Your Honest Opinion On This SCV Portfolio

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FIREGuy88
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Your Honest Opinion On This SCV Portfolio

Post by FIREGuy88 »

Current Age: 35
Retiring: 65
Annual Expenses: $100k
Annual Income: $250k

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livesoft
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Re: Your Honest Opinion On This SCV Portfolio

Post by livesoft »

I do not like all the small percentages. The reality is that you won't pay attention to them and you won't rebalance them anyways.

Suppose your NZ ticker doubles in value in a single day. That is, it goes up 100% in single day. Then that doubling will just get lost in what the other tickers do in the same day. And if it doubles in one year your entire portfolio would get just a 1% boost in performance.

I suggest one stick to fractions of at least 10% to any individual ETF holding.

But you know, give it a try and you will find out what I mean.
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nisiprius
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Re: Your Honest Opinion On This SCV Portfolio

Post by nisiprius »

My opinion is that the most important question about this portfolio, by far, is whether you have the right amount of bonds in it.

Otherwise, my impression is that it is cluttered, and it is like going to a buffet and being unable to resist putting a little bit of everything on your plate. At some point it doesn't improve the mashed potatoes to add a teaspoon of rice to them.

Unless you have a really extraordinary financial memory, I don't think you can possibly remember the broad outline of how all of these funds have behaved in the past with various times and with respect to each other. For example, can you tell us, without looking it up, during 2008-2009, which country's stock market declined the least, which declined the most, and how much difference there was in drawdown between the best and the worst countries?

I mean, it is probably going to be fine. It will get you to retirement as well as any 90% stocks, 5% bonds, 5% cash portfolio will, but I think you're kidding yourself if you think by artistically choosing the best asset classes and the best-of-breed funds to represent them that you've made made any big improvement, or even any improvement at all, over... 2021 - 35 + 65 ... a year-2050 target date fund.

The inclusion of tiny percentages of mutual funds is always suspect.

I think these are all very low-cost funds--but have you bothered to calculate the weighted expense ratio of the whole portfolio? If your reaction is "gee, that seems like a lot of work," then I would suggest that managing a portfolio of fifteen funds is more work than you feel like doing.

Here is a challenge. One of these portfolios is the one you posted. The other has 14% in Schwab Fundamental Small Cap and nothing in Schwab International Small Cap, instead of 9% + 5%. Based on what you know about the recent performance of these two asset classes, which of the two do you think is yours?


Source

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With such a short period of time to look at, it truly means almost nothing as to which of several portfolios is better, although "how far did it drop in 2020" is interesting. But, just for laughs, I decided to include the Vanguard Target Retirement 2050 fund in the comparison. I am not saying it is better or will be better in the future, but my point is that all of your fine tuning and tinkering did not do any better than the simple, plain-vanilla choice.

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mike_in_ny
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Re: Your Honest Opinion On This SCV Portfolio

Post by mike_in_ny »

I agree that your portfolio is much too cluttered. If you can't commit 10-15% to something as part of
a strategy, it probably doesn't belong in your portfolio.

I'm ok with 5%, 10%, or even 0% bonds at your age, but would suggest that you look at asset location.
Where you keep these are important -- for example your REIT should be in a non-taxable account.

A secondary problem with a potpourri like this is the confusion or delay in deciding where to make
your next investment. I believe you want to be on auto-pilot, and every time you have $1k or $2k,
to throw it into your taxable portfolio (assuming things like 401k are on automatic) looks like it will
take analysis and decision making. I believe in taking all the thought out of those tactical decisions.
muffins14
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Re: Your Honest Opinion On This SCV Portfolio

Post by muffins14 »

Terrible. I think there’s abundant academic evidence that Denmark should be 1.33% and New Zealand should be 0.67%.
burritoLover
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Re: Your Honest Opinion On This SCV Portfolio

Post by burritoLover »

Error 505 - no SCV found.

Having small caps funds and separate value funds is not a portfolio with a small cap value tilt. Small cap funds have small cap growth stocks which you are trying to avoid in your SCV tilt.
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typical.investor
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Re: Your Honest Opinion On This SCV Portfolio

Post by typical.investor »

FIREGuy88 wrote: Tue May 11, 2021 5:43 am Current Age: 35
Retiring: 65
Annual Expenses: $100k
Annual Income: $250k

Image
Why no emerging markets value (such as FNDE)?

Why the individual country funds as opposed to broader market?

I'd prefer something like this:

VTI Vanguard Total Stock Market ETF 30.00%
VNQ Vanguard Real Estate ETF 10.00%
RPV Invesco S&P 500 Pure Value ETF 10.00%
FNDA Schwab Fundamental US Small Company ETF 10.00%
FNDC Schwab Fundamental Intl Sm Co ETF 10.00%
BND Vanguard Total Bond Market ETF 5.00%
CASHX Cash 5.00%
FNDE Schwab Fundamental Emerg Mkts Lg Co ETF 10.00%
VXUS Vanguard Total International Stock ETF 10.00%

https://www.portfoliovisualizer.com/bac ... ion18_3=10
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nisiprius
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Re: Your Honest Opinion On This SCV Portfolio

Post by nisiprius »

burritoLover wrote: Tue May 11, 2021 6:47 am Error 505 - no SCV found.

