Ultimate Buy and Hold - 8 slices vs 4

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kMz
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Post by kMz »

Trev H wrote:The exact Vanguard Funds that could be used to setup the Simplified Ultimate Buy and Hold LB,SV,ILV,IS combo..

LB = Large Cap Index or 500 Index
SV = Small Cap Value Index
ILV = International Value
ISB = FTSE X-US Intl Small Cap (or International Explorer).

If you wanted to stick with all Index funds then could sub FTSE X-US Intl Large Cap fund for International Value.

On the Bond allocation side, I would suggest InterTerm Treasury Bonds and TIPS.
What if I substitute Total Stock Market for the 500 Index? Does that mess up the asset allocation? (As you can tell, I am a beginner at this!)
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Chuck T
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Post by Chuck T »

Kmz

Substituting Total Stock MKt (VTSMX) for the S&P 500 Index Fund (VFINX), will not significantly impact the 4 slice portfolio. You are swapping one large cap fund for another.
Chuck | Past Performance Is Just That - bob | For info on the SC LowCountry & Savannah GA Area Bogleheads contact me at chucktanner46@gmail.com
Chuck T
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Post by Chuck T »

Kmz

If you are in fact a beginner, I suggest you spend some time educating yourself on investing before you get in too deep. The Bogleheads WIKI is a wonderful place to start. Please check the reading list and read some of the books for beginners.

My 2 favorites are The Bogleheads Guide to Investing by Taylor, Mel and Michael and All About Asset Allocation by Rick Ferri. Both are very easy to read and digest. They will provide you a good foundation on which to build your knowledge. Good luck. Chuck
Chuck | Past Performance Is Just That - bob | For info on the SC LowCountry & Savannah GA Area Bogleheads contact me at chucktanner46@gmail.com
JustinR
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Re: Funds...

Post by JustinR »

Trev H wrote:The exact Vanguard Funds that could be used to setup the Simplified Ultimate Buy and Hold LB,SV,ILV,IS combo..

LB = Large Cap Index or 500 Index
SV = Small Cap Value Index
ILV = International Value
ISB = FTSE X-US Intl Small Cap (or International Explorer).

If you wanted to stick with all Index funds then could sub FTSE X-US Intl Large Cap fund for International Value.

On the Bond allocation side, I would suggest InterTerm Treasury Bonds and TIPS.

==
Hello, since this post was made a year ago, so I was wondering if anyone can chime in if there is an update to the 4 slice Ultimate Buy and Hold for Vanguard funds.

1) Are the four slices (for Vanguard, at least) still LB,SV,ILV,ISB?

2) Can I achieve it through my five current funds, or which funds would I need to add?:
  • Vanguard FTSE All-Wld ex-US SmCp Idx Inv VFSVX
    Vanguard FTSE All-World ex-US Index Inv VFWIX
    Vanguard Small Cap Index Instl VSCIX
    Vanguard Total Stock Mkt Idx VTSMX
    PIMCO Total Return Instl PTTRX (bond fund so I guess this wouldn't apply)
Chuck T
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Post by Chuck T »

Tev H would have to answer your question and he hasn't posted on this forum since earlier this year. to the best of my knowledge there has been no change to this strategy. I myself follow it. Trev is posting on the Morningstar Vanguard DieHards forum. Good luck.


Here is how I implemented Trev's strategy. (Only 1 way.)

VTSMX
VISVX Small Cap Value
VFWIX
VFSVX (originally typed VFWSX by mistake)
VBMFX
VIPSX

I ran it by Trev when he was around and he said it looked very good. The only rec I would make for you is to exchange Small Cap for Small Cap Value (VISVX).
Last edited by Chuck T on Sun Jun 06, 2010 2:01 pm, edited 2 times in total.
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woof755
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Re: Funds...

Post by woof755 »

JustinR wrote:
Trev H wrote:The exact Vanguard Funds that could be used to setup the Simplified Ultimate Buy and Hold LB,SV,ILV,IS combo..

LB = Large Cap Index or 500 Index
SV = Small Cap Value Index
ILV = International Value
ISB = FTSE X-US Intl Small Cap (or International Explorer).

If you wanted to stick with all Index funds then could sub FTSE X-US Intl Large Cap fund for International Value.

On the Bond allocation side, I would suggest InterTerm Treasury Bonds and TIPS.

==
Hello, since this post was made a year ago, so I was wondering if anyone can chime in if there is an update to the 4 slice Ultimate Buy and Hold for Vanguard funds.

1) Are the four slices (for Vanguard, at least) still LB,SV,ILV,ISB?

