Ultimate Buy and Hold - 8 slices vs 4

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m_s5000
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by m_s5000 » Mon Sep 21, 2015 4:52 pm

Hi Trev H,

In case you are still accepting requests, can you run the original chart including (LB, SV, ILV, ISB) till 08/15? Want to see how this portfolio performed from 1970 till 2015 versus standard 3-F portfolio of TSM, TISM and TBM.

Thanks.

Fabio
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Ultimate Buy and Hold for European investors

Post by Fabio » Tue Apr 19, 2016 11:03 am

This has been a really informative discussion!

I'd like to ask you a suggestion for European investors who would like to implement a simplified Ultimate Buy and Hold portfolio. In many european countries Vanguard ETFs are not an option as they all distribute didivends which are heavily taxed, besides there are no low expense world-ex-US or ex-EU funds available. Choices are quite limited for this kind of tilt here, as far as I know.

In the European UBH thread (which apparently is no longer active) Dman proposed the following allocation:

50% Vanguard FTSE All-World UCITS ETF (or iShares Core MSCI World UCITS ETF* for those who cannot use Vanguard)
25% SPDR MSCI USA Small Cap Value Weighted UCITS ETF
20% SPDR MSCI Europe Small Cap Value Weighted UCITS ETF
5% SPDR MSCI Emerging Markets Small Cap UCITS ETF

Which is close to Trev H's portfolio:

Code: Select all

V   C    G
15  15   14 L
11  10   8  M
14  9	 5  S
or (using the iShares ETF*):

Code: Select all

V   C    G
15  15   14 L
12  9    8  M
14  9	 4  S
Country allocation: 56% USA, 32% Europe, 10% Asia (4% Japan). What do you think of this split?

All of these SPDR funds have very low assets under management and a low trading volume. Do you think that the possible advantages of tilting towards small and value outweight this fact? I'd like to hear your thoughts, thanks!

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Johnnie
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Johnnie » Sat May 28, 2016 8:53 pm

I haven't read every page of the thread so I don't know if this has been discussed, but I suspect the rebalancing dynamics of this system contribute a lot to it's value.

Merriman says his asset classes are the ones the academics find the most productive in the long term. But those "periodic tables" illustrating how asset classes bounce between hot one year and not the next make a hash of that in the medium term.

My untested suspicion is that it's the combination of the inherent "buy low/sell high" dynamic of annual rebalancing, plus doing so between those A+ asset classes, that creates the "magic sauce" mentioned in various contexts by one savvy poster here - except this one actually add a little.

Moreover, dicing into eight proven A+ slices compounds the positive effect. Plus of course in good years you're pocketing any extra gains through rebalancing equity and income.

~~~~~

I only discovered this system a year ago, and indeed this whole world of systematic investing, even though I'm within five years of retirement. I've always been a buy and holder with an emphasis on small value, and a supersaver, but with no plan, and too much got frittered away trying to beat the market.

I was sold the first time I read Merriman's description of his "Ultimate" with the evidence, with the usual proviso. So I jumped in whole hog, which as these discussions explore isn't easy. Having just turned 60 I was able to move a bunch of Vanguard 403b money into a Vanguard rollover IRA with brokerage - which also triggered some promotions to "admiral," thank you very much.

I also have a Schwab rollover IRA with more tax deferred money, which is in short term bond funds, and a Roth there, which contains a couple of Merriman's slices plus what's left of some of those side bets. I hope to be all-in by the end of this year.

OK, who cares? Only me, except this shows how in the right circumstances executing this system isn't easy but isn't THAT hard either.. And as far as I can tell, the only rap against it is that it's complex and doesn't exempt you from the usual downsides of investing. But I like complicated, and feel like I'm doing everything I can to maximize the probabilities of getting higher returns with no more risk.

And - for the first time ever I feel like I have a "grownup" portfolio vs an ad-hoc mish-mash, which is pathetic given that I've always known a lot about markets and the economy. That's probably a curse, and my new guru for anything to do with the future is Sergeant Schultz - "I know nuh-thing!"

~~~~~~~~

PS. The only asset class I could not cover within Vanguard was ISCV, where I'm using DLS. Merriman doesn't like VISVX because it's light on "small" and "value" so that might migrate to SLYV.
"I know nothing."

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by blues008 » Tue Aug 02, 2016 5:51 pm

Sorry if I missed this in the thread, but how does having 50% of the portfolio weighted in international reconcile with most Bogleheads not putting more than 20% of of their equities in international?

