By Dr. Jim Dahle, WCI Founder
[Update for 2020: This post originally ran in January 2014. Since then it has been one of the most popular posts on the blog (2nd actually, just behind The Backdoor Roth IRA Tutorial and ahead of a Whole Life Insurance Post). There were really two points to writing the post:
- To help new investors realize there is no perfect portfolio and that the best one can only be known in retrospect. Therefore they should pick something reasonable and stick with it.
- As a bit of a rebuke to three-fund portfolio fanatics. Since that time the three-fund portfolio has only become even more popular, thanks in part to Taylor Larimore's book and in part to outperformance since 2009 of the large growth stocks that make up a large part of a total market index fund.
For this 2020 update, I went back and added a few comments to the various portfolios and added another 50. I'll leave the title the same (since lots of people search for “150 portfolios” to find the post, but now it is 200 Portfolios Better Than Yours! It is still just as relevant today as it was 6 years ago.]
Designing the Perfect Investment Portfolio
As investors move from their investment childhood through the teenage years, many of them seem to almost become fixated on designing the perfect investment portfolio. They've learned the importance of buy and hold, the importance of keeping costs low, and the importance of using passive investments over active ones. They learn about the efficient frontier and seek to get themselves onto it, not realizing it can only be defined in retrospect.
They start learning about various portfolios, and their pluses and minuses, and seem to be eternally seeking a better one. Even some investment advisors fall into this trap, designing their own portfolios, borrowing someone else's, or even paying to use someone else's models. Occasionally, I even see investment advisors try to keep their model portfolios secret, as though theirs are somehow magically better than anyone else's.
The truth is that no one knows which portfolio is going to outperform in the future. You can change all the factors you want—more or less diversification, additional risks/factors, lower costs vs additional risk or diversification, more of this and less of that. Does it matter? Absolutely. Take a look at Madsinger's Monthly Report some time, where a Bogleheads poster has been tracking the returns of a dozen balanced portfolios for the last decade. But it doesn't matter that much. No diversified portfolio in that report has done better than 1%-2% per year more than a similarly risky portfolio over the last 15 years. Now 1-2% does matter, especially over long periods of time, but keep in mind the edge that a very complex portfolio might provide over a very simple one can easily be eaten up by advisory fees, behavioral errors, and poor tax management.
Pick a Portfolio and Stick with It
I suggest you pick a portfolio you like and think you can stick with for a few decades, and then do so. Eventually, any given investment portfolio will have its day in the sun. Just don't continually change your portfolio in response to changes in the investment winds. This is the equivalent of driving while looking through the rearview mirror, or, as Dr. Bernstein likes to phrase it, skating to where the puck was.
Now don't get me wrong, I went through the process like everyone else. I designed my own portfolio (see Portfolios 150 and 200) to fit my own need, ability, and desire to take risk. I added some asset classes and left out others because I thought doing so would give me a higher long-term, risk-adjusted return. But I'm not cocky enough to think I've got the best portfolio out there. In fact, I'm positive mine isn't the very best one. Neither I nor anyone else knows what the very best portfolio is.
Investment Portfolio Examples
In that spirit, let's talk about some of the investment portfolios you can use (or modify for your own needs). These portfolios will often use Vanguard funds as my usual default, but similar low-cost portfolios can generally be made using Fidelity, Schwab, or iShares index mutual funds or ETFs.
Portfolio 1: The S&P 500 Portfolio
100% Vanguard S&P 500 Index Fund
Don't laugh. I know a very successful two-physician couple who invest in nothing but this, are 7 years out of residency, and have a net worth in the $1 Million-$2 Million range. [6 years later, I'm sure this couple is now financially independent as their plan has worked out spectacularly over those years.] Their investment plan is working fine. Every investment dollar, whether in a retirement account or a taxable account, goes into this single fund. It is simple, very low cost, diversified among 500 different companies, and has a long track record of exceptional returns.
Portfolio 2: Total Stock Market Portfolio
100% Vanguard Total Stock Market Index Fund
Perhaps one step up on the S&P 500 portfolio, for about the same cost you get another 5000+ stocks in the portfolio.
Portfolio 3: Total World Stock Market Portfolio
100% Vanguard Total World Index Fund
This 100% stock portfolio has the advantage of not only holding all the US Stocks like the Total Stock Market Portfolio but also holding all of the stocks in pretty much all the other countries in the world that matter. It is a little more expensive (and in fact, it is actually cheaper to build this fund yourself from its components), but it still weighs in at just 10 basis points.