2) Can I achieve it through my five current funds, or which funds would I need to add?:
  • Vanguard FTSE All-Wld ex-US SmCp Idx Inv VFSVX
    Vanguard FTSE All-World ex-US Index Inv VFWIX
    Vanguard Small Cap Index Instl VSCIX
    Vanguard Total Stock Mkt Idx VTSMX
    PIMCO Total Return Instl PTTRX (bond fund so I guess this wouldn't apply)

You are missing the value aspect of the portfolio. US small cap value versus small cap index is a big difference. Internationally, VFWIX has a value tilt to it, but for reasons I can't recall exactly, Int'l Large Value is thought to be preferable--presumably more of a value tilt, something you can compare on morningstar.

Your portfolio, though, is good enough that I wouldn't stress over finding SCV somewhere else, especially if that means investing in a taxable account.
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing
rustymutt
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Add REITS

Post by rustymutt »

Would be interesting to see what reits, US, and IntL. added to these would change them.
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Chuck T
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Post by Chuck T »

I think REITS were discussed earlier in this very long thread. Personally I don't own REITS. I am too old for their volatility.
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winterescape
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Post by winterescape »

Chuck T wrote: Here is how I implemented Trev's strategy. (Only 1 way.)

VTSMX
VISVX Small Cap Value
VFWIX
VFWSX

VBMFX
VIPSX

VFWIX and VFWSX appear to be different share classes of the same fund, am I missing something? (VFWIX = VFWSX =VEU except for ER)

Taking bond/stock allocation out of the mix is there a consensus on the recommended breakdown of stock allocation?

If the starting point was VTSMX and you were adding VFWIX and VISVX what is the recommended % in each?
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Post by Chuck T »

Winterscape

You are correct, I typed the wrong fund identifier. I typed VFWSX when I meant to type VFSVX (small cap)

I think I made a typo:

VFWIX is Large Cap

VFSVX is Small Cap (I typed VFWSX when I meant VFSVX (Small Cap, which I have)

Both are All World with the exception of the US (they include Canada).

Hope that helps. Chuck

I have modified my original message with the correct fund identifier. Sorry for the confusion.
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Post by Chuck T »

winterscape

Trev suggested holding equal parts of the equity funds. For example, my AA is 40/60 (I am old and retired).

My portfolio is as follows:

VTSMX 10%
VISVX 10%

VFWIX 10%
VFSVX 10%


VBMFX 30%
VIPSX 30%

Some suggest holding VFITX (Int Term Treasury) in place of VBMFX (Total Bond).
Chuck | Past Performance Is Just That - bob | For info on the SC LowCountry & Savannah GA Area Bogleheads contact me at chucktanner46@gmail.com
winterescape
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Post by winterescape »

Thanks Chuck!

I guess I should have assumed the equal weighting from the first post in this thread, I thought I had read further down in the thread that adding a “small” holding in SV so I doubted my interpretation that most were doing equal weighting…
cb474
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Post by cb474 »

You might be interested to look at the portfolio suggestions Paul Merriman makes on his web site, since he is the person who devised the Ultimate Buy and Hold Strategy in the first place, the strategy which this thread is derives from and takes its name from. Merriman is using an 8 slice strategy, which Trev H was simplifying to 4 slices with his observations in the original post of this thread.

But anyway, Merriman has a lot of different suggestions for funds to use to do this strategy. He also goes for the equal portions allocation, which I'm assuming is where Trev H took the idea from.

Here's Merriman's portfolio suggestions (which he updates regularly):

http://www.fundadvice.com/portfolio.html

He also has a 401k help page where he reviews a lot of different 401k's and gives recommendations for how to use them with the Ultimate Buy and Hold strategy. You could mix and match to achieve a simplified 4 slice version perhaps from his suggesitons.

http://www.fundadvice.com/401k-help/401 ... ction.html
JustinR
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Post by JustinR »

cb474 wrote:You might be interested to look at the portfolio suggestions Paul Merriman makes on his web site, since he is the person who devised the Ultimate Buy and Hold Strategy in the first place, the strategy which this thread is derives from and takes its name from. Merriman is using an 8 slice strategy, which Trev H was simplifying to 4 slices with his observations in the original post of this thread.

But anyway, Merriman has a lot of different suggestions for funds to use to do this strategy. He also goes for the equal portions allocation, which I'm assuming is where Trev H took the idea from.

