The One-Fund Portfolio as a default suggestion

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bgf
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Re: The One-Fund Portfolio as a default suggestion

Post by bgf » Wed Apr 01, 2020 6:45 am

fortyofforty wrote:
Sun Mar 29, 2020 9:07 am
Just explored a bit the iShares ETFs that would meet these objectives. Unfortunately, Vanguard doesn't seem to have any at the moment. The expense ratio of the iShares Core in One ETFs is 0.25%. I was thinking that Vanguard LifeStrategy funds have a 'high" expense ratio, however they are between 0.11% and 0.14%. Amazing how my expectation of reasonable expense ratios has changed from decades ago, thanks largely to Jack Bogle and Vanguard.
it also hasnt been that high in practice. i just looked at the prospectus last week for AOA, and it only lagged its benchmark by, i think, 0.17% over the past 10 years. maybe im misinterpreting though.

i hold AOA in accounts where vanguard funds dont trade transaction free. its worth it to me to pay a tiny bit more for AOA to keep a consistent strategy throughout my whole portfolio.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: The One-Fund Portfolio as a default suggestion

Post by bgf » Wed Apr 01, 2020 8:14 am

siamond wrote:
Tue Mar 31, 2020 10:40 pm
Personally, even if I wouldn't want to suggest a one-size-fits-all to all investors, I will increasingly promote all-in-one funds as the default suggestion, as one should really have a strong rationale (and commitment) to do something else.
for years I've recommended that people with little interest in investing put everything in target date funds.

i had my epiphany in January of this year that I 1) no longer wanted to spend as much time dealing with my portfolio as i had in prior years and 2) lacked sufficient grounds to do other than what i had been advising others.

turns out I'd been giving pretty solid advice. might as well benefit from it myself.

also, im really starting to react negatively to the terms naive and sophisticated investors... ive been reading about investing, economics, personal finance, and market history for probably 10 years now. im very interested in it. i wouldnt consider myself "naive" but am i "sophisticated"? what does that even mean?

do i trade for a living? no. am i an investment banker or hedge fund analyst or manager? no. im friends with several who are. i know how hard they work and how much knowledge, experience, and connections they've developed over the years... do i have any edge whatsoever in the market? no.

id be willing to bet that many of the "sophisticated" investors here have no edge either and are probably more susceptible to behavioral errors than they think.

a one fund approach is a good choice for just about everyone, not just "naive" investors.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: The One-Fund Portfolio as a default suggestion

Post by Atticus713 » Wed Apr 08, 2020 6:29 am

Dear longinvest,
Thank you for this great thread! We just did a backdoor Roth at Vanguard and, with what I learned through your very helpful posts, we chose a LifeStrategy Fund—thanks for educating me on this option! Would you be so kind as to further explain in more detail the mechanics and thought process behind the “***footnote” you mentioned in your initial post? (See below). Can you also talk about what an SPIA is and why, later in life, you might use some of the fund to purchase that?—in contrast with exchanging the 60/40 LifeStrategy Fund for one of the more conservative (40/60 or 20/80) iterations at around age 70?
Many thanks!
Atticus713

“*** In retirement, combining variable portfolio withdrawals with Social Security (possibly delayed to age 70) and a pension (if any) often results into mild total income fluctuations. When necessary, Total Retirement Income fluctuations can be further dampened by using a small part of the portfolio to buy an inflation-indexed Single Premium Immediate Annuity (SPIA) instead of increasing the bond allocation above 40%.”

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Re: The One-Fund Portfolio as a default suggestion

Post by abuss368 » Wed Apr 08, 2020 10:11 am

bgf wrote:
Wed Apr 01, 2020 8:14 am
siamond wrote:
Tue Mar 31, 2020 10:40 pm
Personally, even if I wouldn't want to suggest a one-size-fits-all to all investors, I will increasingly promote all-in-one funds as the default suggestion, as one should really have a strong rationale (and commitment) to do something else.
for years I've recommended that people with little interest in investing put everything in target date funds.

i had my epiphany in January of this year that I 1) no longer wanted to spend as much time dealing with my portfolio as i had in prior years and 2) lacked sufficient grounds to do other than what i had been advising others.

turns out I'd been giving pretty solid advice. might as well benefit from it myself.

also, im really starting to react negatively to the terms naive and sophisticated investors... ive been reading about investing, economics, personal finance, and market history for probably 10 years now. im very interested in it. i wouldnt consider myself "naive" but am i "sophisticated"? what does that even mean?

do i trade for a living? no. am i an investment banker or hedge fund analyst or manager? no. im friends with several who are. i know how hard they work and how much knowledge, experience, and connections they've developed over the years... do i have any edge whatsoever in the market? no.

id be willing to bet that many of the "sophisticated" investors here have no edge either and are probably more susceptible to behavioral errors than they think.

a one fund approach is a good choice for just about everyone, not just "naive" investors.
I would agree as I believe investor behavior is a larger risk than the under performance of the international markets. A one fund approach that is a balanced fund such as Target or LifeStrategy is a very good strategy.

I have used a Target fund in the College 529 plans and also a former employer plan.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: The One-Fund Portfolio as a default suggestion

Post by SevenBridgesRoad » Wed Apr 08, 2020 10:30 am

bgf wrote:
Wed Apr 01, 2020 8:14 am
siamond wrote:
Tue Mar 31, 2020 10:40 pm
Personally, even if I wouldn't want to suggest a one-size-fits-all to all investors, I will increasingly promote all-in-one funds as the default suggestion, as one should really have a strong rationale (and commitment) to do something else.
...also, im really starting to react negatively to the terms naive and sophisticated investors... ive been reading about investing, economics, personal finance, and market history for probably 10 years now. im very interested in it. i wouldnt consider myself "naive" but am i "sophisticated"? what does that even mean?

...id be willing to bet that many of the "sophisticated" investors here have no edge either and are probably more susceptible to behavioral errors than they think.

a one fund approach is a good choice for just about everyone, not just "naive" investors.
Yes. The last few weeks, many self-identified sophisticated investors have realized they can't "stay the course" with their more complicated plan. It would be a big step if responders would leave out condescending words when discussing a one-fund portfolio.

