"Mix And Match" by Jonathan Clements

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Taylor Larimore
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"Mix And Match" by Jonathan Clements

Post by Taylor Larimore »

Bogleheads:

Jonathan Clements, who wrote over 1,000 financial columns for The Wall Street Journal, is one of my favorite financial writers. I subscribe to his free newsletter which contains solid information in every issue. These are " investment gems" in his latest newsletter:
"Today, I own a dozen different Vanguard Group mutual funds, each giving me exposure to a different part of the global financial markets."

"The poor performers don’t much bother me. That’s the price you pay for portfolio insurance—otherwise known as diversification."

"What nags at me is the complexity."

"Perhaps the simplest solution would be to opt for a single Vanguard target-date fund for my longer-term money, plus a money-market fund to hold money that I’ll spend over the next few years. This will become a more appealing option in February, when Vanguard will lower its target-date fund expenses to 0.08%, equal to 8¢ a year for every $100 invested."

"If I bought a Vanguard Target Retirement or LifeStrategy fund, I’d be getting something akin to the classic three index-fund portfolio—a total U.S. stock market fund, a total U.S. bond market fund and a total international stock fund."

"But there’s a case to be made for buying the three funds directly, rather than as a package."

"I could make things even simpler by going for two total market funds—Vanguard’s Total World Stock ETF and its total U.S. bond market fund—plus a cash account for upcoming spending needs."

"One overriding principle will guide my thinking: As I age, I want my financial life to be simpler."

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Never underrate either the majesty of simplicity or its proven effectiveness as a long-term strategy for productive investing."
"Simplicity is the master key to financial success." -- Jack Bogle
Broken Man 1999
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Re: "Mix And Match" by Jonathan Clements

Post by Broken Man 1999 »

Mr Larimore, I think one of the best gifts we can give those we hope look after our finances when/if we suffer cognitive decline is as simple as is possible portfolio that meets our needs.

Seems the right thing to do for ourselves and those who follow us.

Thanks!

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
AlwaysLearningMore
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Re: "Mix And Match" by Jonathan Clements

Post by AlwaysLearningMore »

Mr. Clements is obviously financially astute. It took him this long to realize this?? :?:
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
RadAudit
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Re: "Mix And Match" by Jonathan Clements

Post by RadAudit »

I read Mr. Clements' newsletter every week and usually find something to pass on to DW and kids via e-mail. I'm finding a simpler portfolio is a lot easier for me to handle and for them to catch on to. And it's good enough to meet projected future needs without clouding the concepts without a lot of fancy bells and whistles - so there's that.
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
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Sandtrap
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Re: "Mix And Match" by Jonathan Clements

Post by Sandtrap »

This is one of those posts that deserve 2 printouts, one to tape to the office door, the other taped on the bathroom mirror.

Thanks Taylor, always a rock!
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heyyou
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Re: "Mix And Match" by Jonathan Clements

Post by heyyou »

On simplicity for those who own or are considering a slice and dice portfolio:

In 2009, poster Trev H, showed that a four fund VG portfolio of domestic Large blend and Small Value, plus international Large Value and Small Blend, had almost identical returns from 1970 to 2014, to that of an 8 fund portfolio of 4 domestic and 4 foreign funds covering those size and value slices. Both the 4 fund and the 8 fund combos, outperformed a two fund allocation of TSM plus its foreign stock equivalent, FOR THAT TIME PERIOD, but not likely recently. My emphasis is on how the 4 VG funds did as well as the more complex 8 fund portfolio.
viewtopic.php?t=38374
Page 16 of the link, has the image that has been deleted from the first page. Now is a decade older, so the dispersion may be different with today's valuations.
sycamore
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Re: "Mix And Match" by Jonathan Clements

Post by sycamore »

heyyou wrote: Sun Dec 05, 2021 1:24 pm On simplicity for those who own or are considering a slice and dice portfolio:

In 2009, poster Trev H, showed that a four fund VG portfolio of domestic Large blend and Small Value, plus international Large Value and Small Blend, had almost identical returns from 1970 to 2014, to that of an 8 fund portfolio of 4 domestic and 4 foreign funds covering those size and value slices. Both the 4 fund and the 8 fund combos, outperformed a two fund allocation of TSM plus its foreign stock equivalent, FOR THAT TIME PERIOD, but not likely recently. My emphasis is on how the 4 VG funds did as well as the more complex 8 fund portfolio.
viewtopic.php?t=38374
Page 16 of the link, has the image that has been deleted from the first page. Now is a decade older, so the dispersion may be different with today's valuations.
FWIW, a snaphost of the image can be seen via the "wayback machine" at web.archive.org. Here's the link: https://web.archive.org/web/20150912014 ... 7yvjh3.gif
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iceport
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Re: "Mix And Match" by Jonathan Clements