Here's Merriman's portfolio suggestions (which he updates regularly):

http://www.fundadvice.com/portfolio.html

He also has a 401k help page where he reviews a lot of different 401k's and gives recommendations for how to use them with the Ultimate Buy and Hold strategy. You could mix and match to achieve a simplified 4 slice version perhaps from his suggesitons.

http://www.fundadvice.com/401k-help/401 ... ction.html
Great link! Something I'm confused about is who would have a portfolio completely in tax-deferred, or one completely in tax-managed (does this mean the same as "taxable account")? Although I guess they are just examples.

Also, thanks to chuck and woof for responding as well, I'm going to take a deeper look this week when I have time.
cb474
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Post by cb474 »

Yes, I think when Merriman says "Tax-Managed" he means a taxable account. It does seem like most people probably do not have only a tax deferred or only a taxable account. But it's not hard to decided what to put in the tax deferred account based on the tax efficiency of the specific fund.

It is also curious to me that Merriman includes everything, but REITs, in his example taxable acccount, whereas many people here seem to think that you wouldn't want to have something like a small value fund in a taxable account. So I've always wondered why Merriman does not see those tax consequences as being as significant as some here in these forums do.
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Post by Chuck T »

CB474 and JustinR

Merriman's 8 slice portfolio (refers to the equity funds only, 12 funds with REITS and Bond funds) is assumed by Merriman to be tax deferred. You can see it at fundadvice.com.

In my case, I am almost equally split between tax deferred (IRA's) and taxable account. My tax deferred funds represent just over 60% of my assets, and taxable is approximately 40%. All my money is with Vanguard.

If I wasn't split 40/60 (my desired AA), and needed more bonds in taxable to meet my AA I would just add Int Term Muni Fund or Limited Term Muni Fund.

As I said earlier, I am retired with a 40/60 AA.

Here is how I implemented Trev's strategy. (Only 1 way, there are others.)

VTSMX 10%
VISVX Small Cap Value 10%

VFWIX 10%
VFSVX (Small Cap Blend, originally typed VFWSX by mistake) 10%

VBMFX 30%
VIPSX 30%


Some feel more comfortable with Int Term Treasury Fund (VFITX) instead of Total Bond Fund.

If you look at fundadvice, Merriman uses Treasury Funds rather than Total Bond. His rationale is that he has taken his risk with the equity funds and wants to be more conservative with the bond funds. Hence he uses Int Term Treasury (VFITX, Short Term Treasury (VFISX) and TIPS (VIPSX). To each his own.

Trev's original point is that he can achieve similar results to Merriman's
8 or 9 equity funds with just 4 equity funds. Please see his original post in this thread.
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grap0013
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Post by grap0013 »

Here's some fun for you.

http://www.bogleheads.org/forum/viewtopic.php?t=2520

Follow the links and download the excel spreadsheet. Voila! You can now backtest to your heart's content.

You've been warned though. I think it is dangerous to construct a portfolio this way. However, I was already convinced of Trev's methods and I wanted to see how a few tweaks here and there altered the performance.

A few notable things I've found out. It doesn't really matter where you put the large value. I personally put all value on U.S. and all blend on International side. Why? That's what's available to me and the cheapest.

REITS decrease volatility overall a little less than I thought they would. Also, a 10% slug of gold/precious metals helps considerably in the 73/74 bear market and 2000-2002 bear market while not decreasing overall returns very much when used responsibly (rebalanced). Finally, long term treasuries>intermediate treasuries>total bond when it comes to downside protection (downward SD) when you need it the most.

My final portfolio turned into this:

10% LCV
30% SCV
10% REITS
10% Large Int
10% EM
20% Small Int
10% Precious Metals

It's a Trev H., Swedroe, Bernstein, hybrid and it works for me.

Good luck!
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kelly46
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Post by kelly46 »

Buy and hold is Buffet's mantra.
cb474
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Post by cb474 »

Chuck T and grap0013, thanks for the thoughts. I do realize that the 8 slice portfolio refers to the equity portion only. Merriman does talk about a hybrid "tax-managed" version, in one of his footnotes I think, where REITS are held in a tax deferred account and the rest of the equities in taxable. I was just noting above that some people don't recommend holding value funds in a taxable account, but Merriman doesn't seem to think that's a problem (at least based on his model portfolio recommendations).
kelly46 wrote:Buy and hold is Buffet's mantra.
Yes, but "The Ultimate Buy-and-Hold Strategy" is a name coined by Merriman to describe his version of the Fama French based investing style. I'm pretty certain that's what Trev H was referring to with the subject heading to this thread and in the first post. In fact, now that I check, Trev H links to Merriman's article by that name in the original post.
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Post by JustinR »

Chuck T wrote:Tev H would have to answer your question and he hasn't posted on this forum since earlier this year. to the best of my knowledge there has been no change to this strategy. I myself follow it. Trev is posting on the Morningstar Vanguard DieHards forum. Good luck.


