Jun 07, 2018 10:57 am
So what is an aggressive portfolio using a combination of only these 4 funds? Diversified yet high risk vs. safe
You're kind of asking for diametrically opposing things, with "diversified yet high risk."

The foreign fund has a huge large cap growth tilt, so it's not high risk.

Among all, the highest alpha potential will probably be either the small or mid cap (mid cap outperformed among some backtests within the last decade or two), because the theory is that they have more room to run. The diversification within that high risk pool could be justified by there being many equities within those funds.

This is all a bad idea though. In my mind, if I can't figure out why I'm diverging from a total market weighting overall, I probably shouldn't be doing it. The allocation posted in the 3rd post almost nails weighting for the domestic market, that would be my starting point, imo.
So 20% 500, 20% mid and 20% small with 30%international doesn't make sense. Higher risk but 40% in small and mid is too much even though in your explanation it sounded like you wanted to lean more towards the small and mid?
You said you wanted full risk for the highest possible return. I didn't mean to imply LEAN toward anything. If that's your criteria then you go all in on something, and the theory is that either small or mid should introduce the highest possibility for highest returns.

If, as you say below, you put all your money on small every month, the usual recommendation here would be to NEVER look at the balance. Reason being, there will be times where it will drop horribly, likely more than what's indicated by headlines touting "Dow down xx%." When you do your backtesting, this is indicated by "maximum drawdown" or something similar.

The allocation user David Jay indicated *for these particular funds*,
SP500 50%
Mid 10%
Small 10%
is very nearly equal to total market weighting of the US domestic market.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 12:42 pm

boglewill34 wrote:
Thu Jun 07, 2018 12:29 pm
detroitdiablo wrote:
Thu Jun 07, 2018 12:17 pm
boglewill34 wrote:
Thu Jun 07, 2018 11:55 am
detroitdiablo wrote:
Thu Jun 07, 2018 10:57 am
So what is an aggressive portfolio using a combination of only these 4 funds? Diversified yet high risk vs. safe
You're kind of asking for diametrically opposing things, with "diversified yet high risk."

The foreign fund has a huge large cap growth tilt, so it's not high risk.

Among all, the highest alpha potential will probably be either the small or mid cap (mid cap outperformed among some backtests within the last decade or two), because the theory is that they have more room to run. The diversification within that high risk pool could be justified by there being many equities within those funds.

This is all a bad idea though. In my mind, if I can't figure out why I'm diverging from a total market weighting overall, I probably shouldn't be doing it. The allocation posted in the 3rd post almost nails weighting for the domestic market, that would be my starting point, imo.
So 20% 500, 20% mid and 20% small with 30%international doesn't make sense. Higher risk but 40% in small and mid is too much even though in your explanation it sounded like you wanted to lean more towards the small and mid?
You said you wanted full risk for the highest possible return. I didn't mean to imply LEAN toward anything. If that's your criteria then you go all in on something, and the theory is that either small or mid should introduce the highest possibility for highest returns.

If, as you say below, you put all your money on small every month, the usual recommendation here would be to NEVER look at the balance. Reason being, there will be times where it will drop horribly, likely more than what's indicated by headlines touting "Dow down xx%." When you do your backtesting, this is indicated by "maximum drawdown" or something similar.

The allocation user David Jay indicated *for these particular funds*,
SP500 50%
Mid 10%
Small 10%
is very nearly equal to total market weighting of the US domestic market.
I didn't take it that you implied to lean toward a category but you made a good case for small and mid. Is going all in on small or mid a terrible idea? Is it worth the risk?

boglewill34
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Re: Help me pick my vanguard investment

Post by boglewill34 » Thu Jun 07, 2018 1:00 pm

detroitdiablo wrote:
Thu Jun 07, 2018 12:42 pm
Is going all in on small or mid a terrible idea? Is it worth the risk?
It's a bad enough idea that I would never do it.

I hold the equivalent of what David Jay indicated in his first post well above.

onourway
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Re: Help me pick my vanguard investment

Post by onourway » Thu Jun 07, 2018 1:08 pm

Nobody can answer whether it is 'worth the risk.' That's a decision you have to make for yourself. I'm sure you would think it was worth it if the market-tilt you chose ended up being the right one and you made extra money. How would you feel if it was the wrong one and you perpetually under-performed the entire market every year for 10-20 years? How would that impact your goals? The risk might be that you have to work longer, perhaps years longer. Is that worth it? Further, in order to realize the historical edge that segments like small-cap value have returned over the total market has required waiting through these kind of decade-long periods of under-performance, in order to be fully invested when they came roaring back and pulled out their edge. Most people can't hold on to a losing investment that long, and they'll constantly move from one previously 'hot' class to another chasing performance that was not realizing it has nothing to do with what will be.