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by dbr » Tue Aug 02, 2016 6:58 pm

blues008 wrote:Sorry if I missed this in the thread, but how does having 50% of the portfolio weighted in international reconcile with most Bogleheads not putting more than 20% of of their equities in international?
It doesn't, or it wouldn't if Bogleheads in fact don't put more than 20% in international. Note, by the way, that we always have to be clear whether we mean a fraction of the portfolio in international or a fraction of stocks or of bonds in international. Referring to stocks, people usually mean to say what fraction of stocks to put in international and that seems to come down to somewhere between 0% and 50% of stocks in international stocks.

The forum doesn't support surveys anymore so I don't know what the actual data is in what participants on this forum actually do. I do not think no more than 20% of stocks would be an accurate estimate, but who knows. Where did you get that number? Vanguard seems to be recommending 40% of stocks and Mr. Bogle still holds out for none.

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Taylor Larimore
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% of international stocks?

Post by Taylor Larimore » Tue Aug 02, 2016 7:36 pm

Bluesoo8:

Mr. Bogle allows a maximum of 20% of stocks in international.

Vanguard recommends a minimum of 20% in stocks.

Seems to me that 20% might be a reasonable allocation.

Best wishes.

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

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Phineas J. Whoopee
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Phineas J. Whoopee » Tue Aug 02, 2016 7:46 pm

blues008 wrote:Sorry if I missed this in the thread, but how does having 50% of the portfolio weighted in international reconcile with most Bogleheads not putting more than 20% of of their equities in international?
Can you please provide a cite for most? I'll even settle for a cite that supports many but less than half.

I personally keep 40% of equity international. Staying that course is far more important than whether it's 30% or 50%.

My reasoning: I'm a US-based investor, worker, and prospective retiree. My expenses are in US dollars. My votes are for US and state legislators and executives. Right now global market cap is around 50/50, which the (dubious because the market-cap argument applies to a single market in a single currency) reflect-world-equity-or-you're-somehow-morally-inconsistent-therefore-your-opinions-and-choices-are-to-be-dismissed-out-of-hand arguers say we're blind about.

I'm not an average world investor. I have good reasons, based on my own opinions about my own personal financial risks, to somewhat tilt toward the US.

It's really 62.5%/37.5%, not by design but because at 40% equity - selected due to the fact that from where I am now I can meet my financial goals without greater equity risk so I've chosen not to take more - the percent-of-portfolio split would be 24%/16%, and it strains my brain less to call it 25%/15%, and 60%/40% vs. 62.5%/37.5% isn't enough to make a material difference.

Please, as I asked at the beginning of this post, cite support for your claim of most Bogleheads.

PJW

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by artbug » Tue Aug 02, 2016 11:30 pm

I was heavily influenced by this thread, but my portfolio also some differences. Some of it is based on what's available and practical through my employer-sponsored retirement plan.

One difference is that my target allocation for international stocks is 40%, too. It simply made sense to me and I like a the 60:40 US/Int'l relationship. (I did it before Vanguard began recommending "40% of equities".)

A target of 40% of stocks equals 30% of my entire portfolio. (40% x 74% = 30%) In reality, 36% of my stocks (27% of my portfolio) are international holdings due to some limitations and other investment decisions. It's good enough.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 11:45 am

Would anyone hold the value portions of this portfolio if they only had room in taxable (e.g. VBR (small cap value etf) and VSS (international small cap value etf)? I don't have those in my 401k and my Roth is full of REITs.

In the 28% tax bracket. Read in several posts on here that value funds aren't as tax-efficient for taxable accounts.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by livesoft » Wed Aug 03, 2016 11:48 am

I have held VBR and VSS in a taxable account for quite a long time, so yes, I would do that.

Do you think VBR and VSS are not tax efficient? Why? Is it just because you read that somewhere on the internet? Have you checked it out for yourself?
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 12:08 pm

Thanks, Livesoft. Yes, mainly what I've read on the internet, for example the below post.
Re: VSS and Tax Efficiency - Alternatives and/or Shifting locations?
Postby livesoft » Wed Jan 27, 2016 3:51 pm

I agree that VSS has gotten less tax-efficient. I did something about it, as I wrote in this post:
viewtopic.php?p=2768583#p2768583
and in this post:
viewtopic.php?p=2777063#p2777063

My solution was to just buy VSS in tax-advantaged and sell at a gain in taxable. Not necessarily in that order.