Here is how I implemented Trev's strategy. (Only 1 way.)

VTSMX
VISVX Small Cap Value
VFWIX
VFSVX (originally typed VFWSX by mistake)

I ran it by Trev when he was around and he said it looked very good. The only rec I would make for you is to exchange Small Cap for Small Cap Value (VISVX).
So I took a look at this using X-ray and it looks pretty good (and simple, because it looks like I just have to switch one fund out), but I have a few questions.

1) It seems like VFWIX (Vanguard FTSE All-World ex-US Index Inv) is actually Large Blend rather than the Intl Large Value in Trev's vanguard strat. Is that ok?

--

2) Which tools do you guys use to figure out your allocation for the 4 slice? For example, right now I'm using the above four funds, but I get this in the X-ray:

Large Value 14.62
Large Core 13.58
Large Growth 12.24
Mid-Cap Value 10.72
Mid-Cap Core 10.73
Mid-Cap Growth 7.85
Small Value 14.11
Small Core 10.54
Small Growth 5.60

So, how do I know that I'm doing it right? From what I know, I think I'm aiming for the bolded ones, but then I'm allocated pretty far into a bunch of other styles as well. And how do I know which styles are international versus domestic? There is another pie graph showing me that they are split pretty 50/50, but I have no idea if I have enough in "International Large Value" and "International Small Blend" since it doesn't break it down by style.

I guess I'm just confused how you guys are figuring it out, or maybe my whole approach to this is just wrong. Some insight would be immensely helpful.

--

3) The other two non-equity slices are EMs and REITs. First of all, do you guys think it's worth getting in these two slices? If so, what do you guys think of the Vanguard funds, or what alternatives do you recommend:

VEIEX - Vanguard Emerging Mkts Stock Idx

VGSIX - Vanguard REIT Index - actually, they say that you shouldn't do the REIT in a taxable account, so I may just put the $5k for next year's IRA into that even if it's not the full slice, what do you think?

-----

Just for your reference, I'm 25 so my AA is:
25% bonds
60% equity = 15% * 4 slices
15% possibly in EM/REIT, if not will split into the 4 slices.
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grap0013
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Post by grap0013 »

JustinR wrote:
Chuck T wrote:Tev H would have to answer your question and he hasn't posted on this forum since earlier this year. to the best of my knowledge there has been no change to this strategy. I myself follow it. Trev is posting on the Morningstar Vanguard DieHards forum. Good luck.


Here is how I implemented Trev's strategy. (Only 1 way.)

VTSMX
VISVX Small Cap Value
VFWIX
VFSVX (originally typed VFWSX by mistake)

I ran it by Trev when he was around and he said it looked very good. The only rec I would make for you is to exchange Small Cap for Small Cap Value (VISVX).
So I took a look at this using X-ray and it looks pretty good (and simple, because it looks like I just have to switch one fund out), but I have a few questions.

1) It seems like VFWIX (Vanguard FTSE All-World ex-US Index Inv) is actually Large Blend rather than the Intl Large Value in Trev's vanguard strat. Is that ok?

Yes, look on page 1 or 2 of this thread. You could also do all the value on one side (domestic vs. foreign) and likely achieve similar results in the long haul.

--

2) Which tools do you guys use to figure out your allocation for the 4 slice? For example, right now I'm using the above four funds, but I get this in the X-ray:

Large Value 14.62
Large Core 13.58
Large Growth 12.24
Mid-Cap Value 10.72
Mid-Cap Core 10.73
Mid-Cap Growth 7.85
Small Value 14.11
Small Core 10.54
Small Growth 5.60

So, how do I know that I'm doing it right? From what I know, I think I'm aiming for the bolded ones, but then I'm allocated pretty far into a bunch of other styles as well. And how do I know which styles are international versus domestic? There is another pie graph showing me that they are split pretty 50/50, but I have no idea if I have enough in "International Large Value" and "International Small Blend" since it doesn't break it down by style.

I guess I'm just confused how you guys are figuring it out, or maybe my whole approach to this is just wrong. Some insight would be immensely helpful.

You could do 2 seperate Xrays. One for domestic and one for international and see how they shake out. I want some holding in every box for diversification, but I want to "lean" small and value.

--

3) The other two non-equity slices are EMs and REITs. First of all, do you guys think it's worth getting in these two slices? If so, what do you guys think of the Vanguard funds, or what alternatives do you recommend:

VEIEX - Vanguard Emerging Mkts Stock Idx

VGSIX - Vanguard REIT Index - actually, they say that you shouldn't do the REIT in a taxable account, so I may just put the $5k for next year's IRA into that even if it's not the full slice, what do you think?

