POLL: Multiple Choice Portfolios

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So which Portfolio would you prefer?

Portfolio #1 (more small caps than large)
5
16%
Portfolio #1 (more small caps than large)
5
16%
Portfolio #3 (more large caps than small)
21
68%
 
Total votes: 31

Topic Author
Scorpion
Posts: 388
Joined: Mon Sep 14, 2009 6:56 am

POLL: Multiple Choice Portfolios

Post by Scorpion »

I am trying to decide if I should create one “equity side” of my portfolio that can last me for pretty much the rest of my life (with bond percentages increasing over time), or if it is better to have an equity allocation that adjusts as I get older as well, in addition to the bond percentage changing. I am starting to think the latter is just too calculated and will have costly CG consequences as I switch from one equity S&D strategy to another over time (also, having a constant equity allocation seems more consistent with a “stay the course” philosophy). So, I am trying to decide between the following three portfolios for only the equity side of my portfolio. If you had to choose one of these as your enduring portfolio, which would you choose (and if you have time to post, why)? This question is probably going to be more interesting to those who believe in S&D vs. those who don’t. If you want to see my personal facts, they are here:

http://www.bogleheads.org/forum/viewtop ... highlight= , but I am most curious which portfolio you would prefer. The numbers below are percentages of the total equity side (they add up to 100%).

Portfolio 1 (more small than large caps):
Large Blend: 12
Large Value: 12
Small Blend: 20
Small Value: 20
REIT: 5
Dev. Intl Large Value: 6
Emerg Lrg Blend: 6.5
Dev. Intl Small Blend: 12
Emerg Small Blend: 5
Emerg Lrg Value: 1.5

Portfolio 2 (about equal small and large):
Large Blend: 16
Large Value: 16
Small Blend: 16.875
Small Value: 16.875
REIT: 3.75
Dev. Intl Large Value: 8
Emerg Lrg Blend: 5
Dev. Intl Small Blend: 11
Emerg Small Blend: 4.5
Emerg Lrg Value: 2

Portfolio 3 (more large than small):
Large Blend: 20
Large Value: 20
Small Blend: 13
Small Value: 13
REIT: 5
Dev. Intl Large Value: 10
Emerg Lrg Blend: 4
Dev. Intl Small Blend: 10
Emerg Small Blend: 4
Emerg Lrg Value:3
sommerfeld
Posts: 1159
Joined: Fri Dec 12, 2008 7:02 pm

Post by sommerfeld »

This question is probably going to be more interesting to those who believe in S&D vs. those who don’t.
I would have found it more interesting if you included a "just use TSM" option in the poll.
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Taylor Larimore
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Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Concentrate on what we can control. Not what we can't.

Post by Taylor Larimore »

Hi Scorpion:

I looked at your previous post together with this one. Frankly, I think you may have lost the forest for the trees.

Where are your bonds? What about tax-efficiency? What about simplicity?

It is important to concentrate on what we can control and de-emphasize what we can't.
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
Scorpion
Posts: 388
Joined: Mon Sep 14, 2009 6:56 am

Post by Scorpion »

Thanks Taylor - the bonds are coming (I had a more recent post that wasn't linked title "The Case for Bonds for Aggressive Investors" where I have decided some amount of bonds is appropriate), so this is just the equity side of the portfolio. I know that quite a number of Bogleheads prefer TSM, and a significant number prefer S&D as well. I have been using S&D for years and want to stay that way - that's why only S&D options are offered. I guess that poll is aimed mainly at others who like the S&D approach.
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Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Need more information for useful feedback

Post by Taylor Larimore »

Scorpion wrote:Thanks Taylor - the bonds are coming (I had a more recent post that wasn't linked title "The Case for Bonds for Aggressive Investors" where I have decided some amount of bonds is appropriate), so this is just the equity side of the portfolio. I know that quite a number of Bogleheads prefer TSM, and a significant number prefer S&D as well. I have been using S&D for years and want to stay that way - that's why only S&D options are offered. I guess that poll is aimed mainly at others who like the S&D approach.
Hi Scorpion:

Each of the portfolio's you have listed might be appropriate for certain investor--and very inappropriate for others.

With more information, you should receive more helpful comments: Your age? Income tax bracket? Will these funds be in taxable or tax-deferred accounts?
"Simplicity is the master key to financial success." -- Jack Bogle
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grap0013
Posts: 1892
Joined: Thu Mar 18, 2010 1:24 pm

Post by grap0013 »

I vote portfolio #4.

50% SCV
25% international developed small/mid value
25% emerging market small/mid value

Simple. High expected returns. Low correlation.

Here's what I like best about this mix...what's most likely to cause you to bail from your plan? Long periods of poor performance. When you mix assets that have high expected returns with low correlation you give yourself a smaller chance that you will experience a "lost" decade. You can't find even a 10 year period where this portfolio have returned less than 8% annualized.