I also have no problems owning SCZ and EWX, although I do not own any SCZ at the present time.

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Earl Lemongrab
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Earl Lemongrab » Wed Aug 03, 2016 12:16 pm

The Trev 4-fund is an attempt to simplify the typical Merriman-style slice/dice/tilt portfolio. The amount to international shouldn't be nearly as much of a concern to mainstream Bogleheads as the 50% tilt to value would be. Right now, 50% international is roughly market weight.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by livesoft » Wed Aug 03, 2016 12:28 pm

jayhawk wrote:Thanks, Livesoft. Yes, mainly what I've read on the internet, for example the below post.
Re: VSS and Tax Efficiency - Alternatives and/or Shifting locations?
Postby livesoft » Wed Jan 27, 2016 3:51 pm

I agree that VSS has gotten less tax-efficient. I did something about it, as I wrote in this post:
[…]
Yes, VSS and VBR are less tax-efficient, but that is not the same as writing that "VSS and VBR are not tax-efficient."

In other words, tax-efficiency is all relative.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 12:37 pm

^thanks for confirming. Appreciate it.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by livesoft » Wed Aug 03, 2016 12:43 pm

BTW, instead of VBR, you may wish to use IJS in taxable. I do have both in our taxable account.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 12:53 pm

I have IJS as a TLH partner (I probably stole from another of your posts :sharebeer ).

The challenging part of this is my 401k is the largest account and only offers the vanguard extended market fund, makes getting the 50% split between US large and US small much more difficult across both taxable and 401k. Guess I could take the easy route and use extended market in taxable also. Right now I split those 50/50 S&P/extended market in 401k.

Another option is to just use S&P in 401k but I'd have to only be buying IJS or VBR for a very long time, like a few years to equal 50/50 haha.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 1:11 pm

Also, if it's helpful here is my allocation, and I have additional money to invest in taxable. For international, I'll start adding to VSS in taxable.

taxable:
10% Emerging Market VWO .15%

roth:
10% US REIT VNQ .12%
1% Total Bond BND .06%

401k:
20% S&P 500 VIIIX .02%
20% Extended Market VEMPX .05%
30% International VTPSX .07%
9% Total Bond VBMPX .04%
Last edited by jayhawkerbeef on Wed Aug 03, 2016 2:37 pm, edited 1 time in total.

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Taylor Larimore
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Percentages needed

Post by Taylor Larimore » Wed Aug 03, 2016 1:58 pm

jayhawk:

Is it possible for you to edit your last post showing the percentage of each fund in your total portfolio? Put the percentages in front of each fund. The percentages should total 100%.

The edit function is at the top of your window.

Thank you and best wishes.
Taylor
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 2:38 pm

Thank you, Taylor, edited.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Taylor Larimore » Wed Aug 03, 2016 3:04 pm

Jayhawk:

A few comments:

* Thank you for a more understandable format.

* Your most important decision is your overall stock/bond ratio. 90% stocks means that your portfolio might plunge about 45% (1/2 your stock allocation) in the next bad bear market. Is this acceptable?

* You wrote: "I'll start adding to VSS in taxable." You don't have VSS in taxable?

* 1% of any fund is meaningless and not worth the complexity. Eliminate the 1% bond fund or add to it. Question any fund representing less than 10% of your portfolio.

* You have index funds with very low expense ratios. Good!

Best wishes.
Taylor
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by jayhawkerbeef » Wed Aug 03, 2016 3:30 pm

Thanks, Taylor. Appreciate the feedback.
Taylor Larimore wrote:Jayhawk:

* Your most important decision is your overall stock/bond ratio. 90% stocks means that your portfolio might plunge about 45% (1/2 your stock allocation) in the next bad bear market. Is this acceptable? Yes as long as I'm in the accumulation phase

* You wrote: "I'll start adding to VSS in taxable." You don't have VSS in taxable? Not as of yet, was topping off emerging market to my desired allocation that I met this week.