Lots of VG international funda already contain EMs. Click on the fund and scroll to the bottom of the page to see the breakdown. However, I personally add a slice of VEIEX because I want to overweight it relatively. SCV contains about 12% REITS, but I add an individual slice of REITS as well.

-----

Just for your reference, I'm 25 so my AA is:
25% bonds
60% equity = 15% * 4 slices
15% possibly in EM/REIT, if not will split into the 4 slices.
There are no guarantees, only probabilities.
JustinR
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Post by JustinR »

grap0013 wrote: Yes, look on page 1 or 2 of this thread. You could also do all the value on one side (domestic vs. foreign) and likely achieve similar results in the long haul.

You could do 2 seperate Xrays. One for domestic and one for international and see how they shake out. I want some holding in every box for diversification, but I want to "lean" small and value.

Lots of VG international funda already contain EMs. Click on the fund and scroll to the bottom of the page to see the breakdown. However, I personally add a slice of VEIEX because I want to overweight it relatively. SCV contains about 12% REITS, but I add an individual slice of REITS as well.
Thanks for the help! It's very helpful and I'm putting the finishing touches on my plan now.

1) How do I tell if a fund has EMs in it? What am I looking for on the fund's page?


2) On the same note, how do you determine how much of a certain fund are in REITs? I'm looking at the Bogle wiki but I'm not sure how they're determining the percentages. What am I looking for on a fund page?

Edit: Oh I see, they're just manually comparing holdings from the official VG REIT fund?


3) What's the difference between these two funds? VFWSX and VFWIX They seem identical to me but the former is available in my 401k. It'll help me figure out my rebalancing.
Cash
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Post by Cash »

JustinR wrote: 3) What's the difference between these two funds? VFWSX and VFWIX They seem identical to me but the former is available in my 401k. It'll help me figure out my rebalancing.
One is the institutional class (VFWSX); the other is the investor class (VFWIX). The institutional class typically enjoys (as is the case here) more favorable expense ratios because of the large amount of the fund being collectively purchased. You usually want the institutional class when it's available.
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grap0013
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Post by grap0013 »

JustinR wrote: 1) How do I tell if a fund has EMs in it? What am I looking for on the fund's page?

https://personal.vanguard.com/us/funds/ ... IntExt=INT

Look towards bottom left of this page under portfolio holdings.



2) On the same note, how do you determine how much of a certain fund are in REITs? I'm looking at the Bogle wiki but I'm not sure how they're determining the percentages. What am I looking for on a fund page?

I just use the boglehead wiki info. The amount in SCV does not influence me in either direction. If it was 20% I'd probably reduce my REITS to 5% rather than 10%.

Edit: Oh I see, they're just manually comparing holdings from the official VG REIT fund?


3) What's the difference between these two funds? VFWSX and VFWIX They seem identical to me but the former is available in my 401k. It'll help me figure out my rebalancing.
Before you implement this strategy I highly recommend you read a book or 2 on asset allocation because it's the most important investing decision you'll ever make. Ricki Ferri is coming out with All About Asset Allocation 2nd edition. Also, The Intelligent Asset Allocater is very good.
There are no guarantees, only probabilities.
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iceport
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Re: Funds...

Post by iceport »

JustinR wrote:Hello, since this post was made a year ago, so I was wondering if anyone can chime in if there is an update to the 4 slice Ultimate Buy and Hold for Vanguard funds.
Granted, there could be new, more desirable products that have been rolled out in the past year. But still, isn't an "updated Ultimate Buy and Hold portfolio" something of an oxymoron? (Would backtesting using more recent return data ever warrant revisions to a buy-and-hold portfolio?)

--Pete
JustinR
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Re: Funds...

Post by JustinR »

petrico wrote:
JustinR wrote:Hello, since this post was made a year ago, so I was wondering if anyone can chime in if there is an update to the 4 slice Ultimate Buy and Hold for Vanguard funds.
Granted, there could be new, more desirable products that have been rolled out in the past year. But still, isn't an "updated Ultimate Buy and Hold portfolio" something of an oxymoron? (Would backtesting using more recent return data ever warrant revisions to a buy-and-hold portfolio?)

--Pete
Oh, by that I just meant updates for Vanguard users (from any new fund selections etc), not changes to the strategy itself. Seems like the 4 slice version of Vanguard is pretty specific due to the type of funds available to fit the strategy.
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Re: Funds...