Steve Jobs was a pretty smart guy. He understood there was an elegance and sophistication on the other side of complexity. The path of sophistication is more like: naivety → complexity → simplicity. “It takes a lot of hard work,” Jobs said, “to make something simple, to truly understand the underlying challenges and come up with elegant solutions.” As the headline of Apple’s first marketing brochure proclaimed in 1977, “Simplicity is the ultimate sophistication.”
Retired 2018 age 61/Variable Percentage Withdrawal method/One fund: VTINX all accounts/No mortgage,debt/Good enough | "Not using an alarm is one of the great glories of my life." Robert Greene

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Wed Apr 08, 2020 5:53 pm

Atticus713 wrote:
Wed Apr 08, 2020 6:29 am
Dear longinvest,
Thank you for this great thread! We just did a backdoor Roth at Vanguard and, with what I learned through your very helpful posts, we chose a LifeStrategy Fund—thanks for educating me on this option! Would you be so kind as to further explain in more detail the mechanics and thought process behind the “***footnote” you mentioned in your initial post? (See below). Can you also talk about what an SPIA is and why, later in life, you might use some of the fund to purchase that?—in contrast with exchanging the 60/40 LifeStrategy Fund for one of the more conservative (40/60 or 20/80) iterations at around age 70?
Many thanks!
Atticus713

“*** In retirement, combining variable portfolio withdrawals with Social Security (possibly delayed to age 70) and a pension (if any) often results into mild total income fluctuations. When necessary, Total Retirement Income fluctuations can be further dampened by using a small part of the portfolio to buy an inflation-indexed Single Premium Immediate Annuity (SPIA) instead of increasing the bond allocation above 40%.”
Atticus713, to avoid derailing this thread, I've answered your question in this post of the "Variable Percentage Withdrawal (VPW)" thread.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

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Re: The One-Fund Portfolio as a default suggestion

Post by abuss368 » Wed Apr 08, 2020 6:05 pm

SevenBridgesRoad wrote:
Wed Apr 08, 2020 10:30 am
Steve Jobs was a pretty smart guy. He understood there was an elegance and sophistication on the other side of complexity. The path of sophistication is more like: naivety → complexity → simplicity. “It takes a lot of hard work,” Jobs said, “to make something simple, to truly understand the underlying challenges and come up with elegant solutions.” As the headline of Apple’s first marketing brochure proclaimed in 1977, “Simplicity is the ultimate sophistication.”
Well said and I enjoyed reading the book by Walter Isaacson about him as he had direct access to Steve Jobs even up until his final moments at home.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: The One-Fund Portfolio as a default suggestion

Post by Atticus713 » Wed Apr 08, 2020 7:04 pm

Great—I’ll check out the other thread—thanks again!
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Re: The One-Fund Portfolio as a default suggestion

Post by BB76 » Wed Apr 08, 2020 8:30 pm

See signature. :sharebeer
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Re: The One-Fund Portfolio as a default suggestion

Post by SevenBridgesRoad » Wed Apr 08, 2020 8:57 pm

BB76 wrote:
Wed Apr 08, 2020 8:30 pm
See signature. :sharebeer
Excellent signature, BB76.

A movement is afoot on this forum. Simple is not unsophisticated.
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Re: The One-Fund Portfolio as a default suggestion

Post by abuss368 » Wed Apr 08, 2020 9:17 pm

SevenBridgesRoad wrote:
Wed Apr 08, 2020 8:57 pm
BB76 wrote:
Wed Apr 08, 2020 8:30 pm
See signature. :sharebeer
Excellent signature, BB76.

A movement is afoot on this forum. Simple is not unsophisticated.
I have been feeling the same. One can read that message in a lot of posts.
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Re: The One-Fund Portfolio as a default suggestion

Post by abuss368 » Wed Apr 08, 2020 9:18 pm

Age can impact this as well. If I was just starting my career I would be 100% Total Stock or S&P 500.
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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Wed Apr 08, 2020 9:28 pm

abuss368 wrote:
Wed Apr 08, 2020 9:18 pm
If I was just starting my career I would be 100% Total Stock or S&P 500.
Dear Abuss368,

This threads isn't about portfolios concentrated into a single asset class of a single country. It's about all-in-one internationally-diversified balanced index portfolios, with either a constant or a gliding asset allocation.

Best regards,

longinvest
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Re: The One-Fund Portfolio as a default suggestion

Post by Mountain Doc » Wed Apr 08, 2020 9:28 pm

After managing a three-fund portfolio for 8 years, I transitioned to a one-fund portfolio early this year. That decision was part of an overall move toward simplicity and acceptance of good enough instead of trying to optimize the details. It has been really freeing to have a single balanced fund. Knowing there is nothing to do takes away any urge to make tweaks, and it makes it easier to ignore the market movements. I think it is an excellent default suggestion for both "naive" and "sophisticated" investors. :beer

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Re: The One-Fund Portfolio as a default suggestion

Post by JBTX » Wed Apr 08, 2020 9:32 pm

longinvest wrote:
Tue Mar 10, 2020 7:02 pm
Here's a copy of a post I wrote on another thread:
longinvest wrote:
Tue Mar 10, 2020 6:02 pm
Last year I moved my entire portfolio into an all-in-one Vanguard "Asset Allocation ETF" very similar to a LifeStrategy fund (except for a different home bias). I was lucky to do the switch early enough before having accumulated significant unrealized gains in my taxable account. This has made investing much simpler for my wife and, surprisingly, for me (which isn't something I had anticipated). I had not realized how simpler a One-Fund Portfolio actually is. It almost feels like a bank account, except for its fluctuating balance, in that I only have to regularly put money in. I don't have to think, anymore, about planning rebalancing moves carefully to avoid (the equivalent of) wash sales, etc.

I think that there's a lot of unfounded fear about the use of a lifestrategy or a target date fund in a taxable account. I think that too few forum members pay attention to the following statement of our wiki's page on Tax-efficient fund placement: "Tax rates and brackets change frequently. What was a logical tax location one year may turn out to be a poor choice a few years later. Consider if it's worth the effort (added complexity) to take this approach."

I've provided, in the One-Fund Portfolio thread, a mathematical proof that a mirrored asset allocation is more resilient in face of an unknown future than prioritizing the placement of a specific asset (stocks or bonds) into specific tax-advantaged accounts:
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 beat it.

Now that I have experienced the simplicity of a One-Fund Portfolio (with, obviously, a mirrored asset allocation) and the peace of mind it brings, I'll never go back to holding separate funds or ETFs.
I agree that the asset placement arguments are greatly exaggerated and any of the simple models I've put together don't generally confirm that "bonds in tax advantaged" argument. At least as long as interest rates stay below 4-5%. It is generally more of a timing argument of when you pay the taxes.