* 1% of any fund is meaningless and not worth the complexity. Eliminate the 1% bond fund or add to it. Question any fund representing less than 10% of your portfolio. Since REITs are all that's in the Roth I like holding some bonds there to assist with rebalancing when there is a downtown. Plus I contribute the max in January and so can't add more cash. Also, I've hit my REIT allocation and do not want to hold cash.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by blues008 » Thu Aug 04, 2016 11:28 am

The four fund portfolio is 25% each LB, SV, ILV, and ISB. Doesn't that mean 50% gets weighted towards international? Apologies if I missed something.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by livesoft » Thu Aug 04, 2016 11:44 am

blues008 wrote:The four fund portfolio is 25% each LB, SV, ILV, and ISB. Doesn't that mean 50% gets weighted towards international? Apologies if I missed something.
Yes, that's what it means. But one does not have to strictly follow recommendations. And why would you want to anyways? One should have a good reason to follow the recommendations in this thread.

BTW: US:foreign is close to 50:50 in my portfolio, but it varies.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by blues008 » Thu Aug 04, 2016 11:47 am

Understanding that past returns are no guarantee of future returns, isn't this percentage breakdown the best for risk/reward? And if I wanted to keep international allocation around 20% how would that effect the rest of my four fund portfolio? Thanks!

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by JohnnyM » Wed Aug 24, 2016 10:04 am

I am interested in knowing the specific ticker symbols for the 4 fund portfolio. When I enter some suggestions into the Vanguard search box per the previous posts in this thread, it seems that some of the symbols of change etc. I do know one of the four but can you guys help me out with the other three ticker symbols? These would all be Admiral shares for my portfolio. Thanks

LB = Large Blend-500 index = Vanguard 500 Index Fund Admiral Shares (VFIAX)
SV = small value,
ILV = international large value=
ISB = international small blend=

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Earl Lemongrab » Wed Aug 24, 2016 10:27 am

JohnnyM wrote:I am interested in knowing the specific ticker symbols for the 4 fund portfolio. When I enter some suggestions into the Vanguard search box per the previous posts in this thread, it seems that some of the symbols of change etc. I do know one of the four but can you guys help me out with the other three ticker symbols? These would all be Admiral shares for my portfolio. Thanks

LB = Large Blend-500 index = Vanguard 500 Index Fund Admiral Shares (VFIAX)
SV = small value,
ILV = international large value=
ISB = international small blend=
If you are wanting all Vanguard Admiral, then it is a bit tough. Small value is no problem, but the only real Vanguard ILV is VTRIX, which is active and has no Admiral class. I use EFV (iShares) which is the #2 recommendation in that allocation from Altruist:

http://www.altruistfa.com/dfavanguard.htm

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by JohnnyM » Wed Aug 24, 2016 10:51 am

Thanks Earl.
I'll answer part of my question & welcome anyone's comments while I research further per your link & elsewhere
The four fund portfolio is 25% each LB, SV, ILV, and ISB

1- LB = Large Blend-500 index = Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.05%
2- SV = small value, Vanguard Small-Cap Value Index Fund Admiral (VSIAX) 0.08%
3- ILV = international large value=
Vanguard International Value Fund (VTRIX) active and has no Admiral class ER 0.46%
or
iShares MSCI EAFE Value ETF (EFV) ER 0.40%
4- ISB = international small blend=
FTSE X-US Intl Small Cap Vanguard FTSE All-World ex-US Small-Cap Index Fund Investor Shares (VFSVX)ER 0.31%. Also available as the an ETF Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) ER 0.17%
or
International Explorer = Vanguard International Explorer Fund (VINEX) E/R: 0.36%

Regarding the above 4- ISB = international small blend; if I want this category just go with the lowest ER, right, which is (VSS) ER 0.17% ?

The same can be said of the above 3- ILV = international large value; better to go with the lower ER which is Earl's suggestion (EFV) ER 0.40%.

I am new to index fund investing and am ready to invest/pull the trigger. I know the ratio I want stocks to bonds, I know the ratio I want domestic and international. I know the asset allocation I want for my equities portion which are the above four categories. I just want to verify I'm thinking properly with choosing the specific funds; would rather do it right the first time although I realize so long as one is reasonably well diversified it doesn't make much difference in the long run as long as you are not jumping in and out of your game plan. All comments appreciated.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Earl Lemongrab » Wed Aug 24, 2016 12:26 pm

Outside of my 401(k), I'm totally ETFs. I generally like the low costs and flexibility, especially as I like to move my assets around from time to time for bonuses:

viewtopic.php?f=10&t=196884

EFV is a natural choice for me. As I'm not a 4-funder, I have a few more categories to cover as well.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by livesoft » Wed Aug 24, 2016 12:39 pm

A fund does not need "value" in the fund name for the fund to have a value tilt. Also, everything is a matter of degree. I don't think one necessarily needs to have EFV or VTRIX when VXUS or VEU or many other Vanguard index funds will do.

