Your Favorite Portfolio Tilts

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QuietProsperity
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Re: Your Favorite Portfolio Tilts

Postby QuietProsperity » Sun Jun 18, 2017 11:05 pm

US LC Momentum
US SC Value
DM LC Momentum
DM SC Value
EM Value (If better options arise in my lifetime I would split this into same format as US & DM)

My small bond allocation is all US Treasuries and TIPS.

aj76er
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Re: Your Favorite Portfolio Tilts

Postby aj76er » Mon Jun 19, 2017 12:01 am

I have an SCV tilt in my 401k. The SCV fund is used as a valuey completion index to an S&P 500 fund.

As I've increased bond holdings in the 401k and stock holdings in taxable, the SCV tilt has dwindled to only 3% of my portfolio. I only continue to hold because of inertia :).

I also tilt equities to 70% U.S. because I want to minimize currency risks while still getting the diversification benefits of international.There was a VG paper that showed that 99% of the diversification benefits can be achieved with 30% international equities.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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grap0013
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Re: Your Favorite Portfolio Tilts

Postby grap0013 » Mon Jun 19, 2017 7:13 am

danaht wrote:
zaboomafoozarg wrote:70% total market, 20% small value and 10% REITs.

There are many tilts like it, but this one is mine.


I think your combination is the best one in this thread.


Why?

It's like saying I have return sources of:

70% A
20% B
10% C

A dominates the returns. If it does poorly it hurts more.

Would it not be better to be something like:

40% A
20% B
20% C
10% D
10% E

Now if A does poorly you have B-E to help along the way. Assuming low correlations of course.
There are no guarantees, only probabilities.

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Re: Your Favorite Portfolio Tilts

Postby saltycaper » Wed Jun 21, 2017 3:00 pm

Dirghatamas wrote:
I am a perma bear about Govt bonds (due to demographics and unfunded liabilities in developed countries) so never hold any bonds of any kind.


If I pretend to accept your concern as valid so as to avoid any discussion in that direction, in general, where do you think money will flow in times of stock market distress if not to government bonds of developed nations? Just curious if you have thought about that and what possibilities you've imagined, or if it doesn't really matter to you.
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

invst65
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Re: Your Favorite Portfolio Tilts

Postby invst65 » Wed Jun 21, 2017 3:48 pm

Oh, sorry. Didn't know my portfolio had any of those but I missed the letter "l".

ANC
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Re: Your Favorite Portfolio Tilts

Postby ANC » Wed Jun 21, 2017 6:45 pm

None are extraordinarily large, but as follows:
- Growth
- Large cap
- Europe (stocks)

Dirghatamas
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Re: Your Favorite Portfolio Tilts

Postby Dirghatamas » Thu Jun 22, 2017 12:06 am

saltycaper wrote:
Dirghatamas wrote:I am a perma bear about Govt bonds (due to demographics and unfunded liabilities in developed countries) so never hold any bonds of any kind.

If I pretend to accept your concern as valid so as to avoid any discussion in that direction, in general, where do you think money will flow in times of stock market distress if not to government bonds of developed nations? Just curious if you have thought about that and what possibilities you've imagined, or if it doesn't really matter to you.

Yes, I have thought about that. For the two bears I have witnessed personally (2000-2002, 2008-2009), certainly under stress, money went into developed Govt bonds especially long bonds. While not a certainty, I would predict this (flight to safety) to be the high probability outcome under most financial/short term stress.

This though to me is short term volatility. The long term outcome (I believe) for nominal bonds will be dominated by demographics and unfunded liabilities. The most probable (IMO) outcome is inflation to handle these. My main long term fear is actually concentration in home country (bad outcome in US stocks with decent outcome elsewhere). So I hedge by diversifying the high expected return asset (stocks) across countries rather than hedge US stocks by low expected return diversifier (bonds).

As for volatility/bear market, my plan is to mitigate it by very low SWR. I am in accumulation with assets already sufficient for 1% SWR and should hopefully hit 0.25-0.5% range before retiring. Yes, I could just sell all my stocks and move to 100% TIPS and the SWR would be sufficient. So, perhaps it doesn't really matter to be honest.

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Re: Your Favorite Portfolio Tilts

Postby Longtermgrowth » Thu Jun 22, 2017 3:21 am

Domestic large value, VYM (Vanguard High Dividend Yield ETF), SCHD (Schwab US Dividend Equity ETF).

Developed small value, DLS (WisdomTree International SmallCap Dividend Fund).

Those three are my favorite, and I have the feeling I would do just fine, maybe even better than the total market funds in the long run, if they were my only holdings.