I also agree with the value of life strategy and target dates funds. I have gravitated my 401ks mostly to target dates, although admittedly I'm still all over the place with funds and tilts in my rollovers and Roths.

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Re: The One-Fund Portfolio as a default suggestion

Post by bck63 » Thu Apr 09, 2020 7:57 pm

longinvest wrote:
Wed Apr 08, 2020 9:28 pm
abuss368 wrote:
Wed Apr 08, 2020 9:18 pm
If I was just starting my career I would be 100% Total Stock or S&P 500.
Dear Abuss368,

This threads isn't about portfolios concentrated into a single asset class of a single country. It's about all-in-one internationally-diversified balanced index portfolios, with either a constant or a gliding asset allocation.

Best regards,

longinvest
I took his post as pointing out the shortcomings of a one-fund portfolio early in the accumulation phase. I don't like them even at my stage, which is close to retirement. I like having stocks and bonds separated out. Just a personal preference.

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Fri Apr 10, 2020 7:08 am

bck63 wrote:
Thu Apr 09, 2020 7:57 pm
longinvest wrote:
Wed Apr 08, 2020 9:28 pm
abuss368 wrote:
Wed Apr 08, 2020 9:18 pm
If I was just starting my career I would be 100% Total Stock or S&P 500.
Dear Abuss368,

This threads isn't about portfolios concentrated into a single asset class of a single country. It's about all-in-one internationally-diversified balanced index portfolios, with either a constant or a gliding asset allocation.

Best regards,

longinvest
I took his post as pointing out the shortcomings of a one-fund portfolio early in the accumulation phase. I don't like them even at my stage, which is close to retirement. I like having stocks and bonds separated out. Just a personal preference.
Dear Bck63,

For those who prefer to glide from a stock-heavy allocation in young age to a bond-heavy allocation in old age, Vanguard provides Target Retirement funds which maintain a 90/10 stock/bond allocation until age 40. That's nine times as much stocks as bonds. Mathematically, there can only be a tiny difference in returns and volatility between a stock-heavy 90/10 stock/bond allocation and a stock-only allocation.

Here's a chart extracted from Vanguard's approach to target-date funds:

Image


For those who prefer a fixed lifelong asset allocation, Vanguard provides LifeStrategy funds and BlackRock provides iShares Core Allocation ETFs.

There are other forum threads which are more appropriate to debate between these two distinct yet reasonable approaches to lifelong asset allocation.

It's nice to know your personal preference for separate funds. You'll find other forum threads to discuss the management of a portfolio composed of multiple funds.

This specific thread is for those of us who wish to discuss the various advantages of using a single identical globally-diversified all-in-one fund or ETF in all accounts.

Best regards,

longinvest
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Re: The One-Fund Portfolio as a default suggestion

Post by vineviz » Fri Apr 10, 2020 7:58 am

longinvest wrote:
Fri Apr 10, 2020 7:08 am
For those who prefer to glide from a stock-heavy allocation in young age to a bond-heavy allocation in old age, Vanguard provides Target Retirement funds which maintain a 90/10 stock/bond allocation until age 40. That's nine times as much stocks as bonds. Mathematically, there can only be a tiny difference in returns and volatility between a stock-heavy 90/10 stock/bond allocation and a stock-only allocation.
Even investors who are convinced that 90% in equities isn't enough will still have options in target date funds: Dimensional Fund Advisor offers funds that start at 95% stocks and Blackrock has options that start at >98% stocks.

The vast majority of investors will be much better served by simply taking whatever low-cost target date fund is most convenient than by imagining that they can build a better mousetrap themselves.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: The One-Fund Portfolio as a default suggestion

Post by 17outs » Fri Apr 10, 2020 8:20 am

One thing not mentioned is the cost differences between these methods. VG TDF are 15 bp. This LS fund is 13 bp. A 3 or 4 fund is on avg 5 bps ish. Even smaller at some other brokerages like fidelity where my 401k is.

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Fri Apr 10, 2020 8:34 am

17outs wrote:
Fri Apr 10, 2020 8:20 am
One thing not mentioned is the cost differences between these methods. VG TDF are 15 bp. This LS fund is 13 bp. A 3 or 4 fund is on avg 5 bps ish. Even smaller at some other brokerages like fidelity where my 401k is.
Dear 17outs,

There were many exchanges about that, previously in this thread. Here's one exchange:
Amadis_of_Gaul wrote:
Mon Feb 03, 2020 1:39 pm
fortyofforty wrote:
Mon Feb 03, 2020 10:14 am
My only gripe is the expense ratio of the LifeStrategy funds. Is it possible that Vanguard will begin using the "Admiral" funds rather than the "Investor" funds, now that the Investor shares are being phased out elsewhere? I hope so.
Though we are incredibly spoiled to be complaining about a .13% ER. That's just a few basis points away from what the ER of a 3FP would be. Additionally, if your retirement gets derailed by a .13% ER, you probably had much worse problems than that!
If a few basis points in expenses derail a retirement plan, I think that the problem isn't due expenses but to an insufficient savings rate.

While mentioning the savings rate, I'll take the opportunity to say that I think that the emphasis should rather be put on the spending amount. In other words, spending reasonably less and living below one's means (but not too much!). I've illustrated this in the post The Mathematics of Retirement Investing.

