Randtor wrote: ↑Sun May 24, 2020 9:27 am
The balanced index fund (VBIAX) actually looks like a very good choice if 60/40 is your AA. In comparing this with VSMGX (Life Strategy Moderate Growth - see "longinvest"'s post on the one fund portfolio), it appears to be a better choice. I did a comparison on the VG website - easy enough for anyone to do - 4 funds.... VBIAX , VSMGX, and the 2 funds that are highly regarded in this thread - VBTLX (total bond) and VTSAX (total stock). In doing so, VBIAX makes a very good showing.
I would exercise great caution
before acting on an intention to select between funds based on their past performance. Here's a link to an awesome post of forum founder and author Taylor Larimore about What Experts Say About "Past Performance"
along with some excerpts:
Taylor Larimore wrote: ↑Sun Jan 25, 2015 1:51 pm
Jack Bogle: "The biggest mistake investors make is looking backward at performance and thinking it’ll recur in the future." "No analysis of the past, no matter how painstaking, assures future superiority." "What comes out of the lab is seldom reflected in the real world."
Bogleheads' Guide to Investing: "Using past performance to pick tomorrow's winning mutual funds is such a bad idea that the government requires a statement similar to this: "Past performance is no guarantee of future performance." Believe it!"
Vanguard Study: "Persistence of performance among past winners is no more predictable than a flip of a coin."
Jason Zweig, author and Wall Street Journal columnist: "Buying funds based purely on their past performance is one of the stupidest things an investor can do."
Here are some facts about the two funds you compared. As of April 30, 2020, the Vanguard Balanced Index Fund (VBIAX
) holds 3,187 stocks
and 7,829 bonds
, all domestic US securities. In contrast, the Vanguard LifeStrategy Moderate Growth Fund (VSMGX
) holds 10,981 stocks
and 15,573 bonds
, partly domestic US (with a moderate home bias
) and partly international (ex US) securities.
I suggest reading a post
I wrote as reply to forum member Abuss368 earlier in this thread:
longinvest wrote: ↑Sat Nov 30, 2019 4:37 pm
Don't you think that a portfolio concentrated into the stock and bond securities of a single winning country, the US, could deliver a significant reward for its concentration risk
The thing is this: taking risk can result into great rewards, but it can also result into steep penalties, as Japanese domestic-only stock investors have learned over the last three decades.
Investing into a diversified portfolio which includes both domestic and international securities (possibly with a moderate home bias
) will always
underperform the higher performing market. A diversified portfolio is never
the best performing one.
The goal of Bogleheads investing isn't to win; it's to not lose.
Broadly diversifying one's investments leads to boring
average returns. But, that's exactly what Bogleheads are looking for: reliably
getting average returns, guaranteeing that they'll never be losers!
Finally, about the tax efficiency of using a One-Fund Portfolio
, here are parts of a post I wrote on your recent thread
longinvest wrote: ↑Thu May 21, 2020 5:40 pm
Many investors mistakenly
think that the objective should be to minimize taxes. Minimizing taxes is easy: in general, the poorer one is, the less taxes one pays. So, to eliminate taxes on portfolio gains, one simply needs to have a $0 portfolio. Problem solved. Some tax-efficient fund placement strategies sometimes
succeed at reducing taxes by effectively reducing after-tax wealth. That isn't very sensible.
A better objective is to aim for higher after-tax portfolio withdrawals in retirement. This is an extremely difficult problem to solve, as a lower-returning portfolio, before taxes, can sometimes generate higher after-tax withdrawals.
The One-Fund Portfolio
thread contains a mathematical proof that using a mirrored
asset location strategy is good enough
longinvest wrote: ↑Thu Oct 17, 2019 12:28 am
Here's the thing. If prioritizing bonds in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation
will turn out to be superior to having prioritized stocks in tax-advantaged accounts. If prioritizing stocks in tax-advantaged accounts turns out to be best over one's specific lifetime, a mirrored allocation
will turn out to be superior to having prioritized bonds in tax-advantaged accounts. A mirrored allocation
is thus mathematically guaranteed not to turn out to have been the worst location strategy among these three strategies, even if tax laws change in unexpected ways.
Some people might consider this mathematical guarantee, of not being the worst asset location strategy, "not very attractive", yet I have not seen a mathematical proof of a "more attractive" asset location strategy that is guaranteed to always
beat a simple mirrored allocation strategy.
It's quite similar to indexing, when you think about it. William Sharpe's theorem
guarantees that a simple total-market cap-weighted index investment strategy is guaranteed to never be worse than average (before fees). Some people might consider this mathematical guarantee "not very attractive", yet I have not seen a mathematical proof of a "more attractive" investment strategy that is guaranteed to always
I'd be careful not to let the tax
tail wag the asset allocation
dog. As of April 30, 2020, the Vanguard Tax-Managed Balanced Fund (VTMFX
) only holds 891 stocks
and 1,946 bonds
, all domestic US securities.