Jeff Albertson
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Re: Your Favorite Portfolio Tilts

Postby Jeff Albertson » Thu Jun 22, 2017 10:27 am

James B. Stewart's current article 'An Index-Fund Evangelist Is Straying From His Gospel', on Burton Malkiel's embrace of smart beta.
https://www.nytimes.com/2017/06/22/business/burton-malkiel-investment-stock-index-funds.html?ref=business
Smart beta has its critics, including Mr. Arnott, viewed by many as the godfather of the field. “Smart beta can be smart, and then it can be not so smart,” Mr. Arnott said. “There are tons of strategies being offered now based on nothing but back tests. Anyone can create a brilliant strategy with benefit of hindsight. But does that mean anything for future returns?”

“Pretty much everyone is looking at the same factors, which is a danger,” he added. “It’s a very crowded space. If 10,000 quants are all looking at the same data and trading on it, the chances are that it’s not going to work.”
...
There are even more single-factor E.T.F.s, such as the venerable Vanguard U.S. Value Fund, started in 2000. Its 10-year annualized return as of this week was 5.8 percent, compared to 7.2 percent for the Standard & Poor’s 500-stock index.

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Re: Your Favorite Portfolio Tilts

Postby MotoTrojan » Thu Jun 22, 2017 10:30 am

Jeff Albertson wrote:James B. Stewart's current article 'An Index-Fund Evangelist Is Straying From His Gospel', on Burton Malkiel's embrace of smart beta.
https://www.nytimes.com/2017/06/22/business/burton-malkiel-investment-stock-index-funds.html?ref=business
Smart beta has its critics, including Mr. Arnott, viewed by many as the godfather of the field. “Smart beta can be smart, and then it can be not so smart,” Mr. Arnott said. “There are tons of strategies being offered now based on nothing but back tests. Anyone can create a brilliant strategy with benefit of hindsight. But does that mean anything for future returns?”

“Pretty much everyone is looking at the same factors, which is a danger,” he added. “It’s a very crowded space. If 10,000 quants are all looking at the same data and trading on it, the chances are that it’s not going to work.”
...
There are even more single-factor E.T.F.s, such as the venerable Vanguard U.S. Value Fund, started in 2000. Its 10-year annualized return as of this week was 5.8 percent, compared to 7.2 percent for the Standard & Poor’s 500-stock index.


How did the US value funds first 10 years compare to the S&P?

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TheTimeLord
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Re: Your Favorite Portfolio Tilts

Postby TheTimeLord » Thu Jun 22, 2017 10:53 am

I like a U.S. Total Market tilt.
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Re: Your Favorite Portfolio Tilts

Postby saltycaper » Thu Jun 22, 2017 11:18 am

MotoTrojan wrote:
Jeff Albertson wrote:James B. Stewart's current article 'An Index-Fund Evangelist Is Straying From His Gospel', on Burton Malkiel's embrace of smart beta.
https://www.nytimes.com/2017/06/22/business/burton-malkiel-investment-stock-index-funds.html?ref=business
Smart beta has its critics, including Mr. Arnott, viewed by many as the godfather of the field. “Smart beta can be smart, and then it can be not so smart,” Mr. Arnott said. “There are tons of strategies being offered now based on nothing but back tests. Anyone can create a brilliant strategy with benefit of hindsight. But does that mean anything for future returns?”

“Pretty much everyone is looking at the same factors, which is a danger,” he added. “It’s a very crowded space. If 10,000 quants are all looking at the same data and trading on it, the chances are that it’s not going to work.”
...
There are even more single-factor E.T.F.s, such as the venerable Vanguard U.S. Value Fund, started in 2000. Its 10-year annualized return as of this week was 5.8 percent, compared to 7.2 percent for the Standard & Poor’s 500-stock index.


How did the US value funds first 10 years compare to the S&P?


Since inception, Vanguard U.S. Value Fund has outperformed Vanguard 500 Index Fund by about 1% per year, and it had a higher risk-adjusted return too. The first 10 years were even better. The first 7 years, it crushed the S&P. (IMO, none of this proves anything. Just responding to one cherry-picked time period with another.)
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

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Hawaiishrimp
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Re: Your Favorite Portfolio Tilts

Postby Hawaiishrimp » Thu Jun 22, 2017 11:22 am

My current tilts:
Apple, Google, Nvidia, IPG Photonics

All in taxable account, too much capital gains if I sell them. I'm letting them run. All 5-10x returns.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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saltycaper
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Re: Your Favorite Portfolio Tilts

Postby saltycaper » Thu Jun 22, 2017 11:26 am

Dirghatamas wrote:
Yes, I have thought about that. For the two bears I have witnessed personally (2000-2002, 2008-2009), certainly under stress, money went into developed Govt bonds especially long bonds. While not a certainty, I would predict this (flight to safety) to be the high probability outcome under most financial/short term stress.