Best regards,

longinvest
Last edited by longinvest on Fri Apr 10, 2020 8:49 am, edited 4 times in total.
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Re: The One-Fund Portfolio as a default suggestion

Post by vineviz » Fri Apr 10, 2020 8:36 am

17outs wrote:
Fri Apr 10, 2020 8:20 am
One thing not mentioned is the cost differences between these methods. VG TDF are 15 bp. This LS fund is 13 bp. A 3 or 4 fund is on avg 5 bps ish. Even smaller at some other brokerages like fidelity where my 401k is.
Behavioral and cognitive errors will result in most investors costing themselves much more than the 5-10 bps difference in expenses. Maybe an order of magnitude more, according to Morningstar research.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: The One-Fund Portfolio as a default suggestion

Post by absolute zero » Fri Apr 10, 2020 8:50 am

longinvest wrote:
Fri Apr 10, 2020 8:34 am
17outs wrote:
Fri Apr 10, 2020 8:20 am
One thing not mentioned is the cost differences between these methods. VG TDF are 15 bp. This LS fund is 13 bp. A 3 or 4 fund is on avg 5 bps ish. Even smaller at some other brokerages like fidelity where my 401k is.
Dear 17outs,

There were many exchanges about that, previously in this thread. Here's one exchange:
Amadis_of_Gaul wrote:
Mon Feb 03, 2020 1:39 pm
fortyofforty wrote:
Mon Feb 03, 2020 10:14 am
My only gripe is the expense ratio of the LifeStrategy funds. Is it possible that Vanguard will begin using the "Admiral" funds rather than the "Investor" funds, now that the Investor shares are being phased out elsewhere? I hope so.
Though we are incredibly spoiled to be complaining about a .13% ER. That's just a few basis points away from what the ER of a 3FP would be. Additionally, if your retirement gets derailed by a .13% ER, you probably had much worse problems than that!
I think that the problem isn't due expenses but due to an insufficient savings rate if a few basis points in expenses derail a retirement plan,

While mentioning the savings rate, I'll take the opportunity to say that I believe that the emphasis should rather be put on the spending amount as I've illustrated in the post "The Mathematics of Retirement Investing".

Best regards,

longinvest
You guys are just attacking a straw man. Obviously no one out there is suggesting that 13 basis points is derailing anyone’s retirement. But it WILL result in less money, assuming a person is able to stick to their plan regardless of whether they use 1 fund or 3 funds.

How much less money? Hard to say but I’m sure someone could run some numbers. Maybe it means someone has to work 1 extra week before retiring. Or maybe they have to work 2 extra months. I don’t know, but I’m not sure any extra work at the end of my career is worth avoiding something simple like a 3 fund portfolio.

If someone chooses 1 fund due to simplicity and higher likelihood to stay the course, then that is a completely valid choice. But let’s not cover our eyes to the cost associated with it. It’s not a big cost, but it is a cost.

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Re: The One-Fund Portfolio as a default suggestion

Post by bck63 » Fri Apr 10, 2020 8:56 am

longinvest wrote:
Fri Apr 10, 2020 7:08 am
This specific thread is for those of us who wish to discuss the various advantages of using a single identical globally-diversified all-in-one fund or ETF in all accounts.
There is a rule which says discussing the clear disadvantages of balanced and target funds is disallowed in this thread? Please elucidate.

The disadvantages are many, including having stocks and bonds mixed in one fund. For instance, if you want to sell bonds, or change the type of bonds you own, or increase or decrease your bond allocation, you must sell equities as well. I have been in that situation and it was difficult.

I use a two-fund portfolio of S&P 500 and total bond market. In taxable I use short-term treasuries instead of TBM. Works for me and is better than a one-fund strategy in my opinion.

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Fri Apr 10, 2020 9:03 am

absolute zero wrote:
Fri Apr 10, 2020 8:50 am
longinvest wrote:
Fri Apr 10, 2020 8:34 am
17outs wrote:
Fri Apr 10, 2020 8:20 am
One thing not mentioned is the cost differences between these methods. VG TDF are 15 bp. This LS fund is 13 bp. A 3 or 4 fund is on avg 5 bps ish. Even smaller at some other brokerages like fidelity where my 401k is.
Dear 17outs,

There were many exchanges about that, previously in this thread. Here's one exchange:
Amadis_of_Gaul wrote:
Mon Feb 03, 2020 1:39 pm
fortyofforty wrote:
Mon Feb 03, 2020 10:14 am
My only gripe is the expense ratio of the LifeStrategy funds. Is it possible that Vanguard will begin using the "Admiral" funds rather than the "Investor" funds, now that the Investor shares are being phased out elsewhere? I hope so.
Though we are incredibly spoiled to be complaining about a .13% ER. That's just a few basis points away from what the ER of a 3FP would be. Additionally, if your retirement gets derailed by a .13% ER, you probably had much worse problems than that!
If a few basis points in expenses derail a retirement plan, I think that the problem isn't due expenses but to an insufficient savings rate.

While mentioning the savings rate, I'll take the opportunity to say that I think that the emphasis should rather be put on the spending amount. In other words, spending reasonably less and living below one's means (but not too much!). I've illustrated this in the post The Mathematics of Retirement Investing.

Best regards,

longinvest
You guys are just attacking a straw man. Obviously no one out there is suggesting that 13 basis points is derailing anyone’s retirement. But it WILL result in less money, assuming a person is able to stick to their plan regardless of whether they use 1 fund or 3 funds.

How much less money? Hard to say but I’m sure someone could run some numbers. Maybe it means someone has to work 1 extra week before retiring. Or maybe they have to work 2 extra months. I don’t know, but I’m not sure any extra work at the end of my career is worth avoiding something simple like a 3 fund portfolio.

If someone chooses 1 fund due to simplicity and higher likelihood to stay the course, then that is a completely valid choice. But let’s not cover our eyes to the cost associated with it. It’s not a big cost, but it is a cost.
Dear "Absolute zero",

Investing an inflation-adjusted $1,000 per month for 40 years into a portfolio at a constant annual 4% real rate of return (after expenses) grows to $1,161,064 inflation-adjusted. If we subtract 8 basis points in additional annual expenses (that's a little more than the difference between VSMGX and the equivalent VTI/VXUS/BND/BNDX 4-ETF portfolio)*, the same stream of contributions grows to $1,138,994, barely 2% less after 40 years, assuming perfect management of the 4-ETF portfolio without any commissions. That's before taking into account that VSMGX rebalances daily with the cash flows of other investors. In other words, it's impossible to predict which of the two is likely to win in real life after 40 years, even if we assume perfect costless execution with a 4-ETF portfolio.

* I'm doubly unfair to VSMGX, as the difference is 0.077% (see this post for detailed calculations) and I'm subtracting 0.08% from the real rate of return instead of subtracting it from the nominal rate of return. Being fair would further reduce the tiny difference in real rate of returns after expenses between the two portfolios.