Post by Chuck T »

JustinR wrote:
petrico wrote:
JustinR wrote:Hello, since this post was made a year ago, so I was wondering if anyone can chime in if there is an update to the 4 slice Ultimate Buy and Hold for Vanguard funds.
Granted, there could be new, more desirable products that have been rolled out in the past year. But still, isn't an "updated Ultimate Buy and Hold portfolio" something of an oxymoron? (Would backtesting using more recent return data ever warrant revisions to a buy-and-hold portfolio?)

--Pete
Oh, by that I just meant updates for Vanguard users (from any new fund selections etc), not changes to the strategy itself. Seems like the 4 slice version of Vanguard is pretty specific due to the type of funds available to fit the strategy.
Justin

There have been no new updates to the strategy. IMO in order to implement it with the least amount of impact to your portfolio I would exchange VG Small Cap for VG Small Cap Value. This is all it takes. Try not to overthink this. Good luck. Chuck

PS: The more important decision is for you to make sure you asset allocation is right for your situation. As someone else previously mentioned, I recommend Rick Ferri's All About Asset Allocation. It is a great book and very easy to read.
Chuck | Past Performance Is Just That - bob | For info on the SC LowCountry & Savannah GA Area Bogleheads contact me at chucktanner46@gmail.com
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Leif
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Post by Leif »

I find the information in this post very convincing. One way to look at diversification is at the individual stock level. I believe this is what lumpers do. However looking at their favorite fund, TSM, it is a large blend fund. S&D folks, such as Trev, Swedroe, Bernstein look at it from a larger point of view, asset class diversification. It is at this level the S&D folks put diversification and MPT to work.

Most will say it is a risk story. But, if most of your assets are in a single class is that not risky? Large US companies can do well in a decade or do poorly, as an asset class.

There is much history, not only in the long term, but sliced into shorter terms, and international, that asset class diversification is good for your portfolio. However, to many this will not matter. Their point is history is not the future. Really? I've seen quite a bit or history being replayed. Swedroe says what we see is not new, only the history we don't know.
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Re: Funds...

Post by JustinR »

Does anyone have an opinion on the Permanent Portfolio strategy compared to this one? I've started doing the Ultimate Buy and Hold and, like Boglehead philosophy states, I don't want to switch, but since I am literally just starting now (at the age of 25) I want to get it right, right now instead of switching later in life.

Both seem like attractive choices, the PP is a little different than what I've been reading but it seems like it works. But this strategy also seems to be proven as well.

Any thoughts?
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Taylor Larimore
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Unsuitable

Post by Taylor Larimore »

Hi Justin:

The "Permanent Portfolio" contains only 25% stocks. In my opinion, it is unsuitable for a 25 year old.
"Simplicity is the master key to financial success." -- Jack Bogle
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Post by beardsworth »

Leif Eriksen wrote:There is much history, not only in the long term, but sliced into shorter terms, and international, that asset class diversification is good for your portfolio. However, to many this will not matter. Their point is history is not the future. Really? I've seen quite a bit or history being replayed. Swedroe says what we see is not new, only the history we don't know.
Or, as Twain said, history does not repeat itself, but it does rhyme.

Marc
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Post by caklim00 »

Looks like this thread will soon be able to be updated to either the Trev H proposed solution (US LC, US SCV, Int LCV, Int SC) or the newly available (soon):
US LC
US SCV
Int LC
Int SCV (Russell 2000 Global ex-US Value)
Ed 2
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Post by Ed 2 »

My favorites:

Total Stock Market Index Fund
Total International Index Fund
Total Bond Index Fund or GNMA's.
I Bonds
REIT's
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Leif
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Post by Leif »

caklim00 wrote:Looks like this thread will soon be able to be updated to either the Trev H proposed solution (US LC, US SCV, Int LCV, Int SC) or the newly available (soon):
US LC
US SCV
Int LC
Int SCV (Russell 2000 Global ex-US Value)
I have room in my taxable to US & Intl LC, which are tax efficient and room in my tax deferred for US & Intl SCV & EMV. Plus a pinch of REITs and CF in my tax deferred. Plus, of course, ST and IT bonds. I like it. Tax efficient and diversified at the asset class level. A bit more complex then the 4 slices, but it works for me.
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Post by rustymutt »

I'm a slice and dice guy myself, and I'm having a problem with the graph.
Who supplied the number? Was this an all Vanguard index fund slice and dice? Vanguard international small cap wasn't even around.
Last edited by rustymutt on Sat Mar 12, 2011 12:20 pm, edited 1 time in total.
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Post by james22 »

Trev H wrote:Below is from my return data source document for the International equity returns shown in the charts. Other than ILB (or Total International) most of the older data came from IFA.com and I am listing the sources they list.