This though to me is short term volatility. The long term outcome (I believe) for nominal bonds will be dominated by demographics and unfunded liabilities. The most probable (IMO) outcome is inflation to handle these. My main long term fear is actually concentration in home country (bad outcome in US stocks with decent outcome elsewhere). So I hedge by diversifying the high expected return asset (stocks) across countries rather than hedge US stocks by low expected return diversifier (bonds).

As for volatility/bear market, my plan is to mitigate it by very low SWR. I am in accumulation with assets already sufficient for 1% SWR and should hopefully hit 0.25-0.5% range before retiring. Yes, I could just sell all my stocks and move to 100% TIPS and the SWR would be sufficient. So, perhaps it doesn't really matter to be honest.


I share some of your concerns and strategy (I'm about 50/50 US/Int'l), except I could never see myself holding more than 60-70% equities, so I focus most of my fixed income allocation on TIPS and short-duration instruments. I see my large tilt to small-cap value as something of an inflation hedge too, albeit unpredictable. Now that you mention your SWR (LOL--literally), I remember some of your other posts. Yes. I think you'll be good regardless of AA. :D
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

MotoTrojan
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Re: Your Favorite Portfolio Tilts

Postby MotoTrojan » Thu Jun 22, 2017 11:41 am

saltycaper wrote:
MotoTrojan wrote:
Jeff Albertson wrote:James B. Stewart's current article 'An Index-Fund Evangelist Is Straying From His Gospel', on Burton Malkiel's embrace of smart beta.
https://www.nytimes.com/2017/06/22/business/burton-malkiel-investment-stock-index-funds.html?ref=business
Smart beta has its critics, including Mr. Arnott, viewed by many as the godfather of the field. “Smart beta can be smart, and then it can be not so smart,” Mr. Arnott said. “There are tons of strategies being offered now based on nothing but back tests. Anyone can create a brilliant strategy with benefit of hindsight. But does that mean anything for future returns?”

“Pretty much everyone is looking at the same factors, which is a danger,” he added. “It’s a very crowded space. If 10,000 quants are all looking at the same data and trading on it, the chances are that it’s not going to work.”
...
There are even more single-factor E.T.F.s, such as the venerable Vanguard U.S. Value Fund, started in 2000. Its 10-year annualized return as of this week was 5.8 percent, compared to 7.2 percent for the Standard & Poor’s 500-stock index.


How did the US value funds first 10 years compare to the S&P?


Since inception, Vanguard U.S. Value Fund has outperformed Vanguard 500 Index Fund by about 1% per year, and it had a higher risk-adjusted return too. The first 10 years were even better. The first 7 years, it crushed the S&P. (IMO, none of this proves anything. Just responding to one cherry-picked time period with another.)


There you go. And I'd take 17 years over 10, if I'm going to cherry pick; especially when the 17 includes the 10. This is an excellent example of tracking error and behavioral risk being a concern, when in reality the decision would've netted a massive 1% premium over almost 2 decades.

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Re: Your Favorite Portfolio Tilts

Postby Jeff Albertson » Thu Jun 22, 2017 11:55 am

I think that is Arnott's point. When a lot of money flows into an asset class, the future returns likely suffer. William Bernstein's ebook, 'Skating Where the Puck Was', discusses this.
Renkenthaler's Rule: "If the bozos know about it, it doesn't work anymore." The one exception to Renkenthaler's Rule may be the value premium.

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Re: Your Favorite Portfolio Tilts

Postby saltycaper » Thu Jun 22, 2017 12:05 pm

Jeff Albertson wrote:
I think that is Arnott's point. When a lot of money flows into an asset class, the future returns likely suffer. William Bernstein's ebook, 'Skating Where the Puck Was', discusses this.
Renkenthaler's Rule: "If the bozos know about it, it doesn't work anymore." The one exception to Renkenthaler's Rule may be the value premium.


How splendidly apropos. :wink:
"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said." --Alan Greenspan

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Leif
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Re: Your Favorite Portfolio Tilts

Postby Leif » Thu Jun 22, 2017 12:10 pm

- Small/Value (US & Intl)
- EM
- REITs (US)
- US tilt (about 55/45)
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: Your Favorite Portfolio Tilts

Postby MikeMak27 » Thu Jun 22, 2017 12:17 pm

After waiting for some of my capital gains in IXUS and ITOT to hit the 1 year mark and become long term capital gains, I will be entirely invested in only 3 things.

