Rick Ferri has (once again?) made his own portfolio public.
One quick caveat before we share that: he says what’s more important than the exact funds you use, assuming you’re in globally diversified low-cost index funds and not expensive actively managed funds, is the asset allocation. “Let’s think of it as baking a cake. The cake is 80 percent equity and 20 percent fixed-income. Those are the two ingredients,” he said. “How you get to that allocation and what the funds are doesn’t matter very much. It’s the icing on the cake.”
34% Vanguard Total Stock Market ETF (VTI)
10% S&P SmallCap 600 Value Index Fund (IJS)
5% Ultra-Small Company Market (BRSIX)
8% Vanguard REIT ETF (VNQ)
7% Vanguard Pacific ETF (VPL)
7% Vanguard European ETF (VGK)
5% DFA International Small Cap Value
5% DFA Emerging Markets Core (Vanguard Emerging Markets ETF would do)
12% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
4% Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX)
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
(Yeah, that's 101%. Must be some rounding in there.)
That was an interesting conversation with the NY Times journalist. She was very thorough.
7% Vanguard Pacific ETF (VPL)
7% Vanguard European ETF (VGK)
Should be:
6.5% Vanguard Pacific ETF (VPL)
6.5% Vanguard European ETF (VGK)
That's the extra 1%. I guess they don't do fractions.
Rick Ferri
BTW, I also own about $3k in BRKB to get that personal invitation from Warren Buffett to visit him in Omaha each year, along with 40,000 of his other friends.
Great to see the personal selections of someone with recognized expertise in the area....
The asset allocations are very well explained. As for the asset locations, is it safe to surmise the REIT ETF and the three bond funds are in tax-deferred accounts? (or is this just another of my usually dumb questions?)
Shawcroft
shawcroft wrote:is it safe to surmise the REIT ETF and the three bond funds are in tax-deferred accounts? (or is this just another of my usually dumb questions?)
Not a dumb question. It's this way because of what you say: Taxes!
SSSS wrote:Oddly enough, that's almost the same as my asset allocation. I stole it from a book called All About Asset Allocation. What are the odds?
The book had a foreign bond allocation, though... wonder what happened to that?
The second edition of the book doesn't have foreign bond allocation--unless I missed it. It's also same portfolio from his 2008 ETF book except US Small Cap Value and US Micro Cap have been added.
If I may ask a question of Mr. Ferri--you say, "“Let’s think of it as baking a cake. The cake is 80 percent equity and 20 percent fixed-income. Those are the two ingredients,” he said. “How you get to that allocation and what the funds are doesn’t matter very much. It’s the icing on the cake.” Does it also follow that let's say 6% in VPL (vs your 7%) and 6% in DFA Emerg Mkts Core vs 5% in yours-- or any other subcategory %--doesn't matter very much? Once one decides the ratio between equity/fixed-- how important are the sub-categories?
Thanks...I've read both the first and second editions of your book on Asset Allocation and guessed that would be the strategy. (Being Scottish by ancestry, I "gifted" my copy of the first edition to a nascent Boglehead once I had received the second edition. He enjoyed it and proceeded to "dump" his Edward Jones Advisor once he finished the book)
Still, I suspect there are only a few truly dumb questions. Being absolutely certain of what location is best to place an asset is fundamental to both economic survival and, more importantly, avoiding a diet of Alpo in one's "golden years" (Arf!!)
Thanks for your response.
Shawcroft
I'm amazed at how similar this is to my portfolio. I also use VTI, IJS, BRSIX, and VNQ in similar proportions. The main difference is that I get my international exposure from VEA.
Rick
This is a first for a pro to reveal what they do with their money. The bookstores are full of investment books IMO, all in the abstract.
This is a first!
Steve
Never in the history of market day-traders’ has the obsession with so much massive, sophisticated, & powerful statistical machinery used by the brightest people on earth with such useless results.
Thats quite a tilt towards small value, you must have strong beliefs in the SCV tilt.
Is this a floating belief or are you pretty much a B&H with this AA? Meaning, you can be a Boglehead style investor but that does not mean you never change tilts or styles. Yes you could call that market timing if you want, but market timing doesn't have to mean you make multiple adjustments in a year.
petrico wrote:Rick Ferri has (once again?) made his own portfolio public.
One quick caveat before we share that: he says what’s more important than the exact funds you use, assuming you’re in globally diversified low-cost index funds and not expensive actively managed funds, is the asset allocation. “Let’s think of it as baking a cake. The cake is 80 percent equity and 20 percent fixed-income. Those are the two ingredients,” he said. “How you get to that allocation and what the funds are doesn’t matter very much. It’s the icing on the cake.”