Having small caps funds and separate value funds is not a portfolio with a small cap value tilt. Small cap funds have small cap growth stocks which you are trying to avoid in your SCV tilt.
And yet the "classic" factor portfolios--a simplified one being the Bill Schultheis Coffeehouse Portfolio, but also the Merriman Ultimate Buy-and-Hold and the model portfolios published by Larry Swedroe in the late 1990s--all had four separate allocations to large-cap blend, large-cap value, small-cap blend, and small-cap value. So they did include small-cap value, but I've never been completely clear on the rationale for the inclusion of large-cap value and small-cap blend.
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Brianmcg321
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Re: Your Honest Opinion On This SCV Portfolio

Post by Brianmcg321 »

Too complicated.

VT

Done.
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burritoLover
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Re: Your Honest Opinion On This SCV Portfolio

Post by burritoLover »

nisiprius wrote: Tue May 11, 2021 7:11 am
burritoLover wrote: Tue May 11, 2021 6:47 am Error 505 - no SCV found.

Having small caps funds and separate value funds is not a portfolio with a small cap value tilt. Small cap funds have small cap growth stocks which you are trying to avoid in your SCV tilt.
And yet the "classic" factor portfolios--a simplified one being the Bill Schultheis Coffeehouse Portfolio, but also the Merriman Ultimate Buy-and-Hold and the model portfolios published by Larry Swedroe in the late 1990s--all had four separate allocations to large-cap blend, large-cap value, small-cap blend, and small-cap value. So they did include small-cap value, but I've never been completely clear on the rationale for the inclusion of large-cap value and small-cap blend.
LCV still has an expected premium over market and may help reduce the dispersion of outcomes compared to holding only an SCV tilt - Merriman likes to point out periods where LCV outperformed SCV. As far as the small-cap blend, the validity of SMB has only recently been questioned in factor investing. For me, I just go with a total market fund and then the SCV tilt.
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snailderby
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Re: Your Honest Opinion On This SCV Portfolio

Post by snailderby »

1. I agree that this can be much simpler. If you want to hold international stocks at global market weight, I'd start with VT and BND. If you want to tilt to small-cap value, you can add AVUV (or SLYV or FNDA) on the domestic side and/or AVDV (or FNDC) on the international side.

2. Just one month ago you posted this:
FIREGuy88 wrote: Wed Apr 14, 2021 10:23 pm I'm not sure I understand the allure of [Paul Merriman]. It looks like the "Ultimate Buy and Hold" portfolio has been getting its ass kicked since 2015.

"Past performance is not indicative of..." I get it. But the 3-fund portfolio seems infinitely easier to manage and is starting to blow the doors off of Merriman's small cap value strategy.
Have you changed your mind on small-cap value stocks since then? There's nothing wrong with a small-cap value tilt. Just make sure you have enough conviction in the strategy to stick with it even if it continues to underperform for another 5 or 10 years.
dbr
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Re: Your Honest Opinion On This SCV Portfolio

Post by dbr »

If you want a small cap and value tilt don't you at least want to go somewhere and calculate the factor loadings to see what you have done?

Of course the question what they should be has no answer without running some sort of optimization on an appropriate output.
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Re: Your Honest Opinion On This SCV Portfolio

Post by Wade Garrett »

SCV portfolio? Where's the SCV? The two Schwab RAFI funds are the closest thing I'm seeing but their value exposure is designed to shift over time.
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ruralavalon
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Re: Your Honest Opinion On This SCV Portfolio

Post by ruralavalon »

Far too complex. Instead of 15 ETFs, why not just 5 ETFs?
Vanguard Total Stock Market ETF (VTI).
Vanguard S&P Small-Cap 600 Value ETF (VIOV)
Vanguard Total International Stock ETF (VXUS)
Avantis International Small Cap Value ETF (AVDV)
A low cost bond index fund.

Either 15 or 5 ETFs for small-cap value tilted portfolio is a huge switch from the three-fund portfolio you wanted last month.
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FIREGuy88
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Re: Your Honest Opinion On This SCV Portfolio

Post by FIREGuy88 »

Interesting perspectives, thanks all.
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FIREGuy88
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Re: Your Honest Opinion On This SCV Portfolio

Post by FIREGuy88 »

ruralavalon wrote: Tue May 11, 2021 3:43 pm Far too complex. Instead of 15 ETFs, why not just 5 ETFs?
Vanguard Total Stock Market ETF (VTI).
Vanguard S&P Small-Cap 600 Value ETF (VIOV)
Vanguard Total International Stock ETF (VXUS)
Avantis International Small Cap Value ETF (AVDV)
A low cost bond index fund.

