100% VMNVX [Vanguard Global Minimum Volatility Fund]

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Topic Author
Marinheadlands
Posts: 2
Joined: Thu Mar 07, 2019 11:27 pm

100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by Marinheadlands » Fri Jul 12, 2019 4:54 pm

Hi,

First time poster. Thank you for your generosity in responding.

Emergency funds: Six months of expenses $50000 in VCADX

Debt: Mortgage debt of $600K with 10/1 ARM at 3.125, 7 years to go. may decide to either payoff in 7 years or convert to 15 year FRM.

Tax Filing Status: Married Filing Jointly, 2 Dependent Children (5 and 9)

Tax Rate: 32% Federal, 10.3% State

State of Residence: CA

Age:42

Desired Asset allocation: 80-100% VMNVX 0-20% bonds?
Desired International allocation: 50% of stocks

Total about 800K in retirement accounts - IRA and 401K for wife & I. 85% currently in VMNVX and rest 7.5% each in total international and mid cap blend

No retirement contributions currently in taxable

$250K in UESP 529 plans

New annual Contributions - Both are maximizing 401k 18,500 yearly
New contribution are added to FSMAX (Fidelity extended market) & Russell small cap completeness index respectively by both of us.

1. Is it reasonable to have 80-100% of our portfolio in VMNVX.
2. Would the construction seem like a global multi-factor fund with size, quality, momentum and profitability incorporated in it. It may not be optimal but single fund is easy to manage for many decades
3. Please suggest alternate approaches. I prefer global diversification with some factor exposure.

Thanks.
Last edited by Marinheadlands on Sat Jul 13, 2019 12:58 am, edited 1 time in total.

mathguy3021
Posts: 138
Joined: Sat Apr 09, 2011 9:30 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by mathguy3021 » Fri Jul 12, 2019 5:13 pm

I own the same fund in my roth ira, but it is only about 10% of my portfolio. You may be betting too heavily on active management and low volatility stocks. I wouldn't hold too much low volatility stocks 25 years from retirement. I understand that low volatility has done well recently and over the long term past, but that may not continue over the next 25 years. I think you should hold some VMNVX in a tax advantaged account like a 401(k) or roth ira, if you really want to mitigate volatility with global diversification at a low cost, but I wouldn't bet my entire net worth on active management.

stan1
Posts: 7225
Joined: Mon Oct 08, 2007 4:35 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by stan1 » Fri Jul 12, 2019 5:49 pm

Welcome. When someone comes in with a unique portfolio (and yours is) the first question I like to ask is "why did you choose this?" Did an advisor tell you to do this? Did you read an article? Advice from a friend?

Best thing to do would be to follow the asking advice guidance template at this link. There's a lot more we need to know to give you good advice.
viewtopic.php?t=6212

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Wiggums
Posts: 1217
Joined: Thu Jan 31, 2019 8:02 am

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by Wiggums » Fri Jul 12, 2019 5:53 pm

I agree. More information is needed. I would not make that fund my only holding.

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hdas
Posts: 1022
Joined: Thu Jun 11, 2015 8:24 am

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by hdas » Fri Jul 12, 2019 6:03 pm

Marinheadlands wrote:
Fri Jul 12, 2019 4:54 pm
Hi,

First time poster. Thank you for your generosity in responding.

1. Is it reasonable to have 100% of my portfolio in VMNVX with retirement about 25 years away.
2. Please suggest alternate approaches. I prefer global diversification with some factor exposure .

Thanks.
Go for it. You won’t need to add bonds for a while :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

stlutz
Posts: 5223
Joined: Fri Jan 02, 2009 1:08 am

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by stlutz » Fri Jul 12, 2019 6:06 pm

It's reasonable.

A 70/30 stock/bond balance would be better. Adding a completely different type of lower-risk asset (bonds) is a better way to reduce risk than focusing entirely on lower volatility stocks.

Topic Author
Marinheadlands
Posts: 2
Joined: Thu Mar 07, 2019 11:27 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by Marinheadlands » Sat Jul 13, 2019 10:59 am

I added more details. Appreciate your advice.

mathguy3021
Posts: 138
Joined: Sat Apr 09, 2011 9:30 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by mathguy3021 » Sat Jul 13, 2019 5:00 pm

80% to 100% in VMNVX sounds like a lot but it's hard to find other investments that are similar in terms of minimizing volatility with global diversification. I would say if your goal is to minimize volatility without adding a lot of bonds, then keep 80% to 90% in VMNVX. At your age and asset level, reduced volatility seems appropriate.