34% Vanguard Total Stock Market ETF (VTI)
10% S&P SmallCap 600 Value Index Fund (IJS)
5% Ultra-Small Company Market (BRSIX)
8% Vanguard REIT ETF (VNQ)
7% Vanguard Pacific ETF (VPL)
7% Vanguard European ETF (VGK)
5% DFA International Small Cap Value
5% DFA Emerging Markets Core (Vanguard Emerging Markets ETF would do)
12% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
4% Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX)
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
(Yeah, that's 101%. Must be some rounding in there.)
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." |
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--Jason Zweig, quoted in The Bogleheads' Guide to Investing
Thats quite a tilt toward small value, you must have strong beliefs in the SCV tilt.
To the contrary. I'm not counting on a SCV tilt to make or break my retirement account. While the tilts are there, my belief is that I shouldn't do any worse with them in relation to the TSM. If I do better, that's icing on the cake.
42.50% Vanguard Total Stock Market ETF (VTI)
12.50% iShares S&P SmallCap 600 Value Index Fund (IJS)
6.25% Bridgeway Ultra-Small Company Market (BRSIX)
10.00% Vanguard REIT ETF (VNQ)
8.125% Vanguard Pacific ETF (VPL)
8.125% Vanguard European ETF (VGK)
6.250% DFA International Small Cap Value (DISVX)
6.250% DFA Emerging Markets Core (DFEMX)
Yields these results:
18 18 17
07 07 04
11 11 06
72% No. America
12% UK/West. Europe
7% Japan
2% Latin America
8% Asia ex-Japan
1% other
Yield: 2.24%
Avg. Market Cap: $8,062 mil Avg. ER: 0.23%
I forget, how old is Rick? I was thinking he was close to my age (60) so I am surprised by the 80% in stocks. Also, I am wondering, but too polite to ask, how rich is Rick? Is he 80% stocks because he is so rich he can afford to gamble, or 80% stocks because he needs a high rate of return, or 80% stocks because he is younger than I thought?
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The most important thing you should know about me is that I am not an expert.
tc101 wrote:I forget, how old is Rick? I was thinking he was close to my age (60) so I am surprised by the 80% in stocks. Also, I am wondering, but too polite to ask, how rich is Rick? Is he 80% stocks because he is so rich he can afford to gamble, or 80% stocks because he needs a high rate of return, or 80% stocks because he is younger than I thought?
Probably better to let Rick speak for himself, but this was in the article:
Meanwhile, since he has a pension and defined-benefit plans from former employers and thus can handle some risk, he’s more aggressive when it comes to his own retirement savings.
(Might not get a very detailed response on at least one of your questions.)
Thats quite a tilt toward small value, you must have strong beliefs in the SCV tilt.
To the contrary. I'm not counting on a SCV tilt to make or break my retirement account. While the tilts are there, my belief is that I shouldn't do any worse with them in relation to the TSM. If I do better, that's icing on the cake.
Rick Ferri
So a weak belief in EMH, then? As in small cap value is riskier (but not really).
34% Vanguard Total Stock Market ETF (VTI)
10% S&P SmallCap 600 Value Index Fund (IJS)
5% Ultra-Small Company Market (BRSIX)
8% Vanguard REIT ETF (VNQ)
7% Vanguard Pacific ETF (VPL)
7% Vanguard European ETF (VGK)
5% DFA International Small Cap Value
5% DFA Emerging Markets Core (Vanguard Emerging Markets ETF would do)
12% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)
4% Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX)
4% Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
(Yeah, that's 101%. Must be some rounding in there.)
Rick seems to be pretty broke for an author and world-renowned financial advisor... You only need $100,000 to qualify for Total Bond Market Admiral shares, yet 12% of his portfolio isn't enough to qualify...
(Just kidding, I'm sure he has the Admiral shares, but listed it as VBMFX anyway)
rrosenkoetter wrote:
Rick seems to be pretty broke for an author and world-renowned financial advisor...
Well authors don't generally make very much unless they have a string of bestsellers and the type of financial advising he does doesn't seem to lend itself to stockpiling huge sums of cash.
rrosenkoetter wrote:Rick seems to be pretty broke for an author and world-renowned financial advisor...Just kidding
Well, I wouldn't call it broke, but for many years after starting Portfolio Solutions in 1999 I was probably the lowest paid author and world-renowned financial advisor in existence. How much money do you think I earned over the years by charging 0.25% to manage money? And remember that I spent the first 8 years out of college serving in the Marines. It's only been a few years since my firm has grown to the point when I've been able to enjoy higher standard of living. These were my choices, of course. I could have gone to work for Wall Street right out of college, and then probably started a hedge fund that has 2% + 20% in fees. But I didn't go that direction, and have no regrets.