37% IEMG / VWO / FPMAX (Emerging markets)
43% IJS (US small cap value)
20% FIBAX (Intermediate Term US treasuries) & checking account / savings account bonuses.

It's my version of Taylor's very successful 3 fund portfolio :)
It's just adjusted for more risk since I'm only 30 and need the growth.

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Re: Your Favorite Portfolio Tilts

Postby Theoretical » Thu Jun 22, 2017 12:39 pm

With that kind of equity risk, you should be using EDV or ZROZ, not intermediate treasuries and a savings account.

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Taylor Larimore
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Re: Your Favorite Portfolio Tilts

Postby Taylor Larimore » Thu Jun 22, 2017 2:31 pm

Bogleheads:

Allen Roth has written his follow advisors about "tilts":
"Owning even one other stock fund will actually decrease diversification since it will be making specific bets on industries, styles, or other factors."

"Over the years, I’ve benchmarked hundreds of portfolios against the equivalent weighted three-fund portfolio and can count on one hand the number of portfolios I’ve seen that bested this benchmark."

viewtopic.php?f=10&t=221740&newpost=3419077

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Your Favorite Portfolio Tilts

Postby DaftInvestor » Thu Jun 22, 2017 3:09 pm

Stock Index Fund tilts:
- Small-Cap-Value (10%)
- REITs (10%)
(And I suppose I have a "US Tilt" as well since I only hold 25% of my equity in International).

For Bonds I have some TIPS and iBonds for a small amount of inflation protected stability - not sure if you would consider this a tilt or not (goes beyond a 3-fund portfolio so by that definition yes).

Why did I do it?: From reading various books (Ferri and Bernstein I believe both provided compelling back-tested data to support value and reit tilts), threads, papers, etc. I started with also a small additional tilt to Large-Value but have since removed this fund for simplicity. I have recently started considering removing the additional tilts just to simplify things a bit more.

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unclescrooge
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Re: Your Favorite Portfolio Tilts

Postby unclescrooge » Thu Jun 22, 2017 3:09 pm

I tilt towards relative value.

Right now, that means I'm over weight EM, particularly China, and EM Bonds.

I'm under weight developed market intl bonds (0% allocation) and US stocks. In the US, I tilt towards value and quality.

This in an active portfolio and more work than a passive portfolio. But this suits my personality of being an optimizer.

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Re: Your Favorite Portfolio Tilts

Postby Robert T » Thu Jun 22, 2017 4:29 pm

.
Using an indicative ‘market portfolio’ of:

    30% US stocks
    25% non-US stocks
    23% US bonds
    22% Non-US bonds
(re: pg 22 of Bill Sharpe’s online book http://web.stanford.edu/~wfsharpe/RISMAT/RISMAT-7.pdf)

My preferred long-term tilts are:

Equities (75% relative to 55% in ‘market portfolio’)
    Value (target long-term load = 0.4)
    Small (target long-term load = 0.2)
US bonds (0% non-US bonds)
    Term (target long-term load = 0.5)
    Default (target long-term load = 0.0)
Robert
.

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TheTimeLord
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Re: Your Favorite Portfolio Tilts

Postby TheTimeLord » Thu Jun 22, 2017 7:28 pm

Image
Run, You Clever Boy!

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patrick013
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Re: Your Favorite Portfolio Tilts

Postby patrick013 » Thu Jun 22, 2017 8:19 pm

Many "tilts" have made over market returns the last 10 years, some
9-10-even 11 percent and holding. Mid cap, small cap, high yield
dividend index, and even my favorite low beta safety index Utilities.

Not any particular industry or country but I have read some concern
lately that China is under-represented in EM indexes.

So there's a few tilts that can't be completely ignored based on performance
over many decades.
age in bonds, buy-and-hold, 10 year business cycle

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Re: Your Favorite Portfolio Tilts

Postby Dave55 » Thu Jun 22, 2017 8:23 pm

patrick013 wrote:Many "tilts" have made over market returns the last 10 years, some
9-10-even 11 percent and holding. Mid cap, small cap, high yield
dividend index, and even my favorite low beta safety index Utilities.

Not any particular industry or country but I have read some concern
lately that China is under-represented in EM indexes.

So there's a few tilts that can't be completely ignored based on performance
over many decades.


Patrick013

What are you using for index Utilities?