ILB - Total International:
============================
MSCI EAFE Index 1970-1987 (Developed Only)
85% EAFE Index, 15% Emerg Mkt Index 1988-1996
Vanguards Total Intel Index Fund 1997-2008

ILV - International Large Value including EM
===============================
85% IV, 15% EV (ifa.com) 1970-1990
IV – 1970-1974 MSCI EAFE Gross Div -3.67 bp/month
---- 1975-1990 MSCI EAFE Value Gross Div -3.67 bp/month
EV - 1970-1988 IFA EM Index
---- 1989-1990 Fama/French EM Value Index -5.0 bp/month
1991-2008 Vanguards International Value Fund

ISB - International Small Cap including EM
============================================
1970-1996 85% IS, 15% ES (ifa.com)
IS - Dimensional Intl Small Cap Index -4.58bp/month
ES - 1970-1988 IFA Emerging Markets Index,
---- 1989-1996 Fama/French EM Small -6.5bp/month
1997-2008 Vanguards International Explorer Fund
2009-Forward Vanguards FTSE X-US Intl Small Cap Index

ISV – International Small Value including EM
============================================
1970-2008 85% ISV, 15% ESV (data from ifa.com + DFA Funds)
ISV 1970-1981 Dimensional Intl Small Cap Index -4.58 bp/month
--- 1982-1994 Dimensional Intl Small Value Index -5.75 bp/month
--- 1995-Present – DFA Intl Small Cap Value Fund DISVX
ESV = 50% EV, 50% ES *calculated* (ifa.com)
--- EV 1970-1988 IFA EM Index
------ 1989-1998 Fama/French EM Value Index -5.0 bp/month
------ 1999-Present DFA EM Value Fund DFEVX
--- ES 1970-1988 IFA EM Index
------ 1989-1998 Fama/French EM Small Index -6.5 bp/month
------ 1999-Present DFA EM Small Cap Fund DEMSX

==

And if you look at the same mixes starting in 1997 going forward, using nothing but Vanguard Fund Returns you get the same (or at least very similar results).

Total Intl & International Explorer had their first full year in 1997.

My data set does use actual Vanguard Fund returns where possible (best of asset class) which for 1997-2008 for ISB = International Explorer - but going forward will be FTSE X-US Intl Small Cap.
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Charybdis
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Post by Charybdis »

For those European investors who follow this model portfolio, exactly which ETFs do you buy?

Emerging market ETFs in Europe suck, what to do? (they fall behind the benchmark big time due to the costs)
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Re: Unsuitable

Post by Ed 2 »

Taylor Larimore wrote:Hi Justin:

The "Permanent Portfolio" contains only 25% stocks. In my opinion, it is unsuitable for a 25 year old.
Not even for 40 years old.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Unsuitable

Post by rustymutt »

Ed 2 wrote:
Taylor Larimore wrote:Hi Justin:

The "Permanent Portfolio" contains only 25% stocks. In my opinion, it is unsuitable for a 25 year old.
Not even for 40 years old.
I believe that the amount of money one has also plays in the allocation question. If I had $15,000,000.00, I'm going to have 3/4's of that in 100% equities and leave my heirs very wealthy indeed. I could still live like a king on $5 million dollars.
Even educators need education. And some can be hard headed to the point of needing time out.
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Re: Unsuitable

Post by Ed 2 »

rcasement wrote:
Ed 2 wrote:
Taylor Larimore wrote:Hi Justin:

The "Permanent Portfolio" contains only 25% stocks. In my opinion, it is unsuitable for a 25 year old.
Not even for 40 years old.
I believe that the amount of money one has also plays in the allocation question. If I had $15,000,000.00, I'm going to have 3/4's of that in 100% equities and leave my heirs very wealthy indeed. I could still live like a king on $5 million dollars.
If I have that much I would invest half in my business and half in safe non- risky vehicle some soared.
For my personally don't need any more, my goal to have 3 mil. at least. by the time I retire.
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Post by nocash365 »

Isn't this all just attempting to predict future performance from past performance?
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Post by paper200 »

It is trying to predict future from the past.

Incidently, today late afternoon (~3:45-4PM) in Bloomberg radio a person was discussing use of artifical intelligence - which incidentally predicted the 2007/2008 downturn. When we will have a zillion of them predicting and adjusting porfolios in a millisecond the outcome will be ____________(fill in the blank).