VMNVX is not a multi factor global fund. It's a minimum volatility fund.

CRTR
Posts: 231
Joined: Sat Apr 11, 2015 1:15 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by CRTR » Sat Jul 13, 2019 8:19 pm

stlutz wrote:
Fri Jul 12, 2019 6:06 pm

A 70/30 stock/bond balance would be better. Adding a completely different type of lower-risk asset (bonds) is a better way to reduce risk than focusing entirely on lower volatility stocks.
That's interesting. Why do you say that? Hasn't been the case thus far. VMNVX (and ACWV) have outperformed a 70/30 3-fund approach since VMNVX's inception (5 years). They've beat the 3 fund portfolio on both an absolute and risk-adjusted return basis, with lower volatility (no surprise there). They both had lower maximum drawdowns in 2018 than a 70/30 mix. Of course, this is only a 5 year track record and in no way means the future will reflect the same . . . .no one knows. Perhaps a better way of phrasing things might be to say a "adding bonds to a stock portfolio is a more traditional and time tested way to reduce volatility." In spite of my nit-picky comment, personally, I hope you're statement ends up being correct because if it doesn't and VMNVX continues to outperform, it will mess up everything I believe about the markets!

Apropos to VMNVX and ACWV, my personal bias is towards VMNVX in tax advantaged accounts. It has a lower ER, more individual holdings (>500), better market cap diversification and better sector diversification. So far, this fund is doing everything it's supposed to, in a pretty impressive fashion!

Whether all this would be enough to get me to commit to 80-100%?? Probably not. I'd chicken out and maybe do half in VMNVX and the other half in something more traditional and time-tested like an 80/20 or 70/30 3 fund portfolio . . .but that's just me . . .

smectym
Posts: 443
Joined: Thu May 26, 2011 5:07 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by smectym » Sun Jul 14, 2019 1:16 am

My assumption would be that if you’re looking at a 25 year time horizon your primary concern would not be emphasizing low volatility.

fennewaldaj
Posts: 771
Joined: Sun Oct 22, 2017 11:30 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by fennewaldaj » Sun Jul 14, 2019 1:25 am

I probably wouldn't go 100% VMNVX but something like 40% VT 40% VMNVX 20% bond fund of your choice seems very reasonable.

dalbright
Posts: 164
Joined: Sun Oct 21, 2018 6:23 am

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by dalbright » Sun Jul 14, 2019 5:41 am

Marinheadlands wrote:
Fri Jul 12, 2019 4:54 pm
Hi,

First time poster. Thank you for your generosity in responding.

Emergency funds: Six months of expenses $50000 in VCADX

Debt: Mortgage debt of $600K with 10/1 ARM at 3.125, 7 years to go. may decide to either payoff in 7 years or convert to 15 year FRM.

Tax Filing Status: Married Filing Jointly, 2 Dependent Children (5 and 9)

Tax Rate: 32% Federal, 10.3% State

State of Residence: CA

Age:42

Desired Asset allocation: 80-100% VMNVX 0-20% bonds?
Desired International allocation: 50% of stocks

Total about 800K in retirement accounts - IRA and 401K for wife & I. 85% currently in VMNVX and rest 7.5% each in total international and mid cap blend

No retirement contributions currently in taxable

$250K in UESP 529 plans

New annual Contributions - Both are maximizing 401k 18,500 yearly
New contribution are added to FSMAX (Fidelity extended market) & Russell small cap completeness index respectively by both of us.

1. Is it reasonable to have 80-100% of our portfolio in VMNVX.
2. Would the construction seem like a global multi-factor fund with size, quality, momentum and profitability incorporated in it. It may not be optimal but single fund is easy to manage for many decades
3. Please suggest alternate approaches. I prefer global diversification with some factor exposure.