Tread carefully.

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Re: Help me pick my vanguard investment

Post by CantPassAgain » Thu Jun 07, 2018 1:23 pm

Maybe you need to back up and examine why you want the "highest possible return," and understand that higher return always means higher risk of not getting those returns and falling short of your goals. Shooting for the moon is great when you win. When you lose it can be ruinous.

It seems like you want quick and easy answers and the hard truth is, there aren't any. But that doesn't mean investing has to be difficult. You might want to take a look at the boglehead wiki, starting here:

https://www.bogleheads.org/wiki/Getting_started

And watching all of the videos here:

https://www.bogleheads.org/wiki/Video:B ... philosophy

Then read a book or two and ask questions on the forum regarding what you learned (or think you learned). Some good recommendations here:

https://www.bogleheads.org/RecommendedReading.php

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 1:48 pm

onourway wrote:
Thu Jun 07, 2018 1:08 pm
Nobody can answer whether it is 'worth the risk.' That's a decision you have to make for yourself. I'm sure you would think it was worth it if the market-tilt you chose ended up being the right one and you made extra money. How would you feel if it was the wrong one and you perpetually under-performed the entire market every year for 10-20 years? How would that impact your goals? The risk might be that you have to work longer, perhaps years longer. Is that worth it? Further, in order to realize the historical edge that segments like small-cap value have returned over the total market has required waiting through these kind of decade-long periods of under-performance, in order to be fully invested when they came roaring back and pulled out their edge. Most people can't hold on to a losing investment that long, and they'll constantly move from one previously 'hot' class to another chasing performance that was not realizing it has nothing to do with what will be.

Tread carefully.
But even if you were eyeing replicating total stock market, couldn't you weigh more towards small and mid in that model? I mean it still is total stock market coverage your just buying a little more small and mid stocks to up the risk?

onourway
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Re: Help me pick my vanguard investment

Post by onourway » Thu Jun 07, 2018 1:51 pm

detroitdiablo wrote:
Thu Jun 07, 2018 1:48 pm

But even if you were eyeing replicating total stock market, couldn't you weigh more towards small and mid in that model? I mean it still is total stock market coverage your just buying a little more small and mid stocks to up the risk?
What does 'risk' mean to you? It sounds to me like you only see the potential up-side of a riskier investment. The reality is that risk works both ways. You need to consider the very real possibility that additional risk means lower returns instead of higher - and that you end up not meeting your goals because of that.

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 2:10 pm

onourway wrote:
Thu Jun 07, 2018 1:51 pm
detroitdiablo wrote:
Thu Jun 07, 2018 1:48 pm

But even if you were eyeing replicating total stock market, couldn't you weigh more towards small and mid in that model? I mean it still is total stock market coverage your just buying a little more small and mid stocks to up the risk?
What does 'risk' mean to you? It sounds to me like you only see the potential up-side of a riskier investment. The reality is that risk works both ways. You need to consider the very real possibility that additional risk means lower returns instead of higher - and that you end up not meeting your goals because of that.
I totally understand the risk involved, it just seems as though smalls, or even mids, but not as much as smalls, have more of a potential to have higher returns (my opinion). With that being said if you replicate the total stock market with the 81, 4, 15 or 82 and 18 philosophy, why can't you uptick the small and/or mids? Wouldn't it still be a total stock market package just more $ in smalls and mids but still the same funds? If two people like red bull and vodka, one likes more vodka (risky) and one likes more red bull (stable) isn't it overall the same drink?

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Re: Help me pick my vanguard investment

Post by PatrickA5 » Thu Jun 07, 2018 2:48 pm

If you are looking for the absolute highest return over the next 20 years, you'd want to pick the single fund that does the best. Having more than one fund will result in a lower performance. Having said that, there's not a single person in the Bogleheads community that can tell you for certain which of your 4 choices is best (or worst).

Personally, I wouldn't even try to figure out what will ultimately be the best choice. You're likely to be wrong. As suggested by others, pick a mix that mimics the market, put as much in as you can then just forget about it.

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ruralavalon
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Re: Help me pick my vanguard investment

Post by ruralavalon » Thu Jun 07, 2018 3:55 pm

In my opinion the three-fund type portfolio using very broadly diversified index funds is the better approach than tilting or overweighting to a section of the market (like small-cap or mid-cap).

If you guess right on which section of the market to overweight, then you might do better, or not.