Best regards,

longinvest
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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Fri Apr 10, 2020 10:30 am

Mountain Doc wrote:
Wed Apr 08, 2020 9:28 pm
After managing a three-fund portfolio for 8 years, I transitioned to a one-fund portfolio early this year. That decision was part of an overall move toward simplicity and acceptance of good enough instead of trying to optimize the details. It has been really freeing to have a single balanced fund. Knowing there is nothing to do takes away any urge to make tweaks, and it makes it easier to ignore the market movements. I think it is an excellent default suggestion for both "naive" and "sophisticated" investors. :beer
Thanks.
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Re: The One-Fund Portfolio as a default suggestion

Post by 1210sda » Fri Apr 10, 2020 5:34 pm

absolute zero wrote:
Fri Apr 10, 2020 8:50 am
You guys are just attacking a straw man. Obviously no one out there is suggesting that 13 basis points is derailing anyone’s retirement. But it WILL result in less money, assuming a person is able to stick to their plan regardless of whether they use 1 fund or 3 funds.
For me, a one-fund approach makes it easier for investors to "stick to their plan".

This past March, I had re-balancing opportunities due to the big stock market slide.

I'm a long term investor (since 1980) and I have followed my IPS fairly well in the past. Yet, I agonized over rebalancing more than I would have liked. Eventually, I did do it.

Vanguard Life Strategy fund owners didn't have to make that decision. There is less opportunity for behavioral mistakes.

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Sun Apr 12, 2020 11:21 am

Here's a post I made on another thread about the mistake of aiming to minimize short-term taxes using simple calculations when making asset allocation and asset location decisions, instead of aiming for higher lifelong after-tax income which requires complex models and reveals a high level of uncertainty about future outcomes:
longinvest wrote:
Sun Apr 12, 2020 9:36 am
It can be a bad idea to let the goal of minimizing taxes dictate asset allocation and asset location decisions.

The most efficient approach to minimize taxes is to have no income and no assets. It's simple to do: one just has to stop working and give away all possessions, leading to reliably win the tax minimization game. Yet, this is probably not an attractive goal for most forum members.

If the goal shouldn't be to minimize taxes, what should it be? I personally think that it should be to aim for higher lifelong after-tax income.

Increasing lifelong after-tax income could sometimes lead to paying more taxes in the short term.

A common mistake of investors is to focus on reducing short-term taxes, instead of aiming to keep long-term after-tax income higher. The latter involves complex calculations on models of lifelong portfolio contributions and withdrawals, revealing an incredibly high level of uncertainty about future outcomes. Unfortunately, very few people take the time to make such calculations and realize how uncertain things are.

As it's much easier to make a single-year calculation of taxes to make asset allocation and asset location decisions, many investors do that and they feel confident in their decisions because they were "based on mathematics". They're often not even aware that the objective of their simple calculation (which is to minimize short-term taxes) could be counterproductive to the more logical objective of keeping lifelong after-tax income higher.

I encourage forum members to require a formal (mathematical) proof of superiority of any strong recommendation about asset allocation or asset location in delivering higher lifelong after-tax income.

For example, any recommendation of using tax-exempt bonds instead of a total-market bond index fund which isn't accompanied with a discussion of differences in risk should be questioned. Also, any recommendation of prioritarily placing bonds into tax-advantaged accounts based on short-term calculations, instead of an analysis of lifelong after-tax cash flows, should be questioned, especially if not accompanied with a discussion of the risk of unanticipated asset returns and unforeseen changes in investor circumstances or tax laws which could dramatically change things.

In the One-Fund Portfolio thread, I've provided a mathematical proof that a mirrored asset allocation is more resilient in face of an unknown future than prioritizing the placement of a specific asset class (stocks or bonds) into specific tax-advantaged accounts:
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 beat it.
Last edited by longinvest on Sun Jun 14, 2020 7:59 am, edited 2 times in total.
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Re: The One-Fund Portfolio as a default suggestion

Post by fortyofforty » Sun Apr 12, 2020 12:25 pm

longinvest wrote:
Sun Apr 12, 2020 11:21 am
Here's a post I made on another thread about the mistake of aiming to minimize short-term taxes using simple calculations when making asset allocation and asset location decisions, instead of aiming for higher lifelong after-tax income which requires complex models and reveals a high level of uncertainty about future outcomes:
longinvest wrote:
Sun Apr 12, 2020 9:36 am
It can be a bad idea to let the goal of minimizing taxes dictate asset allocation and asset location decisions.

The most efficient approach minimize taxes is to have no income and no assets. It's simple to do: one just has to stop working and give away all possessions, leading to reliably win the tax minimization game. Yet, this is probably not an attractive goal for most forum members.

If the goal shouldn't be to minimize taxes, what should it be? I personally think that it should be to aim for higher lifelong after-tax income.

Increasing lifelong after-tax income could sometimes lead to paying more taxes in the short term.

A common mistake of investors is to focus on reducing short-term taxes, instead of aiming to keep long-term after-tax income higher. The latter involve complex calculations on models of lifelong portfolio contributions and withdrawals, revealing an incredibly high level of uncertainty about future outcomes. Unfortunately, very few people take the time to make such calculations and realize how uncertain things are.

As it's much easier to make single-year calculation of taxes to make asset allocation and asset location decisions, many investors do that and they feel confident in their decisions because they were "based on mathematics". They're often not even aware that the objective of their simple calculation (which is to minimize short-term taxes) could be counterproductive to the more logical objective of keeping lifelong after-tax income higher.

I encourage forum members to require a formal (mathematical) proof of superiority of any strong recommendation about asset allocation or asset location in delivering higher lifelong after-tax income.

For example, any recommendation of using tax-exempt bonds instead of a total-market bond index fund which isn't accompanied with a discussion of differences in risk should be questioned. Also, any recommendation of prioritarily placing bonds into tax-advantaged accounts based on short-term calculations, instead of an analysis of lifelong after-tax cash flows, should be questioned, especially if not accompanied with a discussion of the risk of unanticipated asset returns and unforeseen changes in investor circumstances or tax laws which could dramatically change things.

In the One-Fund Portfolio thread, I've provided a mathematical proof that a mirrored asset allocation is more resilient in face of an unknown future than prioritizing the placement of a specific asset (stocks or bonds) into specific tax-advantaged accounts:
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 beat it.
That's a quote by you, including a quote by you that includes a quote by you. Is that a record?

Anyway, I still like the LifeStrategy funds.

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Re: The One-Fund Portfolio as a default suggestion

Post by roccodean » Sun Apr 12, 2020 1:26 pm

Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?

