Page 1 of 1

Intelligent Assumption of Risk - Portfolio Critique

Posted: Fri Feb 14, 2020 1:25 pm
by radix
Dear Bogleheads,

I have been reading this forum for a long time and enjoy it a lot for a wealth of useful information it contains. This is my first post.

My retirement savings are mostly in the form of a contribution to a defined benefit plan. Assume, for the sake of the argument, that I trust that the defined benefit plan will ensure an adequate standard of living for me. My job is extremely stable.

I am also saving additional amounts to a Roth 401K plan. This is not intended to be the main retirement savings - rather an additional vehicle to create a legacy for children, help with their education, basically just to further accumulate wealth. Consequently, I am able to take more risks with this portfolio and happy to tolerate significant draw downs.

I am seeking to create a portfolio that would assume as much risk as possible, but in an intelligent manner - without taking uncompensated risk. The time horizon is at least 23 years (I am 37 y/o). At the moment this is what I have:

VTI - Vanguard Total Stock Market ETF: 20%
VXUS - Vanguard Total International Stock ETF: 15%
EDV - Vanguard Extended Duration Treasury ETF: 15%
UPRO - ULTRAPRO S&P500: 15%
PISIX - StocksPLUSĀ® International Fund (U.S. Dollar-Hedged): 15%
PSLDX - StocksPLUSĀ® Long Duration Fund: 10%
PSPTX - StocksPLUSĀ® Absolute Return Fund: 10%

This is rebalanced quarterly (and also bi-weekly with additional contributions).

Your suggestions on how to further improve risk adjusted return on this or simplify or consider its robustness to other risks would be very appreciated!

A few considerations I have:
1. I would like to be exposed to international stocks roughly in proportion to their total stock market capitalization in spite of their recently disappointing performance. I did not want to commit all to PISIX, because of manager risk and the fact that it only includes EAFE stocks, and the hedging of US dollar, but this is something I have considered.

2. I am reluctant to use TMF instead of EDV (as you may guess this is inspired by Hedgefundie thread), because I think that TMF is more likely to suffer from broadly constant long-term yields. TMF does deliver about 0.8 percentage points more per year in this portfolio and a slightly higher Sharpe, however.

3. Although I find most of the evidence for risk parity strategy convincing, I struggle to increase the shares of UPRO/EDV. This is to give robustness to the fact that the future may not be like the past.

Thank you very much in advance for your time!