Anyways, the ideas in this thread or in any book are not meant to be followed blindly. Everyone using the information in this thread should be able to comfortably adjust the ideas to their own personal philosophy and their personal availability of funds, their personal ability to rebalance, and their personal ability to tax-loss harvest.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by JohnnyM » Wed Aug 24, 2016 1:52 pm

Here's what I have decided upon; anyone can voice their comments either way.

1- LB = Large Blend-500 index = Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.05%
2- SV = small value, Vanguard Small-Cap Value Index Fund Admiral (VSIAX) 0.08%
3- ILV = international large value= iShares MSCI EAFE Value ETF (EFV) ER 0.40%
4- ISB = international small blend= Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) ER 0.17%

The only two that I had little more complex decision-making about were:
3- ILV = international large value; I chose (EFV) which unfortunately has a higher ER compared to some of the other choices in my posts above, just because it seemed to be more specific to the asset class "international large value" compared to the other ones.
and
4- ISB = international small blend; I chose it just because it had the lowest ER

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by rustymutt » Wed Aug 24, 2016 2:00 pm

That's 50% of the equity side of the portfolio, not 50% of the total. So if your portfolio is 100K and your alllocation is 60/40
Then 40K is bonds and only 30K in international.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by JohnnyM » Wed Aug 24, 2016 9:48 pm

Got it and thank you

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by robertmcd » Mon Jan 16, 2017 3:35 pm

Bringing up an old thread, but what would be the stock/bond allocation for the 4 fund ultimate buy and hold that would match the return of 40%TSM/40%Total international/20% ITT? I know it is past performance and all that but I would just like an idea. I am 23 and have a lot of cash to invest. I have great 5 yr CD's available at a local CU that I would like to use to mimic inter term treasuries. I like the idea of 80/20 stock bond split if I were using total market index funds, but I would like to increase my fixed income allocation with my large amount of cash on hand (possibly going to a mortgage payment in the next few years) to keep my stock exposure to a level I am comfortable with.

The 4 funds would be:
vanguard total stock market
vanguard small cap value
vanguard international value
vanguard ex us small cap

Thanks guys.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Sammy_M » Sat May 13, 2017 11:15 am

^It's going to be very time dependent. From 5/2009 to present using equal parts VTI, VBR, VTRIX, VSS - you could have raised your VFIUX allocation from 20 to 32% and achieved the same return with less volatility, i.e. greater sharpe ratio.

https://www.portfoliovisualizer.com/bac ... tion6_2=32

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Slacker » Thu May 25, 2017 3:48 pm

Trev H wrote:.
Good Evening Bogleheads...

Thought it was interesting how close the 4 slice combo of (LB,SV,ILV,IS) and the 8 slice combo of (LB,LV,SB,SV,ILB,ILV,ISB,ISV) did performance wise.

For most of the near 40 years you can't see one line over the other.

Looks like a reasonable way to greatly simplify the Ultimate Buy and Hold to me.

Included a 50/50 Lumper for comparison.

Have a Nice Evening !

==
How would I translate this to the govt TSP plan (govt 401K)?

I know the C fund would be LB
I believe the I fund would be ILB (It is based on the MSCI EAFE index)
The S fund is the dow jones us total stock market completion index - does that make it essentially SB?

Would you mind constructing the initial graph again with the TSP options equal weighted? I appreciate your time, thank you.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Earl Lemongrab » Thu May 25, 2017 3:52 pm

Trev doesn't post much anymore. If you're restricted to only the TSP, then you really won't be able to do it. If you have an IRA or something, then you could work with that.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by retiredjg » Thu May 25, 2017 3:58 pm

Agree with Earl. If the TSP is your largest account, it is unlikely you can reproduce this 8 slice stock portfolio because the TSP lacks any funds that are tilted toward value. That is NOT a reason to switch from using the TSP which is probably the best plan on the planet.

You can tilt to small cap by using a higher percentage of S fund. You can tilt to value in outside accounts such as IRA and Roth IRA.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by NiceUnparticularMan » Thu May 25, 2017 4:01 pm

Slacker wrote:
Trev H wrote:.
Good Evening Bogleheads...