If you had a small-cap value index fund offered, I might suggest that you try that. But you don't have that choice offered, and that would still be a guess.
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detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 4:13 pm

ruralavalon wrote:
Thu Jun 07, 2018 3:55 pm
In my opinion the three-fund type portfolio using very broadly diversified index funds is the better approach than tilting or overweighting to a section of the market (like small-cap or mid-cap).

If you guess right on which section of the market to overweight, then you might do better, or not.

If you had a small-cap value index fund offered, I might suggest that you try that. But you don't have that choice offered, and that would still be a guess.
Would the 3 fund be something like 52% 500 18% small and 30% international? Or would it just be the US funds like 75% 500 20% small and 5% mid? Skipping the international?

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Re: Help me pick my vanguard investment

Post by dbr » Thu Jun 07, 2018 4:30 pm

detroitdiablo wrote:
Thu Jun 07, 2018 10:11 am
dbr wrote:
Thu Jun 07, 2018 9:49 am
detroitdiablo wrote:
Thu Jun 07, 2018 9:38 am
dbr wrote:
Thu Jun 07, 2018 8:58 am
The standing theory is that the most aggressive portfolio would be 100% small cap value. Those Vanguard funds are not particularly pure representative of those labels, however. Many people who want tilts to small cap value try to blend a total market holding and a small cap holding.

Most people here would probably be happy with matching the total US market with S&P 500, midcap, and small cap. In fact it is hard to argue that one would not be just a well off with the S&P 500 alone.

Any 100% stock holding is already highly aggressive as investing goes, so the question is exactly what the objective really is.
The objective is to get the best return using any combination of the 4 funds listed. It doesn't have to be all the 4, but only picked from the 4. I know 100%stock is highly aggressive and with many years to go that's what I'm going for, however I think 100% in S&P500 is even too safe. I'm willing to roll the bones with a higher risk by choosing higher % in the bottom 3. Is it worth more % in small than mid or maybe even more in small and skip mid since they are already in large and small? I don't know that's why I'm asking. Small/mid or just small tilt is what I'm going for. Is 50% 500 and 50% small crazy?
As far as we know the highest expected return would come from 100% small cap value. The people who doubt that do not think there is another choice that has higher expected return; they just don't believe that the Fama-French results for investment returns will still apply into the future.

My understanding, or opinion if one must, is that the simple answer to your question is 100% SCV. As posed there is no other answer to what you asked. Whether or not what you say you intend is a good idea is another discussion.
That answers a question, but SCV is not a choice for me. The 4 funds listed are the choice so if you had to pick the most aggressive package using only the 4 funds what would it be? I know this is only an educated opinion, not gospel. Is 100% small cap index close enough to value?


Sorry, obviously meant small cap, same reasoning.

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ruralavalon
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Re: Help me pick my vanguard investment

Post by ruralavalon » Thu Jun 07, 2018 4:42 pm

detroitdiablo wrote:
Thu Jun 07, 2018 4:13 pm
ruralavalon wrote:
Thu Jun 07, 2018 3:55 pm
In my opinion the three-fund type portfolio using very broadly diversified index funds is the better approach than tilting or overweighting to a section of the market (like small-cap or mid-cap).

If you guess right on which section of the market to overweight, then you might do better, or not.

If you had a small-cap value index fund offered, I might suggest that you try that. But you don't have that choice offered, and that would still be a guess.
Would the 3 fund be something like 52% 500 18% small and 30% international? Or would it just be the US funds like 75% 500 20% small and 5% mid? Skipping the international?
In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".


A three-fund portfolio would be something like:
60%, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%; and
20%, Vanguard International Growth Admiral Shares (VWILX) ER 0.32%
20%, A bond fund or other fixed income (like CDs).

Even 30 plus years from retirement (about age 30-35?) I suggest about 20 - 25% in bonds. This is expected to substantially reduce portfolio volatility (risk), with only a relatively slight decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".


if you just absolutely don't want to use any bond fund or other fixed income, then my suggestion is still these two funds:
75%, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%; and
25%, Vanguard International Growth Admiral Shares (VWILX) ER 0.32%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

detroitdiablo
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Re: Help me pick my vanguard investment

Post by detroitdiablo » Thu Jun 07, 2018 7:25 pm

I'm going 35% 500 35% small and 30% International and we will see, call me crazy if need be. Thanks for all the info.

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ruralavalon
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Re: Help me pick my vanguard investment

Post by ruralavalon » Thu Jun 07, 2018 8:36 pm

detroitdiablo wrote:
Thu Jun 07, 2018 7:25 pm
I'm going 35% 500 35% small and 30% International and we will see, call me crazy if need be. Thanks for all the info.
Good luck.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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