Thanks.
I wouldn't be opposed to the 80/20 split as long as you recognize the risks of a high stock allocation. I think VMVFX/VNMVX is a great fund for getting exposure to international and midcaps and has shown itself to do a decent job at lowering volatility thus far. I think it is an especially good choice at questionable tops such as right now in the market if one would prefer to derisk but not actually switch to bonds from stocks. Depending on your plan options for bonds I would personally have at least 20% minimum in them however purely for rebalancing if needed with a medium to longer dated treasury best suited for that purpose.

stlutz
Posts: 5223
Joined: Fri Jan 02, 2009 1:08 am

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by stlutz » Sun Jul 14, 2019 11:50 am

CRTR wrote:
Sat Jul 13, 2019 8:19 pm
stlutz wrote:
Fri Jul 12, 2019 6:06 pm

A 70/30 stock/bond balance would be better. Adding a completely different type of lower-risk asset (bonds) is a better way to reduce risk than focusing entirely on lower volatility stocks.
That's interesting. Why do you say that? Hasn't been the case thus far. VMNVX (and ACWV) have outperformed a 70/30 3-fund approach since VMNVX's inception (5 years). They've beat the 3 fund portfolio on both an absolute and risk-adjusted return basis, with lower volatility (no surprise there). They both had lower maximum drawdowns in 2018 than a 70/30 mix. Of course, this is only a 5 year track record and in no way means the future will reflect the same . . . .no one knows. Perhaps a better way of phrasing things might be to say a "adding bonds to a stock portfolio is a more traditional and time tested way to reduce volatility." In spite of my nit-picky comment, personally, I hope you're statement ends up being correct because if it doesn't and VMNVX continues to outperform, it will mess up everything I believe about the markets!

Apropos to VMNVX and ACWV, my personal bias is towards VMNVX in tax advantaged accounts. It has a lower ER, more individual holdings (>500), better market cap diversification and better sector diversification. So far, this fund is doing everything it's supposed to, in a pretty impressive fashion!

Whether all this would be enough to get me to commit to 80-100%?? Probably not. I'd chicken out and maybe do half in VMNVX and the other half in something more traditional and time-tested like an 80/20 or 70/30 3 fund portfolio . . .but that's just me . . .
Since inception, ACWV has outperformed VT--in an up market environment (I pick ACWV as a comparison to VT because neither are currency-hedged). Even promoters of low volatility equity investing do not argue that this is supposed to happen. Obviously it can and has, but that is not a reasonable expectation for time and eternity.

A 70/30 portfolio will likely beat out a 100% Total Stock portfolio on a Sharpe Ratio basis over time. The argument (which I agree with) is that low volatility stocks will also. But given a choice, I'd rather have multiple types of assets. There are times when nothing but a treasury bond will do. When those times come, I want to own them.

tibbitts
Posts: 9017
Joined: Tue Feb 27, 2007 6:50 pm

Re: 100% VMNVX [Vanguard Global Minimum Volatility Fund]

Post by tibbitts » Sun Jul 14, 2019 12:13 pm

Marinheadlands wrote:
Fri Jul 12, 2019 4:54 pm
Hi,

First time poster. Thank you for your generosity in responding.

Emergency funds: Six months of expenses $50000 in VCADX

Debt: Mortgage debt of $600K with 10/1 ARM at 3.125, 7 years to go. may decide to either payoff in 7 years or convert to 15 year FRM.

Tax Filing Status: Married Filing Jointly, 2 Dependent Children (5 and 9)

Tax Rate: 32% Federal, 10.3% State

State of Residence: CA

Age:42

Desired Asset allocation: 80-100% VMNVX 0-20% bonds?
Desired International allocation: 50% of stocks

Total about 800K in retirement accounts - IRA and 401K for wife & I. 85% currently in VMNVX and rest 7.5% each in total international and mid cap blend

No retirement contributions currently in taxable

$250K in UESP 529 plans

New annual Contributions - Both are maximizing 401k 18,500 yearly
New contribution are added to FSMAX (Fidelity extended market) & Russell small cap completeness index respectively by both of us.

1. Is it reasonable to have 80-100% of our portfolio in VMNVX.
2. Would the construction seem like a global multi-factor fund with size, quality, momentum and profitability incorporated in it. It may not be optimal but single fund is easy to manage for many decades
3. Please suggest alternate approaches. I prefer global diversification with some factor exposure.

Thanks.
Pretending, for the moment, that you were a domestic-only advocate, would you even give one second of thought to making VG Multifactor your one and only fund? No fair peeking at performance history before you answer. Full disclosure, I own both Multifactor and Minimum Volatility.

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