Thought it was interesting how close the 4 slice combo of (LB,SV,ILV,IS) and the 8 slice combo of (LB,LV,SB,SV,ILB,ILV,ISB,ISV) did performance wise.

For most of the near 40 years you can't see one line over the other.

Looks like a reasonable way to greatly simplify the Ultimate Buy and Hold to me.

Included a 50/50 Lumper for comparison.

Have a Nice Evening !

==
How would I translate this to the govt TSP plan (govt 401K)?

I know the C fund would be LB
I believe the I fund would be ILB (It is based on the MSCI EAFE index)
The S fund is the dow jones us total stock market completion index - does that make it essentially SB?

Would you mind constructing the initial graph again with the TSP options equal weighted? I appreciate your time, thank you.
That's an old post, but I can confirm for you that you are correct about how to categorize the stock funds in the TSP.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by cb474 » Thu May 25, 2017 10:38 pm

Slacker wrote:
Trev H wrote:.
Good Evening Bogleheads...

Thought it was interesting how close the 4 slice combo of (LB,SV,ILV,IS) and the 8 slice combo of (LB,LV,SB,SV,ILB,ILV,ISB,ISV) did performance wise.

For most of the near 40 years you can't see one line over the other.

Looks like a reasonable way to greatly simplify the Ultimate Buy and Hold to me.

Included a 50/50 Lumper for comparison.

Have a Nice Evening !

==
How would I translate this to the govt TSP plan (govt 401K)?

I know the C fund would be LB
I believe the I fund would be ILB (It is based on the MSCI EAFE index)
The S fund is the dow jones us total stock market completion index - does that make it essentially SB?

Would you mind constructing the initial graph again with the TSP options equal weighted? I appreciate your time, thank you.
If you read this whole thread and elsewhere in the forum, you'll see that some people say it doesn't really matter where you get your small and value tilt from (hence why the whole eight slices does not really seem to be necessary).

If you take that position, possibly the best thing you could do with the TSP funds (if that's all you have) is to put 50% in the S fund and 50% in the I fund. That way you would get your 50% tilt towards small, 50% tilt toward large, and 50/50 US/International split. Yeah it's only two funds, but a lot of people here advocate keeping things that simple anyway (it would sort of be a tilted to small version of Taylor's three fund portfolio). Personally, I'd feel comfortable doing that. But I seem to have a large tolerance for tacking error (I feel good when my portfolio doesn't directly track the S&P--like its working.)

You might want to look through this entire long thread. I don't recall, but I wouldn't be suprised if somewhere trev did a chart of just 50% SV and 50% ILB to see how that holds up. Also, I think there is an old thread somewhere by Rodc, where he charts a bunch of different simpler ways of getting the same amounts of tilt, so you might want to look for that as see if anything approximates your options.

If it makes you anxious to completely leave out the C fund. Then you could just add in some percentage of that, to displace some of the S fund, until you feel more okay about it (knowing that you are moving away from a 50% tilt to small). So you could do way 20% C, 30% S, and 50% I.

Of course, as others have said, if you also have money in funds outside of TSP then you could use those to get some of the tilt you want (especially to pick up value).
Last edited by cb474 on Thu May 25, 2017 11:03 pm, edited 3 times in total.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by cb474 » Thu May 25, 2017 10:58 pm

A couple posts where TrevH plays with some variations sort of close to your options:

viewtopic.php?p=489116#p489116
viewtopic.php?p=489178#p489178

I only went through the first two pages of the thread, so there could be more in here.

Here's the Rodc thread I mentioned, though unfortunately it's so old the images of the charts he created for it don't render anymore. But he still talks about how it doesn't seem to matter that much where you get your tilt from.

viewtopic.php?t=9445

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by tombonneau » Thu Jun 22, 2017 6:44 am

Bumping this incredibly useful thread to subscribe to future replies. :D

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Jiu Jitsu Fighter » Thu Jun 22, 2017 5:21 pm

You could theoretically do this now with Vanguard index funds if you consider VIHAX (International High Yield) as a proxy for ILV. So, you could go 25 VTSAX (LC) / 25 VSIAX (SCV) / 25 VIHAX (ILV) / 25 VFSVX (IS). If they would ever get rid of that ridiculous purchase fee (load) of 25 bps for VIHAX, someone could consider that portfolio or substitute the VYMI ETF for the MF.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by cb474 » Fri Jun 23, 2017 2:56 am

Jiu Jitsu Fighter wrote:You could theoretically do this now with Vanguard index funds if you consider VIHAX (International High Yield) as a proxy for ILV. So, you could go 25 VTSAX (LC) / 25 VSIAX (SCV) / 25 VIHAX (ILV) / 25 VFSVX (IS). If they would ever get rid of that ridiculous purchase fee (load) of 25 bps for VIHAX, someone could consider that portfolio or substitute the VYMI ETF for the MF.
Why not just use VTRIX, since it actually is an international large value fund (no proxy necessary)? That's what Trev H (OP) said he uses years ago when he was still posting to this thread.