Thanks
Dave

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Re: Your Favorite Portfolio Tilts

Postby Lieutenant.Columbo » Thu Jun 22, 2017 8:26 pm

Dirghatamas wrote:I am in accumulation with assets already sufficient for 1% SWR and should hopefully hit 0.25-0.5% range before retiring
Dirghatamas, personal but respectful question: why aren't you retired already? :?:
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

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patrick013
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Re: Your Favorite Portfolio Tilts

Postby patrick013 » Thu Jun 22, 2017 8:31 pm

Dave55 wrote:Patrick013

What are you using for index Utilities?

Thanks
Dave


The Vanguard one, ticker VPU, or ticker XLU will probably always
have 10% of my portfolio. They just go up a little at a time with
low beta too.
age in bonds, buy-and-hold, 10 year business cycle

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Re: Your Favorite Portfolio Tilts

Postby Dirghatamas » Fri Jun 23, 2017 12:11 am

Lieutenant.Columbo wrote:Dirghatamas, personal but respectful question: why aren't you retired already? :?:

This is getting OT but fine. Two reasons 1) worries about future of healthcare 2) mental stimulation. I want a large safety margin because the future of healthcare in US is unknown. Still, my worry has gone down over the last year as I have started reading up more about this topic (self insurance, long term care costs) and started doing some models. The other reason is more important: what to do with one's brain once retired? I am a research engineer and am surrounded by some seriously smart and creative people. Brainstorming and inventing technologies with these folks is great fun. Luckily, I don't deal with any bureaucracy or management/ paperwork. Taking care of one's physical health in retirement sounds easy but I am not sure how to stay mentally sharp (and fulfilled). I suspect I will retire as soon as I start getting bored or my creativity starts waning or if work becomes more bureaucratic/ managerial.

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Re: Your Favorite Portfolio Tilts

Postby Sammy_M » Fri Jun 23, 2017 5:26 am

Robert T wrote:.
Using an indicative ‘market portfolio’ of:

    30% US stocks
    25% non-US stocks
    23% US bonds
    22% Non-US bonds
(re: pg 22 of Bill Sharpe’s online book http://web.stanford.edu/~wfsharpe/RISMAT/RISMAT-7.pdf)

My preferred long-term tilts are:

Equities (75% relative to 55% in ‘market portfolio’)
    Value (target long-term load = 0.4)
    Small (target long-term load = 0.2)
US bonds (0% non-US bonds)
    Term (target long-term load = 0.5)
    Default (target long-term load = 0.0)
Robert
.

I have learned a tremendous amount from Robert over the years and thus compare my portfolio 'tilt' against the same global market benchmark. My portfolio is similar to Robert's, but I perceive that I have a lower risk tolerance. Thus I tilt less to Value and Term, and I allocate a portion of my equity exposure to alternative investments that I expect to be a slight drag on portfolio performance, but hopefully will lower risk (i.e. hedge).

My preferred long-term tilts are:

Equities (67% relative to 55% in ‘market portfolio’)
    Value (target long-term load = 0.2)
    Small (target long-term load = 0.2)
    Includes Alternative asset classes -- 4% Gold Miners (influenced by W. Bernstein), 8% AQR QSPIX (influenced by L. Swedroe)
US bonds (0% non-US bonds)
    Term (target long-term load = 0.2)
    Default (target long-term load = 0.0)
    Around 10% of my 33% bond allocation is in TIPS/I-Bonds.

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Re: Your Favorite Portfolio Tilts

Postby Longtermgrowth » Sat Jun 24, 2017 12:34 am

PrettyCoolWorkshop wrote:My current tilts:
-Small Cap Value (VBR).
-Consumer Staples (VDC). I think this one is a particularly good hedge to be in while valuations are as high as they currently are, in case of an imminent crash. This gets me the returns I want without waiting on the sidelines like a silly market timer!

I am also considering tilting toward the technology sector (VGT). The performance of this sector has been impressive and I think that this outperformance can continue in the long run. There isn't a lot of historical data to back this up though...


I'm curious if you've considered the P/E (Price/Prospective Earnings) of consumer staples vs the S&P 500? I like the idea of consumer staples, though it does appear to carry a premium at the moment vs the market. I asked this question in another thread, and actually considered starting a new thread with this question: How much of a premium does consumer staples generally carry over the market? Is it more now than it was historically? Looking on Morningstar today, VDC P/E is 21.14, VOO (Vanguard 500 index) is at 19.87.

On the subject of P/E, VGT is at 23.51 :shock: Thanks to FANG I'm sure (Facebook, Amazon, Netflix and Google (now Alphabet)). Though Apple is over 14 percent of the fund, and it has done well. I remember seeing numerous comments here last year about how Apple was the top holding of the total market funds and how it was viewed as overvalued, ie another reason not to buy at the current high. From then to now, apparently it wasn't.


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