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Re: The One-Fund Portfolio as a default suggestion

Post by djmbob » Sun Apr 12, 2020 1:49 pm

I find this to be an interesting approach, especially since our portfolio has changed quite a bit. We were 50/50 (with 20% int'l). Then last Dec, I sold much of the stock funds to pay for an expense, and now after all the market changes I am currently at ~30/70.

I participate in the TSP [EDITED] I have funds in the TSP (retired and no longer contributing) and all my money there is in G Fund ~$320K -- that is about 75% of my bond holdings. I have military retirement and VA which pretty much cover my current expenses (and is cola'd), and when I start to take retirement money I will tap the G Fund first, thinking $1K/month, which should last me the rest of my lifetime (age 62). SS planned at 70.

If I were to consider an all-in-one fund for my other assets outside of G Fund, should I find an allocation that would bring me back up to 50/50 (meaning the stock allocation would be higher to offset the amount in G)? The all-in-one would certainly be better for my spouse who has no interest in the markets.

Any advice would be appreciated.
Cheers,
Ray
Last edited by djmbob on Sun Apr 12, 2020 2:08 pm, edited 1 time in total.

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Sun Apr 12, 2020 1:59 pm

roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
Many advantages of using a single identical all-in-one fund (like VSMGX) in all accounts (Traditional, Roth, ..., and even taxable) are discussed in the first post and many other posts of this thread. The main drawback of this approach is that it will underperform the best asset location strategy* for one's specific future lifetime stream of portfolio contributions and withdrawals.

* Unfortunately, the best asset location strategy, specific to each one of us, will only be known after our death.
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Re: The One-Fund Portfolio as a default suggestion

Post by vineviz » Sun Apr 12, 2020 2:09 pm

roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Sun Apr 12, 2020 2:13 pm

vineviz wrote:
Sun Apr 12, 2020 2:09 pm
roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
Dear Vineviz,

Forum member roccodean has his own personal investment support thread. I suggest to continue this personal discussion which is unrelated to using a One-Fund Portfolio in that thread.

Best regards,

longinvest
Last edited by longinvest on Sun Apr 12, 2020 2:39 pm, edited 1 time in total.
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Re: The One-Fund Portfolio as a default suggestion

Post by bck63 » Sun Apr 12, 2020 2:15 pm

vineviz wrote:
Sun Apr 12, 2020 2:09 pm
roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
Yes, this is a great alternative to a One-Fund Portfolio and has many advantages over having everything in one fund. The disadvantages of a single-fund portfolio are many.

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Re: The One-Fund Portfolio as a default suggestion

Post by roccodean » Sun Apr 12, 2020 2:26 pm

bck63 wrote:
Sun Apr 12, 2020 2:15 pm
vineviz wrote:
Sun Apr 12, 2020 2:09 pm
roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
Yes, this is a great alternative to a One-Fund Portfolio and has many advantages over having everything in one fund. The disadvantages of a single-fund portfolio are many.
Thank you.
Would you recd VTEB (Vanguard Tax-Exempt Bond ETF) as opposed to BND to decrease tax implications?

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Sun Apr 12, 2020 2:30 pm

roccodean wrote:
Sun Apr 12, 2020 2:26 pm
bck63 wrote:
Sun Apr 12, 2020 2:15 pm
vineviz wrote:
Sun Apr 12, 2020 2:09 pm
roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
Yes, this is a great alternative to a One-Fund Portfolio and has many advantages over having everything in one fund. The disadvantages of a single-fund portfolio are many.
Thank you.
Would you recd VTEB (Vanguard Tax-Exempt Bond ETF) as opposed to BND to decrease tax implications?
Roccodean, the current thread is of a general nature and located in the Investing - Theory, News & General forum. I suggest discussing your personal portfolio questions in your own existing thread which is located in the Personal Investments forum. Thanks.
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Re: The One-Fund Portfolio as a default suggestion

Post by bck63 » Sun Apr 12, 2020 2:40 pm

roccodean wrote:
Sun Apr 12, 2020 2:26 pm
bck63 wrote:
Sun Apr 12, 2020 2:15 pm
vineviz wrote:
Sun Apr 12, 2020 2:09 pm
roccodean wrote:
Sun Apr 12, 2020 1:26 pm
Great discussion. In a taxable account, I have been debating whether to put in VSMGX vs mirrored asset allocation using ETF's. I have decided to us mirrored ETF's (35.8 % VTI, 28.3% BND , 23.9% VXUS, 12% BNDX). I plan on putting monthly installments. If I am reading all the opinions above, assuming that my behavior won't change and I continue putting in monthly installments and mimic the above allocation, what is the drawback from the mirrored asset allocation?
You could further minimize the number of funds by simply using VT and BNDW.
Yes, this is a great alternative to a One-Fund Portfolio and has many advantages over having everything in one fund. The disadvantages of a single-fund portfolio are many.
Thank you.
Would you recd VTEB (Vanguard Tax-Exempt Bond ETF) as opposed to BND to decrease tax implications?
Interesting you ask. Of course it's a personal experience, but I owned VTEB during the recent market drop. It traded for a while at a deep discount to NAV. I waited till it normalized then got out and put it in with the rest of my short-term treasuries For me, munis are a break even anyway. But as I said it's a personal preference. I've learned in theory about illiquidity but it was interesting and a bit harrowing to experience it in real time.

But regardless of what which you pick, in my opinion a two-fund portfolio is preferable to a one-fund, for a variety of reasons.

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Re: The One-Fund Portfolio as a default suggestion

Post by Silence Dogood » Sun Apr 12, 2020 2:45 pm

I am invested in the Vanguard Target Retirement 2055 fund (VFFVX).

It's the only fund I've ever owned in my Roth IRA - which I opened soon after I turned 20.

Stay the course! :beer

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Re: The One-Fund Portfolio as a default suggestion

Post by 1210sda » Sun Apr 12, 2020 4:04 pm

bck63 wrote:
Sun Apr 12, 2020 2:15 pm
The disadvantages of a single-fund portfolio are many.
Could you please list the many disadvantages of a single fund portfolio (i.e. Vanguard Lifestrategy Funds)

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Re: The One-Fund Portfolio as a default suggestion

Post by bck63 » Sun Apr 12, 2020 7:54 pm

1210sda wrote:
Sun Apr 12, 2020 4:04 pm
bck63 wrote:
Sun Apr 12, 2020 2:15 pm
The disadvantages of a single-fund portfolio are many.
Could you please list the many disadvantages of a single fund portfolio (i.e. Vanguard Lifestrategy Funds)
Nah. These are well known and easily attainable with a Google search. They're not my ideas. You may not agree with them. And the pros may outweigh the cons for some people. But the "cons" of one-fund portfolios are well known.

