Need help building portfolio

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Topic Author
boglelord
Posts: 20
Joined: Sun Mar 01, 2020 9:31 am

Need help building portfolio

Post by boglelord » Thu Mar 26, 2020 6:33 am

Can somebody help me build a portfolio consisting of
1) s&p 500
2) US large cap value
3) US small cap blend
4) US small cap value

Preferably vanguard ETF’s. Thanks in advance!

theorist
Posts: 364
Joined: Sat Sep 28, 2019 11:39 am

Re: Need help building portfolio

Post by theorist » Thu Mar 26, 2020 6:42 am

Those would be VOO, VTV, VB, and VBR respectively. A good holding pattern for a * mild * small and value tilt might be 60%, 20%, 10%, 10%. You’d probably want some bonds too, depending on your risk tolerance and need to take risk. The tilt away from growth isn’t uncommon here, but note that we have lived in an era of growth outperformance for some years now.

Paul Merriman’s four fund portfolio would put your equity allocation at 25% in each. It is too tilted for me, but he justifies it with backtesting — as described many times in his podcast...

Good luck!

Topic Author
boglelord
Posts: 20
Joined: Sun Mar 01, 2020 9:31 am

Re: Need help building portfolio

Post by boglelord » Fri Mar 27, 2020 8:13 am

Thank you so much!

Alex GR
Posts: 137
Joined: Mon Jul 31, 2017 9:17 am

Re: Need help building portfolio

Post by Alex GR » Fri Mar 27, 2020 8:23 am

theorist wrote:
Thu Mar 26, 2020 6:42 am
Those would be VOO, VTV, VB, and VBR respectively. A good holding pattern for a * mild * small and value tilt might be 60%, 20%, 10%, 10%. You’d probably want some bonds too, depending on your risk tolerance and need to take risk. The tilt away from growth isn’t uncommon here, but note that we have lived in an era of growth outperformance for some years now.

Paul Merriman’s four fund portfolio would put your equity allocation at 25% in each. It is too tilted for me, but he justifies it with backtesting — as described many times in his podcast...

Good luck!
Hi theorist,
Is VTV really necessary if you have VOO? Both large cap. Why not just hold more VOO?
What about VOE (mid-cap)?
What would be the optimal amount of VBR (small cap value) for a 60/40 portfolio?
For example: 40% VOO, 10% VBR, 10% Intl', the rest in bonds.
Or... 30% VOO, 10% VOE, 10% VBR, 10% Intl', the rest in bonds.

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LadyGeek
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Re: Need help building portfolio

Post by LadyGeek » Fri Mar 27, 2020 8:32 am

New member Tru3 has a question which I've moved to a new thread. See: [What is the difference between Small-Cap Blend and Value?]
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chevca
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Joined: Wed Jul 26, 2017 11:22 am

Re: Need help building portfolio

Post by chevca » Fri Mar 27, 2020 8:46 am

Building, as in just starting out? Go with the S&P 500 fund and call it good.

theorist
Posts: 364
Joined: Sat Sep 28, 2019 11:39 am

Re: Need help building portfolio

Post by theorist » Fri Mar 27, 2020 12:49 pm

Alex GR wrote:
Fri Mar 27, 2020 8:23 am
theorist wrote:
Thu Mar 26, 2020 6:42 am
Those would be VOO, VTV, VB, and VBR respectively. A good holding pattern for a * mild * small and value tilt might be 60%, 20%, 10%, 10%. You’d probably want some bonds too, depending on your risk tolerance and need to take risk. The tilt away from growth isn’t uncommon here, but note that we have lived in an era of growth outperformance for some years now.

Paul Merriman’s four fund portfolio would put your equity allocation at 25% in each. It is too tilted for me, but he justifies it with backtesting — as described many times in his podcast...

Good luck!
Hi theorist,
Is VTV really necessary if you have VOO? Both large cap. Why not just hold more VOO?
What about VOE (mid-cap)?
What would be the optimal amount of VBR (small cap value) for a 60/40 portfolio?
For example: 40% VOO, 10% VBR, 10% Intl', the rest in bonds.
Or... 30% VOO, 10% VOE, 10% VBR, 10% Intl', the rest in bonds.
Hi Alex,

I was just working with the funds mentioned by OP — I was guessing he was inspired by e.g. Merriman to hold blends + value funds, and wanted to tilt to both small and value. Then my recommendation was to tilt less (psychologically easier than being way tilted to value and small in times of underperformance),

If I were to build a portfolio myself, as I have in my taxable (my retirement accounts are largely in a 2035 Target date fund), I do the following:

70% in equities: this is 60% large cap, 20% mid cap, 20% small cap, with slight value tilts; and is 70% domestic, 30% foreign.