Rick Ferri
BTW, I'm 52, married for 27 years, we've already put our three children through college and they all have full time jobs!, and my financial goals are to be debt free by age 62 and to save enough money so that we can live comfortably in retirement (which isn't that much because we'll have a military pension and other pension income, plus whatever comes in from Social Security). So there you go!
rrosenkoetter wrote:Rick seems to be pretty broke for an author and world-renowned financial advisor... You only need $100,000 to qualify for Total Bond Market Admiral shares, yet 12% of his portfolio isn't enough to qualify...
(Just kidding, I'm sure he has the Admiral shares, but listed it as VBMFX anyway)
For $100,000 to be 12%, he'd have to have over $800,000...that's quite a standard for being considered "pretty broke". I guess I'm destitute and probably should switch to eating cat food by the standards around here.
Someone asked about 'age in bonds'. That's not a rule of thumb that I adhere to because everyone has their own situation. It's fine for younger people who tend to have similar financial situations, but it doesn't work as well for those of use who are older. We all need to do more thinking about asset allocation based security of employment, other retirement income sources, family situation, tolerance and understanding about market risk, and a host of other issues.
Rick is very modest and truly one of the good guys.
All the royalties I earn from the sale of books is donated to the Wounded Heroes Fund. This non-profit organization helps wounded war veterans and their families. The person who is co-chair of the fund is a highly decorated Gulf War veteran who I served with in the Marines. Every dollar donated to Wounded Heroes Fund goes to directly to assist those who sacrificed so much to protect our freedoms and way of life.
edit: link added
Last edited by SteveB3005 on Tue Aug 10, 2010 9:58 am, edited 1 time in total.
SteveB3005 wrote:Rick is very modest and truly one of the good guys.
Yes indeed! Thanks Rick, and people like yourself in this community, for all that you do and all that you share. Sorry you guys don't get paid more for it, but you've earned my respect.
Rick Ferri wrote:That was an interesting conversation with the NY Times journalist. She was very thorough.
7% Vanguard Pacific ETF (VPL)
7% Vanguard European ETF (VGK)
Should be:
6.5% Vanguard Pacific ETF (VPL)
6.5% Vanguard European ETF (VGK)
That's the extra 1%. I guess they don't do fractions.
Rick Ferri
BTW, I also own about $3k in BRKB to get that personal invitation from Warren Buffett to visit him in Omaha each year, along with 40,000 of his other friends.
I remembered you mentioning a while back that you had a higher commitment to high yield bonds. I thought you said 30% of your bond portfolio, but I may be wrong.
Thats quite a tilt toward small value, you must have strong beliefs in the SCV tilt.
To the contrary. I'm not counting on a SCV tilt to make or break my retirement account. While the tilts are there, my belief is that I shouldn't do any worse with them in relation to the TSM. If I do better, that's icing on the cake.
Rick Ferri
Rick, could you elaborate a little bit more on this? If you don't need the expected return from SCV, why do you take the risk? Thanks for being such a great example for all of us!
42.50% Vanguard Total Stock Market ETF (VTI)
12.50% iShares S&P SmallCap 600 Value Index Fund (IJS)
6.25% Bridgeway Ultra-Small Company Market (BRSIX)
10.00% Vanguard REIT ETF (VNQ)
8.125% Vanguard Pacific ETF (VPL)
8.125% Vanguard European ETF (VGK)
6.250% DFA International Small Cap Value (DISVX)
6.250% DFA Emerging Markets Core (DFEMX)
Yields these results:
18 18 17
07 07 04
11 11 06
72% No. America
12% UK/West. Europe
7% Japan
2% Latin America
8% Asia ex-Japan
1% other
Yield: 2.24%
Avg. Market Cap: $8,062 mil Avg. ER: 0.23%
8)
--Pete
Just checked mine as a comparison
11 12 08
16 12 05
15 13 08
U.S. & Canada 48.93
Europe 19.32
Japan 7.96
Latin America 2.00
Pacific Rim 11.93
Other 2.37
Not Classified 7.49
Mkt Cap: 4,025.72
Yield: 2.02
P/B: 1.38
Rick, that's quite a big bet on North America in your allocation...
Rick is truly one of the "good guys." I'll tell a story to illustrate.
Prior to our Bogleheads Reunion in Chicago in 2002, Rick came to me and offered to sit on our "Panel of Experts." Although Rick probably had more experience and knew more about investing than anyone on the panel (except Jack Bogle), we had no more room on the panel and he was regretfully declined.
Despite the rebuke, Rick paid his registration and came anyway, quietly sitting in the back of the room (unlike other experts who were offended when we turned them down).
This generous, humble, former Marine fighter pilot and 10-year Wall Street stock broker, is now one of our most valuable experts on the Panel.
Thank you, Rick Ferri.