See my above post about one disadvantage, holding bonds and equities in the same fund.

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Re: The One-Fund Portfolio as a default suggestion

Post by 1210sda » Sun Apr 12, 2020 9:28 pm

bck63 wrote:
Sun Apr 12, 2020 7:54 pm
1210sda wrote:
Sun Apr 12, 2020 4:04 pm
bck63 wrote:
Sun Apr 12, 2020 2:15 pm
The disadvantages of a single-fund portfolio are many.
Could you please list the many disadvantages of a single fund portfolio (i.e. Vanguard Lifestrategy Funds)
Nah. These are well known and easily attainable with a Google search. They're not my ideas. You may not agree with them. And the pros may outweigh the cons for some people. But the "cons" of one-fund portfolios are well known.

See my above post about one disadvantage, holding bonds and equities in the same fund.
"Nah"...seriously? Well thanks anyway. Perhaps someone else will do so.

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Re: The One-Fund Portfolio as a default suggestion

Post by SevenBridgesRoad » Sun Apr 12, 2020 9:51 pm

1210sda wrote:
Sun Apr 12, 2020 9:28 pm
bck63 wrote:
Sun Apr 12, 2020 7:54 pm
1210sda wrote:
Sun Apr 12, 2020 4:04 pm
bck63 wrote:
Sun Apr 12, 2020 2:15 pm
The disadvantages of a single-fund portfolio are many.
Could you please list the many disadvantages of a single fund portfolio (i.e. Vanguard Lifestrategy Funds)
Nah. These are well known and easily attainable with a Google search. They're not my ideas. You may not agree with them. And the pros may outweigh the cons for some people. But the "cons" of one-fund portfolios are well known.

See my above post about one disadvantage, holding bonds and equities in the same fund.
"Nah"...seriously? Well thanks anyway. Perhaps someone else will do so.
There are two tribes. Always two tribes it seems. The two tribes see the world differently and they can't understand the other tribe's point of view.

One tribe: One fund. Simplicity preferred. Mirrored allocation. Less temptation to tinker. Might not end up being optimal, but never the worst. Not concerned with potential tax advanatages, as they may be ephemeral. OK with good enough. Supported by the postings of longinvest and many others.

Other tribe: More than one fund. Three funds are common. Often more funds. Different holdings in taxable verses tax-advantaged. Rebalancing expected. Sees potential tax advantages. Manages potential behavorial mistakes well. Supported by much (most?) of the conventional wisdom on the forum.

(I guess there is a third tribe. They generate much of the fodder here. I'll call them the 'Look! Squirrel!' tribe.)

Different people. Different thinking, emotions, values. Endless arguments in forum, over and over. The tribes are just different.
Retired 2018 age 61/Variable Percentage Withdrawal method/One fund: VTINX all accounts/No mortgage,debt/Good enough | "Not using an alarm is one of the great glories of my life." Robert Greene

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Re: The One-Fund Portfolio as a default suggestion

Post by Cycle » Sun Apr 12, 2020 10:01 pm

My strategy of target funds in 401k, vtwax (ie total world) in everything else has been working behaviorally pretty good for me in this currently volatile time. There are no levers for me to pull.
Never look back unless you are planning to go that way

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Re: The One-Fund Portfolio as a default suggestion

Post by yogesh » Mon Apr 13, 2020 12:23 am

Cycle wrote:
Sun Apr 12, 2020 10:01 pm
My strategy of target funds in 401k, vtwax (ie total world) in everything else has been working behaviorally pretty good for me in this currently volatile time. There are no levers for me to pull.
I started something like this but more money in taxable started to make it more risky. Hence improvised to Target Retirement in 401K and Tax Managed Balanced in Taxable. Spouse is able to manage (no maintenance, rebalancing required) it well so far. Portfolio in signature that I did ride through 12/2019 and Q1/2020 dips so far so one balanced fund does avoid behavior risks at least in my case.
Emergency: FDIC | Taxable: VTMFX | Retirement: TR2040

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Re: The One-Fund Portfolio as a default suggestion

Post by rudeboy » Fri Apr 17, 2020 7:17 am

A new study by Morningstar would appear to validate the thesis of the OP:

"The savers most likely to tweak their 401(k) allocations [in Q1 2020] were self-directed investors, with 10.8% making changes. By contrast, just 2.4% of investors in target-date funds touched their portfolios."

https://www.bloomberg.com/amp/news/arti ... ts-plunged

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Re: The One-Fund Portfolio as a default suggestion

Post by novice111 » Fri Apr 24, 2020 2:12 pm

yogesh wrote:
Mon Apr 13, 2020 12:23 am
Cycle wrote:
Sun Apr 12, 2020 10:01 pm
My strategy of target funds in 401k, vtwax (ie total world) in everything else has been working behaviorally pretty good for me in this currently volatile time. There are no levers for me to pull.
I started something like this but more money in taxable started to make it more risky. Hence improvised to Target Retirement in 401K and Tax Managed Balanced in Taxable. Spouse is able to manage (no maintenance, rebalancing required) it well so far. Portfolio in signature that I did ride through 12/2019 and Q1/2020 dips so far so one balanced fund does avoid behavior risks at least in my case.
isn't VTMFX 50% bonds. that's more bonds than i might want in the accumulation phase. can i compensate by picking a more aggressive target date fund or lifestrategy growth in retirement accounts?
How do you plan to change your asset allocation in taxable once you near retirement? i.e how will you dodge the capital gains hit

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Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Fri Apr 24, 2020 3:40 pm

novice111 wrote:
Fri Apr 24, 2020 2:12 pm
How do you plan to change your asset allocation in taxable once you near retirement? i.e how will you dodge the capital gains hit
There are some people who prefer a fixed asset allocation all lifelong, who would choose an appropriate Vanguard LifeStrategy fund or iShares Core Allocation ETF. They probably plan to combine withdrawals from their unchanged portfolio, during retirement, with other income from Social Security, a pension (if any), and (if necessary) a small inflation-indexed SPIA.