My slight value tilts are that I have twice as much in small value as small blend, and my large cap is a few percent over in value (using the mutual fund analogue of VTV) and a few percent under in growth.

30% in bonds

I’m 49 and (at least going into the current mess!) we had accumulated about 25 years or more of expenses, but have stable jobs we love and intend to work for many more years. That informs the slightly aggressive (but by no means extreme, compared to others here!) portfolio choices I’ve made for someone knocking on 50 years of age.

I feel the portfolio is too aggressive half the time, and too conservative half the time. So it is about right for me. Notably during the drawdown so far I’ve been itching to add more equities, which has me happy that the AA isn’t way off. (Hopefully I find myself in the same place if we have another 30% plunge 👿.)

Alex GR
Posts: 137
Joined: Mon Jul 31, 2017 9:17 am

Re: Need help building portfolio

Post by Alex GR » Fri Mar 27, 2020 3:22 pm

theorist wrote:
Fri Mar 27, 2020 12:49 pm
Alex GR wrote:
Fri Mar 27, 2020 8:23 am
theorist wrote:
Thu Mar 26, 2020 6:42 am
Those would be VOO, VTV, VB, and VBR respectively. A good holding pattern for a * mild * small and value tilt might be 60%, 20%, 10%, 10%. You’d probably want some bonds too, depending on your risk tolerance and need to take risk. The tilt away from growth isn’t uncommon here, but note that we have lived in an era of growth outperformance for some years now.

Paul Merriman’s four fund portfolio would put your equity allocation at 25% in each. It is too tilted for me, but he justifies it with backtesting — as described many times in his podcast...

Good luck!
Hi theorist,
Is VTV really necessary if you have VOO? Both large cap. Why not just hold more VOO?
What about VOE (mid-cap)?
What would be the optimal amount of VBR (small cap value) for a 60/40 portfolio?
For example: 40% VOO, 10% VBR, 10% Intl', the rest in bonds.
Or... 30% VOO, 10% VOE, 10% VBR, 10% Intl', the rest in bonds.
Hi Alex,

I was just working with the funds mentioned by OP — I was guessing he was inspired by e.g. Merriman to hold blends + value funds, and wanted to tilt to both small and value. Then my recommendation was to tilt less (psychologically easier than being way tilted to value and small in times of underperformance),

If I were to build a portfolio myself, as I have in my taxable (my retirement accounts are largely in a 2035 Target date fund), I do the following:

70% in equities: this is 60% large cap, 20% mid cap, 20% small cap, with slight value tilts; and is 70% domestic, 30% foreign.

My slight value tilts are that I have twice as much in small value as small blend, and my large cap is a few percent over in value (using the mutual fund analogue of VTV) and a few percent under in growth.

30% in bonds

I’m 49 and (at least going into the current mess!) we had accumulated about 25 years or more of expenses, but have stable jobs we love and intend to work for many more years. That informs the slightly aggressive (but by no means extreme, compared to others here!) portfolio choices I’ve made for someone knocking on 50 years of age.

I feel the portfolio is too aggressive half the time, and too conservative half the time. So it is about right for me. Notably during the drawdown so far I’ve been itching to add more equities, which has me happy that the AA isn’t way off. (Hopefully I find myself in the same place if we have another 30% plunge 👿.)
Theorist,
Thank you very much for the detailed explanation.
It sounds similar to what I have:
VOO 33%
VOE 4%
VBR 6%
POGRX 5% (thought of getting rid of this but turns out this has a lot of healthcare which I like)
VXUS 10%
VWO 2%
(yeah, I know, a bit overcooked)
Just to clarify, these percentages are of total portfolio, not equity portion.
The rest (40%) in bonds.
I also had 70/30 before the crash, although now I am at ~60/40 and can't force myself to rebalance.
I was thinking of switching from VOO+VOE+VBR to just VTI. Or perhaps VTI+VBR.
OTOH, I read that VOO actually does better than VTI over time, so I am not sure.
I don't really know how to do the analysis and backtest which combination performs better. Sounds like you do, so I decided to ask you :beer
Thanks!

theorist
Posts: 364
Joined: Sat Sep 28, 2019 11:39 am

Re: Need help building portfolio

Post by theorist » Fri Mar 27, 2020 3:32 pm

Hi Alex,

Ah! Well, to back test portfolios I’d go here

https://www.portfoliovisualizer.com/

and click on the “backtest portfolio” link. It lets you enter fund tickers and look at hypothetical performances for different portfolios over various periods in the past.

If you don’t like doing this, any number of podcasts take you through such analyses with simple (but sometimes extreme) portfolios. For instance Paul Merriman does this with portfolios heavy on small cap value, or equally weighed between large blend and value and small blend and value.

Good luck!

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