"Simplicity is the master key to financial success." -- Jack Bogle
Rick Ferri wrote:And remember that I spent the first 8 years out of college serving in the Marines. It's only been a few years since my firm has grown to the point when I've been able to enjoy higher standard of living. These were my choices, of course. I could have gone to work for Wall Street right out of college, and then probably started a hedge fund that has 2% + 20% in fees. But I didn't go that direction, and have no regrets.
Congratulations on your career choices. Perhaps the priceless part of it is that you have the freedom of being your own boss.
SSSS wrote:Oddly enough, that's almost the same as my asset allocation. I stole it from a book called All About Asset Allocation. What are the odds?
The book had a foreign bond allocation, though... wonder what happened to that?
The second edition of the book doesn't have foreign bond allocation--unless I missed it.
Well dang - there's a second edition? I bought the book only a few months ago and now discover it is (partially) obsolete. Well, I am not buying it again, so what is the deal on Emerging Market Bonds? I have created an AA after reading the book and started putting in place asset movements just yesterday. I was about to start buying PCY to get some EM bonds. Is that out of favor now?
amarone wrote:Well dang - there's a second edition? I bought the book only a few months ago and now discover it is (partially) obsolete. Well, I am not buying it again, so what is the deal on Emerging Market Bonds? I have created an AA after reading the book and started putting in place asset movements just yesterday. I was about to start buying PCY to get some EM bonds. Is that out of favor now?
I'd guess that changing investments based on what's in or out of favor would probably be a really bad idea.
I just compared the editions side-by-side (received my 2nd Edition today). In the Early Saver slice & dice portfolio, Total Bond was increased from 10% to 20% by dropping the 5% foreign bond entirely & reducing the high-yield bond from 10% to 5%.
The relevant section of the book is also more pessimistic than before, citing high expense ratios as the major negative. Which is valid; 0.5% for PCY and 0.6% for EMB, not terrible but higher than most index ETFs... any good, cheaper options out there? The second edition book lists EMB and IGOV (foreign but not emerging market, 0.35%) as good choices for the asset class even though the class isn't included in the sample portfolios.
This generous, humble, former Marine fighter pilot and 10-year Wall Street stock broker, is now one of our most valuable experts on the Panel.
Thank you, Rick Ferri.
I could sense how Rick is a good guy. I am constantly impressed how people take the time to answer my very basic questions. However, even though I am new I did get the impression that Rick is a legend and very respected in this fourm. I was very impressed that he took the time to answer a question of mine and he did it in a way that was basic and humble. Truly the heart of a teacher. I did feel a little intimated, but I was still impressed. The personal finance field needs more guys like Rick.
amarone wrote:Well dang - there's a second edition? I bought the book only a few months ago and now discover it is (partially) obsolete. Well, I am not buying it again, so what is the deal on Emerging Market Bonds? I have created an AA after reading the book and started putting in place asset movements just yesterday. I was about to start buying PCY to get some EM bonds. Is that out of favor now?
I'd guess that changing investments based on what's in or out of favor would probably be a really bad idea.
I just compared the editions side-by-side (received my 2nd Edition today). In the Early Saver slice & dice portfolio, Total Bond was increased from 10% to 20% by dropping the 5% foreign bond entirely & reducing the high-yield bond from 10% to 5%.
The relevant section of the book is also more pessimistic than before, citing high expense ratios as the major negative. Which is valid; 0.5% for PCY and 0.6% for EMB, not terrible but higher than most index ETFs... any good, cheaper options out there? The second edition book lists EMB and IGOV (foreign but not emerging market, 0.35%) as good choices for the asset class even though the class isn't included in the sample portfolios.
The first edition specifically mentioned Emerging Market bonds, not foreign bonds. PCY is the cheapest I have found.
The only asset class that changed between the 1st and 2nd edition of All About Asset Allocation is EM bonds. When I wrote the 1st edition, EM bond spreads were about 700 bps over US Treasuries, and that was compelling to me. By the time I wrote the 2nd edition, EM bonds had railed to about 250 bps over Treasuries. That's just not enough to justify the higher costs of EM bond funds. These are only BB rated securities, after all. All of this is explained in the 2nd edition.
Rick Ferri
PS. About the "priceless part of it is that you have the freedom of being your own boss", this has advantages and disadvantages. The advantage is never having to worry about being laid off, the disadvantage is having to worry about everything else the goes along with running a business. And THAT isn't getting any easier or cheaper these days!
Rick Ferri wrote:The only asset class that changed between the 1st and 2nd edition of All About Asset Allocation is EM bonds. When I wrote the 1st edition, EM bond spreads were about 700 bps over US Treasuries, and that was compelling to me. By the time I wrote the 2nd edition, EM bonds had railed to about 250 bps over Treasuries. That's just not enough to justify the higher costs of EM bond funds. These are only BB rated securities, after all. All of this is explained in the 2nd edition.