Also, I think may people have discussed the ways in which high dividend yield funds are not a good proxy (possibly no longer a proxy at all) for value funds and they come with other problems and risks one probably does not want to take on. For example, Larry Swedroe discusses in these articles:

http://www.etf.com/sections/features/22 ... tegy-.html
http://www.etf.com/sections/index-inves ... -dividends

One of the problems, apparently, with the high dividend yield strategy is that these stocks have become so popular it has driven up their prices making them overvalued, not undervalued, as one would hope to find in a value fund. So the expected returns on high dividend yield funds are not only lower than for value funds, but lower than plain old blend funds (total market, S&P, etc.).

I think if one wants to do value tilting, one should use value funds. If one doesn't like Vanguard's funds in this area and does not want to go outside of Vanguard, then just stick to a simpler investing strategy, rather than pursue investing trends and fads that don't have a good basis in research and analysis.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by spdoublebass » Fri Jun 23, 2017 3:15 am

cb474 wrote:
Jiu Jitsu Fighter wrote:You could theoretically do this now with Vanguard index funds if you consider VIHAX (International High Yield) as a proxy for ILV. So, you could go 25 VTSAX (LC) / 25 VSIAX (SCV) / 25 VIHAX (ILV) / 25 VFSVX (IS). If they would ever get rid of that ridiculous purchase fee (load) of 25 bps for VIHAX, someone could consider that portfolio or substitute the VYMI ETF for the MF.
Why not just use VTRIX, since it actually is an international large value fund (no proxy necessary)? That's what Trev H (OP) said he uses years ago when he was still posting to this thread.
VYMI (Vihax) has lower ER, more stocks, and more of a value tilt then Vtrix. The issue with VYMI is the volume though....
I don't own either. But I follow VYMI cause I think it could one day be good. The ETF doesn't have the added cost.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by cb474 » Fri Jun 23, 2017 3:43 am

spdoublebass wrote:
cb474 wrote:
Jiu Jitsu Fighter wrote:You could theoretically do this now with Vanguard index funds if you consider VIHAX (International High Yield) as a proxy for ILV. So, you could go 25 VTSAX (LC) / 25 VSIAX (SCV) / 25 VIHAX (ILV) / 25 VFSVX (IS). If they would ever get rid of that ridiculous purchase fee (load) of 25 bps for VIHAX, someone could consider that portfolio or substitute the VYMI ETF for the MF.
Why not just use VTRIX, since it actually is an international large value fund (no proxy necessary)? That's what Trev H (OP) said he uses years ago when he was still posting to this thread.
VYMI (Vihax) has lower ER, more stocks, and more of a value tilt then Vtrix. The issue with VYMI is the volume though....
I don't own either. But I follow VYMI cause I think it could one day be good. The ETF doesn't have the added cost.
I was in the middle of editing my post when you responded, so I comment there on the dubiousness of using a high dividend yield fund as a proxy for a value tilt (in may in fact get you the opposite of what you're looking for--Morngingstar instant x-ray "value" analysis notwithstanding). Look at my edits to my previous post for more comments and links on this.

If you really want a value tilted international large fund, use EFV, which is what Swedroe and the other most knowledgeable forum members on this subject have long recommended. If you can't stand going outside Vanguard (even though it is extremely easy through the Vanguard brokerage account) then, well, maybe such a person is not very seriously committed to the idea of value tilting to begin with and, as I say, should just stick to simpler strategies (or get at least a little value tilt with VTRIX). You can also just increase you VTRIX and sv holdings. You don't have to go 25/25/25/25. You can do 15 VTSAX/35 VSIAX/35 VTRIX/15 VFSVX. Now you've got more value, but still 50/50 us/international and 50/50 large/small.