Either 15 or 5 ETFs for small-cap value tilted portfolio is a huge switch from the three-fund portfolio you wanted last month.
This makes a lot of sense, thank you.
bluegill
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Re: Your Honest Opinion On This SCV Portfolio

Post by bluegill »

Can you rebalance this portfolio ? I doubt it. Use a 3-fund or 4-fund portfolio.
ruud
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Re: Your Honest Opinion On This SCV Portfolio

Post by ruud »

The portfolio recommended by PAS didn't work out?
.
snailderby
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Re: Your Honest Opinion On This SCV Portfolio

Post by snailderby »

ruud wrote: Thu May 13, 2021 9:54 am The portfolio recommended by PAS didn't work out?
I'm also curious to hear what made you want to switch from Vanguard PAS to this portfolio.
shess
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Re: Your Honest Opinion On This SCV Portfolio

Post by shess »

mike_in_ny wrote: Tue May 11, 2021 6:36 am A secondary problem with a potpourri like this is the confusion or delay in deciding where to make
your next investment. I believe you want to be on auto-pilot, and every time you have $1k or $2k,
to throw it into your taxable portfolio (assuming things like 401k are on automatic) looks like it will
take analysis and decision making. I believe in taking all the thought out of those tactical decisions.
Once Upon A Time, I had a modest and complicated portfolio, because I was under the impression that complication was where you made your extra $$$. I spent my time stressing out about whether I needed more east asia or developing Europe, more tech or consumer durables, etc. I maybe had an argument for each position, but that argument didn't include any idea of the relative importance. Like, I could argue about how Brazil and Australia markets move differently, etc, but I couldn't tell you why one might justify 3% and the other 6%, so I couldn't tell you if my portfolio was currently invested "right", nor could I tell where to put the next $10k.

Later, after an employment-related windfall, I sat down and really thought about it, and committed to a three-fund goal. I didn't make it (I'm at 5 funds), but I trimmed a LOT of complexity. As a result, I know the position each asset has in my portfolio, I know how to rebalance when it comes up, and deploying an additional $10k takes a couple minutes of pondering. As far as I can tell, I have paid no price for this simplicity.
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Re: Your Honest Opinion On This SCV Portfolio

Post by ruralavalon »

FIREGuy88 wrote: Thu May 13, 2021 6:04 am
ruralavalon wrote: Tue May 11, 2021 3:43 pm Far too complex. Instead of 15 ETFs, why not just 5 ETFs?
Vanguard Total Stock Market ETF (VTI).
Vanguard S&P Small-Cap 600 Value ETF (VIOV)
Vanguard Total International Stock ETF (VXUS)
Avantis International Small Cap Value ETF (AVDV)
A low cost bond index fund.

Either 15 or 5 ETFs for small-cap value tilted portfolio is a huge switch from the three-fund portfolio you wanted last month.
This makes a lot of sense, thank you.
I strongly suggest starting with the simpler three-fund type portfolio.

"The concept of portfolio value tilting is intended for advanced investors. Tilting is not recommended for new investors, as it intentionally deviates from investing in the total market- a Bogleheads' approach to managing your portfolio."

Wiki article Value tilting - stock.
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Taylor Larimore
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Re: Your Honest Opinion On This SCV Portfolio

Post by Taylor Larimore »

FIREGuy88 wrote: Tue May 11, 2021 5:43 am Current Age: 35
Retiring: 65
Annual Expenses: $100k
Annual Income: $250k

Image
FIREGuy88:

I agree with the others that your portfolio is far more complicated than necessary (or helpful).

Take a look at the many benefits of The Bogleheads' Three-Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan."
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Horton
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Re: Your Honest Opinion On This SCV Portfolio

Post by Horton »

nisiprius wrote: Tue May 11, 2021 6:17 am
I mean, it is probably going to be fine. It will get you to retirement as well as any 90% stocks, 5% bonds, 5% cash portfolio will, but I think you're kidding yourself if you think by artistically choosing the best asset classes and the best-of-breed funds to represent them that you've made made any big improvement, or even any improvement at all, over... 2021 - 35 + 65 ... a year-2050 target date fund.

...

With such a short period of time to look at, it truly means almost nothing as to which of several portfolios is better, although "how far did it drop in 2020" is interesting. But, just for laughs, I decided to include the Vanguard Target Retirement 2050 fund in the comparison. I am not saying it is better or will be better in the future, but my point is that all of your fine tuning and tinkering did not do any better than the simple, plain-vanilla choice.

Image
OP - you should reread this post in its entirety about 10 more times. Then, you should ask yourself if you really think you can beat the target date fund. If you think so, you should track your performance for the next 5 years and make yourself a deal - if you outperform then you continue your strategy, but if you underperform then you have to put everything in the target date fund.
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FIREGuy88
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Re: Your Honest Opinion On This SCV Portfolio

Post by FIREGuy88 »

Taylor Larimore wrote: Thu May 13, 2021 11:58 am FIREGuy88:

I agree with the others that your portfolio is far more complicated than necessary (or helpful).

Take a look at the many benefits of The Bogleheads' Three-Fund Portfolio.

Best wishes.
Taylor
You are the man Taylor, thank you!
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