The final outcome depends on luck/timing, saving, persevering with a plan, having a monthly cash flow, expense control and good health.
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Post by rustymutt »

nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
Remember that past performance is not indicative of future returns and that any investment can loose money including your principal.
Even educators need education. And some can be hard headed to the point of needing time out.
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Post by Chuck T »

nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
No. I don't think it is about attempting to predict future performance from past performance. Trev started this thread for some of the Bogleheads he calls those who Slice and Dice. His intent was to analyze whether through backtesting he could achieve similar results over the same time period with 4 equity funds to Paul Merriman's 8 equity fund VG portfolio sometimes referred to as the Ultimate Buy and Hold Portfolio. The portfolio and other sample portfolios are shown on Paul Merriman's fundadvice.com website (with bond funds included).

I find this to be an interesting thread. No one is suggesting you buy or sell any funds based on Trev's analysis. It is food for thought. The graphs are extremely interesting.
Chuck | Past Performance Is Just That - bob | For info on the SC LowCountry & Savannah GA Area Bogleheads contact me at chucktanner46@gmail.com
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Post by jmourik »

nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
As some have said before, what else would you take into consideration when creating your asset allocation?
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Post by dbr »

jmourik wrote:
nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
As some have said before, what else would you take into consideration when creating your asset allocation?
You would take into consideration that risk is mitigated at the cost of suppressing opportunity by diversifying into as wide a selection of uncorrelated assets as possible compatible with costs and tax efficiency. This would also involve including in one's lifelong financial plan resources other than investment in marketable assets.
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Post by jmourik »

dbr wrote:
jmourik wrote:As some have said before, what else would you take into consideration when creating your asset allocation?
You would take into consideration that risk is mitigated at the cost of suppressing opportunity by diversifying into as wide a selection of uncorrelated assets as possible compatible with costs and tax efficiency. This would also involve including in one's lifelong financial plan resources other than investment in marketable assets.
Quite so. I meant more, how do you figure all this out, like which assets are uncorrelated and such, without looking at past performance and behavior? Meaning, the whole mantra "Past performance is not an indication of future results" is obviously true, but we still need to look at it hard. People love to bring it up all the time, and I guess from looking at investor behavior rightfully so, but you need to start from somewhere...
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Post by rustymutt »

dbr wrote:
jmourik wrote:
nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
As some have said before, what else would you take into consideration when creating your asset allocation?
You would take into consideration that risk is mitigated at the cost of suppressing opportunity by diversifying into as wide a selection of uncorrelated assets as possible compatible with costs and tax efficiency. This would also involve including in one's lifelong financial plan resources other than investment in marketable assets.
What are you talking about?
Even educators need education. And some can be hard headed to the point of needing time out.
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Post by Charybdis »

dbr wrote:
jmourik wrote:
nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
As some have said before, what else would you take into consideration when creating your asset allocation?
You would take into consideration that risk is mitigated at the cost of suppressing opportunity by diversifying into as wide a selection of uncorrelated assets as possible compatible with costs and tax efficiency. This would also involve including in one's lifelong financial plan resources other than investment in marketable assets.
That's my problem! I can only access emerging markets through DB x-trackers, but the expense ratio is 0.65% (MSCI emerging markets index). This is the cheapest emerging markets ETF I found in Europe.

So is it worth for me to invest in emerging markets at all? There is a diversification benefit, buy maybe costs eat this benefit?
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Post by Rodc »

Charybdis wrote:
dbr wrote:
jmourik wrote:
nocash365 wrote:Isn't this all just attempting to predict future performance from past performance?
As some have said before, what else would you take into consideration when creating your asset allocation?
You would take into consideration that risk is mitigated at the cost of suppressing opportunity by diversifying into as wide a selection of uncorrelated assets as possible compatible with costs and tax efficiency. This would also involve including in one's lifelong financial plan resources other than investment in marketable assets.
That's my problem! I can only access emerging markets through DB x-trackers, but the expense ratio is 0.65% (MSCI emerging markets index). This is the cheapest emerging markets ETF I found in Europe.

So is it worth for me to invest in emerging markets at all? There is a diversification benefit, buy maybe costs eat this benefit?
This is a question without any clear answer, unfortunately.

IMHO, that cost puts the decision in a gray zone.

If you do go with EM, at that cost I personally would not over weight it.

I am in a similar boat. I chose to split international into 50% large developed, 25% small developed and 25% emerging market large, a simple split of 2/4, 1/4, 1/4 which is not too far off from market cap.

I have 30% in international so that works out to 15/7.5/7.5 percent. Is that enough EM to matter? Maybe and maybe not.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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