This also keeps you outta bubbles fairly well (real estate, gold, tech boom). When they become overbought they leave the index and you make piles of money and buy more "cheap" stocks.

Small caps have done better historically and coming out of recessions. I've read quite a bit of data and I'm just paraphrasing, but in 9 of the last 10 recessions small caps have quite a large advantage over large caps 3 years out post recession bottom. What's doing better now? SCV is beating LCV, small developed beating large, and even small EMs are beating large EMs. Are you surprised? I'm not.

These 3 asset classes all have good tax loss harvesting pairs as well.

Would this work for the average investor? Probably not because the average investor isn't very good, but I've read some of your previous posts and I think it would possibly work for you.

I kept leaning smaller and value in my own portfolio until I said what's the point of these other asset classes? I think you are going in that direction yourself as you are moving past the 50:50 split between large and small.
There are no guarantees, only probabilities.
SP-diceman
Posts: 3968
Joined: Sun Oct 05, 2008 9:17 am

Post by SP-diceman »

grap0013 wrote:I vote portfolio #4.

50% SCV
25% international developed small/mid value
25% emerging market small/mid value

Simple. High expected returns. Low correlation.

Here's what I like best about this mix...what's most likely to cause you to bail from your plan? Long periods of poor performance. When you mix assets that have high expected returns with low correlation you give yourself a smaller chance that you will experience a "lost" decade. You can't find even a 10 year period where this portfolio have returned less than 8% annualized.

This also keeps you outta bubbles fairly well (real estate, gold, tech boom). When they become overbought they leave the index and you make piles of money and buy more "cheap" stocks.

Small caps have done better historically and coming out of recessions. I've read quite a bit of data and I'm just paraphrasing, but in 9 of the last 10 recessions small caps have quite a large advantage over large caps 3 years out post recession bottom. What's doing better now? SCV is beating LCV, small developed beating large, and even small EMs are beating large EMs. Are you surprised? I'm not.

These 3 asset classes all have good tax loss harvesting pairs as well.

Would this work for the average investor? Probably not because the average investor isn't very good, but I've read some of your previous posts and I think it would possibly work for you.

I kept leaning smaller and value in my own portfolio until I said what's the point of these other asset classes? I think you are going in that direction yourself as you are moving past the 50:50 split between large and small.

What funds/ETF's would you use for this?


Thanks
SP-diceman
SP-diceman
Posts: 3968
Joined: Sun Oct 05, 2008 9:17 am

Re: POLL: Multiple Choice Portfolios

Post by SP-diceman »

Scorpion wrote:I am trying to decide if I should create one “equity side” of my portfolio that can last me for pretty much the rest of my life (with bond percentages increasing over time), or if it is better to have an equity allocation that adjusts as I get older as well, in addition to the bond percentage changing. I am starting to think the latter is just too calculated and will have costly CG consequences as I switch from one equity S&D strategy to another over time (also, having a constant equity allocation seems more consistent with a “stay the course” philosophy). So, I am trying to decide between the following three portfolios for only the equity side of my portfolio. If you had to choose one of these as your enduring portfolio, which would you choose (and if you have time to post, why)? This question is probably going to be more interesting to those who believe in S&D vs. those who don’t. If you want to see my personal facts, they are here:

http://www.bogleheads.org/forum/viewtop ... highlight= , but I am most curious which portfolio you would prefer. The numbers below are percentages of the total equity side (they add up to 100%).


Portfolio 2 (about equal small and large):
Large Blend: 16
Large Value: 16
Small Blend: 16.875
Small Value: 16.875
REIT: 3.75
Dev. Intl Large Value: 8
Emerg Lrg Blend: 5
Dev. Intl Small Blend: 11
Emerg Small Blend: 4.5
Emerg Lrg Value: 2
Maybe its just me, but if you have 2 funds at 16 and 7/8's,
your over thinking it.


Thanks
SP-diceman
User avatar
grap0013
Posts: 1892
Joined: Thu Mar 18, 2010 1:24 pm

Post by grap0013 »

SP-diceman wrote:
What funds/ETF's would you use for this?


Thanks
SP-diceman
SCV: RZV, VBR (RZV is hard to TLH because you don't want to miss the gains)

international developed small/mid: SCZ/GWX (I prefer PDN;s valuey attributes, but it is too expensive and too thinly traded)

emerging market small/mid: EWX/DGS (slight preference to EWX as it's slightly more valuey)
There are no guarantees, only probabilities.
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stratton
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Joined: Sun Mar 04, 2007 4:05 pm
Location: Puget Sound

Post by stratton »

The OP needs to make up his/her own mind. If the poll helps with that fine, but don't take an asset allocation just because it wins a poll.

Paul
...and then Buffy staked Edward. The end.
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