Post by iceport »

heyyou wrote: Sun Dec 05, 2021 1:24 pm On simplicity for those who own or are considering a slice and dice portfolio:

In 2009, poster Trev H, showed that a four fund VG portfolio of domestic Large blend and Small Value, plus international Large Value and Small Blend, had almost identical returns from 1970 to 2014, to that of an 8 fund portfolio of 4 domestic and 4 foreign funds covering those size and value slices. Both the 4 fund and the 8 fund combos, outperformed a two fund allocation of TSM plus its foreign stock equivalent, FOR THAT TIME PERIOD, but not likely recently. My emphasis is on how the 4 VG funds did as well as the more complex 8 fund portfolio.
viewtopic.php?t=38374
Page 16 of the link, has the image that has been deleted from the first page. Now is a decade older, so the dispersion may be different with today's valuations.
Oh man, do I remember all those Trev H threads!

And I couldn't stand them. He seemed to me to be like the pied piper, playing his tune and leading multitudes of unwary followers into massive value and small cap tilts. He typically composed his back-testing experiments in the present tense: "Add this, and your portfolio does that!" You get higher returns with less risk!

I often doubted that the historic phenomena he documented with beautiful back-testing graphs would persist indefinitely.

We don't hear much from Trev H anymore. Now I wonder just how many of the people Trev H convinced to adopt massive small cap and value tilts actually stuck with those allocations, and if they ended up worse for following Trev H's unflinchingly confident lead in the hopes with a clear expectation of superior returns.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Silence Dogood
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Re: "Mix And Match" by Jonathan Clements

Post by Silence Dogood »

Thanks for sharing, Taylor! I hope you're doing well.

I am a big proponent of the Vanguard Target Retirement Funds.
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dwickenh
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Re: "Mix And Match" by Jonathan Clements

Post by dwickenh »

Taylor,

I read that on his website and immediately thought of you Taylor!!! You have never changed your stance in the time
I have been active on this website. If I ever think of adding some fund or ETF, I think of your wisdom and stay the course
with my 3 funds.

Best wishes and health to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett
Parkinglotracer
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Re: "Mix And Match" by Jonathan Clements

Post by Parkinglotracer »

dwickenh wrote: Sun Dec 05, 2021 7:50 pm Taylor,

I read that on his website and immediately thought of you Taylor!!! You have never changed your stance in the time
I have been active on this website. If I ever think of adding some fund or ETF, I think of your wisdom and stay the course
with my 3 funds.

Best wishes and health to you,

Dan
Same here - when I read the column in the humble dollar newsletter I thought “ jonathan doesn’t seem to have his simplicity down like Taylor does”.

Thank you Taylor
grok87
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Re: "Mix And Match" by Jonathan Clements

Post by grok87 »

As i get older i agree with a more simple approach. Wasn't it Einstein who said "“Everything should be made as simple as possible, but no simpler”?

for me it's a 5 fund portfolio:

Total World Stock index (VT)
Treasuries
TIPS
"USD Hedged" International Bond Index (i.e. VTABX or BNDX)
Real Estate/REITs (TIAA Real estate account or VNQ)

It's the last 2 obviously that might be the most controversial and that i think hardest about. Some thoughts:

1) "USD Hedged" International Bond Index: These days this fund mostly shadows the US Aggregate Bond index. So what is the point?

Well i'm not buying bonds for their expected performance anyway but for their ability to diversify in unusual times. Take TIPS. This year they have been a home run while treasuries have struggled. On the stock front US stocks have been a home run while international stocks have lagged. Are these things related? Arguably yes. As inflation has taken off, nominal US interest rates have risen while real interest rates have fallen. The rise in nominal US interest rates has, arguably, caused the USD to strengthen. which has hurt international stocks and un-hedged international bonds. by contrast Hedged international bonds have tracked the US agg bond index pretty closely.

The argument generally for VTABX is that US investors shouldn't take bond currency risk as it is an unrewarded risk factor. for international stocks it's a little different since when foreign currencies depreciate against the USD their economies become more competitive from an export perspective. (i.e. helps manufacturers)

2) Real Estate/REITs: The commercial real estate market is huge- say around $20 Trillion vs. the Stock market at $50 Trillion.
https://www.reit.com/data-research/rese ... -market-us
I like getting meaningful exposure to that market both through the TIAA real estate account and through REITS. many would argue that the total stock market (TSM) includes REITs and that is all you need. But if you compare the $20 Trillion to the $50 Trillion the ratio is 40% whereas REITs make up <3% of TSM.

cheers,
grok
RIP Mr. Bogle.
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