There are other people who prefer to hold a stock-heavy portfolio when young and a bond-heavy portfolio when old, who would choose an appropriate low-cost globally-diversified all-in-one balanced index fund with a gliding allocation based on a target retirement year, like a Vanguard Target Retirement fund. They don't need to change anything when retiring to increase the allocation to bonds; it's automatically done gradually over a period of many years within the fund.
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Re: The One-Fund Portfolio as a default suggestion

Post by yogesh » Sun Apr 26, 2020 12:42 pm

longinvest wrote:
Fri Apr 24, 2020 3:40 pm
novice111 wrote:
Fri Apr 24, 2020 2:12 pm
How do you plan to change your asset allocation in taxable once you near retirement? i.e how will you dodge the capital gains hit
There are some people who prefer a fixed asset allocation all lifelong, who would choose an appropriate Vanguard LifeStrategy fund or iShares Core Allocation ETF. They probably plan to combine withdrawals from their unchanged portfolio, during retirement, with other income from Social Security, a pension (if any), and (if necessary) a small inflation-indexed SPIA.

There are other people who prefer to hold a stock-heavy portfolio when young and a bond-heavy portfolio when old, who would choose an appropriate low-cost globally-diversified all-in-one balanced index fund with a gliding allocation based on a target retirement year, like a Vanguard Target Retirement fund. They don't need to change anything when retiring to increase the allocation to bonds; it's automatically done gradually over a period of many years within the fund.
That's correct. Most folks use either dynamic adjusting allocation or fixed allocation.
I am about 15-20 years away from retirement so here is how it should play out.

Taxable: VTMFX (50% Stock, 50% Muni Bonds) -> Keep it as is through retirement
401-K::: VFORX (85% Stock, 15% Total Bonds) -> Auto adjusts to 35% Stock, 65% Bonds
Last edited by yogesh on Sun Apr 26, 2020 12:47 pm, edited 1 time in total.
Emergency: FDIC | Taxable: VTMFX | Retirement: TR2040

Topic Author
longinvest
Posts: 4289
Joined: Sat Aug 11, 2012 8:44 am

Re: The One-Fund Portfolio as a default suggestion

Post by longinvest » Sun Apr 26, 2020 12:47 pm

yogesh wrote:
Sun Apr 26, 2020 12:42 pm
longinvest wrote:
Fri Apr 24, 2020 3:40 pm
novice111 wrote:
Fri Apr 24, 2020 2:12 pm
How do you plan to change your asset allocation in taxable once you near retirement? i.e how will you dodge the capital gains hit
There are some people who prefer a fixed asset allocation all lifelong, who would choose an appropriate Vanguard LifeStrategy fund or iShares Core Allocation ETF. They probably plan to combine withdrawals from their unchanged portfolio, during retirement, with other income from Social Security, a pension (if any), and (if necessary) a small inflation-indexed SPIA.

There are other people who prefer to hold a stock-heavy portfolio when young and a bond-heavy portfolio when old, who would choose an appropriate low-cost globally-diversified all-in-one balanced index fund with a gliding allocation based on a target retirement year, like a Vanguard Target Retirement fund. They don't need to change anything when retiring to increase the allocation to bonds; it's automatically done gradually over a period of many years within the fund.
That's correct. Most folks use either dynamic adjusting allocation or fixed allocation.
I am about 15-20 years away from retirement so here is how it should play out.
Taxable: VTMFX (50% Stock, 50% Muni Bonds) -> Keep it as is through retirement
401K: VFORX (85% Stock, 15% Total Bonds) -> Auto adjusts to 35% Stock, 65% Bonds
That's unfortunately not a One-Fund Portfolio as described in this thread. It's a two-fund portfolio with an asset allocation which is mostly dictated by the size of the investor's accounts. If the taxable account grows more, the overall asset allocation will get closer to 50/50. If the 401K grows more, the overall asset allocation will get closer to the gliding asset allocation of VFORX.

This thread is about using a single identical all-in-one index fund in all accounts. There might be cases when it's impossible, due to what's available in the employer retirement account.
Last edited by longinvest on Sun Apr 26, 2020 12:49 pm, edited 3 times in total.
Bogleheads investment philosophy | One-ETF global balanced index portfolio | VPW

yogesh
Posts: 469
Joined: Thu Oct 11, 2012 6:20 pm

Re: The One-Fund Portfolio as a default suggestion

Post by yogesh » Sun Apr 26, 2020 12:48 pm

longinvest wrote:
Sun Apr 26, 2020 12:47 pm
yogesh wrote:
Sun Apr 26, 2020 12:42 pm
longinvest wrote:
Fri Apr 24, 2020 3:40 pm
novice111 wrote:
Fri Apr 24, 2020 2:12 pm
How do you plan to change your asset allocation in taxable once you near retirement? i.e how will you dodge the capital gains hit
There are some people who prefer a fixed asset allocation all lifelong, who would choose an appropriate Vanguard LifeStrategy fund or iShares Core Allocation ETF. They probably plan to combine withdrawals from their unchanged portfolio, during retirement, with other income from Social Security, a pension (if any), and (if necessary) a small inflation-indexed SPIA.

There are other people who prefer to hold a stock-heavy portfolio when young and a bond-heavy portfolio when old, who would choose an appropriate low-cost globally-diversified all-in-one balanced index fund with a gliding allocation based on a target retirement year, like a Vanguard Target Retirement fund. They don't need to change anything when retiring to increase the allocation to bonds; it's automatically done gradually over a period of many years within the fund.
That's correct. Most folks use either dynamic adjusting allocation or fixed allocation.
I am about 15-20 years away from retirement so here is how it should play out.
Taxable: VTMFX (50% Stock, 50% Muni Bonds) -> Keep it as is through retirement
401K: VFORX (85% Stock, 15% Total Bonds) -> Auto adjusts to 35% Stock, 65% Bonds
That's unfortunately not a One-Fund Portfolio as described in this thread. It's a two-fun portfolio with an asset allocation which is mostly dictated by the size of the investor's account. If the taxable account grows more, the overall asset allocation will get closer to 50/50. If the 401K grows more, the overall asset allocation will get closer to the gliding asset allocation of VFORX.

This thread is about using a single identical all-in-one index fund in all accounts.
Depends how you read it; it's single allocation fund. Due to high tax bracket I can't keep taxable bonds in taxable.
Emergency: FDIC | Taxable: VTMFX | Retirement: TR2040

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