But I think VYMI is not a good idea for the reasons stated in the edits to my previous post. Just because Vanguard does not have all the funds one might hope for does not mean tipping ones head and squinting ones eyes to try to make a fund look like something it's not is a good idea. So I think choose between the real value funds and make it work or, again, just do something simpler, you'll almost certainly be better off.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by spdoublebass » Fri Jun 23, 2017 3:53 am

Cb474 I agree 100%. I was just pointing out that it's the volume that makes me not want VYMI.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by cb474 » Fri Jun 23, 2017 4:04 am

Yeah, the volume is always low on new Vanguard funds. Sometimes it eventually picks up, others not.

But even if the volume was good, I wouldn't want it. I think the arguments for high dividend yield funds don't hold much water and probably are worse for one's portfolio than just sticking with total market.

I'm disappointed to see Vanguard adding funds that just follow current investing fads, even when they are not a good idea (while not for example having better value funds, which have a lot of evidence to back them up). I thought the whole point of Vanguard was not to offer funds with dubious justifications. But maybe they just feel like they would lose customers if they didn't do some of these things.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Earl Lemongrab » Fri Jun 23, 2017 10:11 am

I also use EFV (iShares). While its ER is relatively high for an ETF at .40, that's still slightly lower than VTRIX. I like the flexibility of ETFs and I can always get them with no transaction cost somewhere in my portfolio.
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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by Jiu Jitsu Fighter » Fri Jun 23, 2017 1:19 pm

cb474 wrote:
Jiu Jitsu Fighter wrote:You could theoretically do this now with Vanguard index funds if you consider VIHAX (International High Yield) as a proxy for ILV. So, you could go 25 VTSAX (LC) / 25 VSIAX (SCV) / 25 VIHAX (ILV) / 25 VFSVX (IS). If they would ever get rid of that ridiculous purchase fee (load) of 25 bps for VIHAX, someone could consider that portfolio or substitute the VYMI ETF for the MF.
Why not just use VTRIX, since it actually is an international large value fund (no proxy necessary)? That's what Trev H (OP) said he uses years ago when he was still posting to this thread.

Also, I think may people have discussed the ways in which high dividend yield funds are not a good proxy (possibly no longer a proxy at all) for value funds and they come with other problems and risks one probably does not want to take on. For example, Larry Swedroe discusses in these articles:

http://www.etf.com/sections/features/22 ... tegy-.html
http://www.etf.com/sections/index-inves ... -dividends

One of the problems, apparently, with the high dividend yield strategy is that these stocks have become so popular it has driven up their prices making them overvalued, not undervalued, as one would hope to find in a value fund. So the expected returns on high dividend yield funds are not only lower than for value funds, but lower than plain old blend funds (total market, S&P, etc.).

I think if one wants to do value tilting, one should use value funds. If one doesn't like Vanguard's funds in this area and does not want to go outside of Vanguard, then just stick to a simpler investing strategy, rather than pursue investing trends and fads that don't have a good basis in research and analysis.
First of all, VTRIX isn't really a value fund, at least in the academic sense (although the name suggests otherwise). It is more of a international large-cap core actively managed fund.

Second, I agree that there are much better metrics to use to get value exposure than dividends such as price-to-book, price-to-value, price-to sales, etc... , and, although in the US, many more companies are opting to not pay dividends in lieu of stock buybacks which limits the universe of stocks to pick from, international companies are much more likely to pay dividends. An international strategy will definitely give you a value tilt without the expense of excluding too many stocks as the same strategy would in the US.

Third, the argument that the recent dividend chasing strategy due to low yields is valid, although, it's a self-defeating proposal. As money pours into dividend stocks, the prices increase, thus lowering the stock's yield which may ultimately exclude it from the fund.

For those who prefer EFV, that is a perfectly good fund (albeit a relatively high ER .40), but it includes developed markets only. VIHAX / VYMI include emerging markets as well.

This OP topic relates to using the fewest funds to get a global exposure with half value / half small, so I think the VTSAX/VSIAX/VIHAX/VFSVX portfolio, while certainly not perfect, gets you the exposure that you are looking for with four funds.

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Re: Ultimate Buy and Hold - 8 slices vs 4

Post by robertmcd » Fri Jun 23, 2017 1:43 pm

Just as an FYI about EFV's supposedly high ER, I have heard that it makes quite a bit from securities lending revenue, even though ishares only gives back 75% to fund holders. Someone else can chime in about the true cost after securities lending.

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