Portfolios 4 and 5: Balanced Index Fund
100% Vanguard Balanced Index Fund
Prefer to diversify out of stocks? Actually want some bonds in the portfolio? How about this one? For 7 basis points you get all the stocks in the US and all the bonds in the US in a 60/40 balance. Still just one fund. If you're in a high tax bracket, you may prefer the Tax-Managed Balanced Fund, a 50/50 blend of US Stocks and Municipal bonds, all for just 9 basis points.
Portfolios 6-9: Life Strategy Moderate Growth Portfolio
100% Vanguard Life Strategy Moderate Growth Fund
There are tons of options out there, many of which are good. Pick a good one and stick with it.
For just 13 basis points, you get all the US (32%) and international (18%) stocks and all the US (42%) and international (8%) bonds wrapped up in a handy, fixed asset allocation. Want to be a little more (or a little less) aggressive? Then check out the “aggressive growth” (80/20), “conservative growth” (41/59) or “income” (30/70) version with a slightly different allocation of the same asset classes. Think it's silly to have a portfolio composed of just one fund of funds? Mike Piper doesn't.
Portfolios 10-21: Target Retirement 2030 Fund
100% Vanguard Target Retirement 2030 Fund
Don't like a static asset allocation? Don't want to have to make the decision of when to change from one Life Strategy Fund to the next? Consider a Target Retirement Fund where Vanguard makes that decision for you. For a cost of just 14 basis points, the 2030 Fund uses the same 4 funds that the Life Strategy funds use (in a 69/31 allocation) but gradually makes the asset allocation less aggressive as the years go by. The portfolios range from 90/10 (2045 and higher) to 30/70 (Income). 2020 and newer add a short-term TIPS fund to the mix.
Portfolios 22-25: The Two-Fund Portfolio
50% Vanguard Total Stock Market Fund
50% Vanguard Total Bond Market Fund
Perhaps you like the concept of a balanced index fund but would like to shave off a few basis points, or just be in control of the stock to bond ratio. For 4.5 basis points, you can build your own balanced index fund. Want all the stocks, not just US ones? For 7.5 basis points, you can substitute in Total World Index for Total Stock Market Index. For 13 basis points you could use Total World plus Intermediate-term tax-exempt fund, or if you want to stay domestic in a taxable account, TSM plus the muni fund for about 10.5 basis points. Paul Merriman has a simple “two funds for life” approach that offsets a conservative target-date fund with an all-equity fund. Lots of combinations.
Portfolio 26: The Three-Fund Portfolio
1/3 Vanguard Total Stock Market Fund
1/3 Vanguard Total International Stock Market Fund
1/3 Vanguard Total Bond Market Fund
A favorite among the Bogleheads, the Three Fund portfolio gives you Total World plus Total Bond for 0.03% less per year! Despite its popularity, you can see there is really nothing particularly special about this portfolio compared to the other 25 above it. It is broadly diversified and low-cost, although is heavily weighted in large-cap stocks, just like the overall US market.
Portfolio 27-35: Three-Fund Plus One
30% Vanguard Total Stock Market Fund
30% Vanguard Total International Stock Market Fund
10% Vanguard REIT Index Fund
30% Vanguard Total Bond Market Fund
Another popular portfolio for those who want “just a little tilt.” An investor convinced of the benefit of additional diversification (or less diversification, depending on how you look at it) can add a fund to the ever-popular Three Fund Portfolio. Some add the Vanguard REIT index fund for their intermittently low correlation with the overall stock market. Others add Vanguard Small Value Index Fund to try to capture the benefits of the Fama/French Small and Value factors. Still, others add a TIPS fund, an international bond fund, or a high-yield fund since these bonds aren't included in the Total Bond Market Fund. Other options include a microcap fund, a precious metal equities fund, a precious metals fund, or even a commodities futures fund. The possibilities are endless, especially once you start considering adding 2, 3, or even more of these asset classes to the portfolio. What will do best in the future? Nobody knows, we can only tell you what did well in the past.
Portfolio 36-37: Four Corners Portfolio
25% Vanguard Growth Index Fund
25% Vanguard Value Index Fund
25% Vanguard Small Growth Index Fund
25% Vanguard Small Value Index Fund
One of the first of the “slice and dice” type portfolios, this portfolio tried to capture some benefit from the fact that sometimes growth stocks outperform value stocks, and vice versa. Its detractors argued that you were just recreating TSM at higher cost (6 basis points versus 4). Another variation is to use Total Stock Market instead of Growth Index and Small Cap Index Fund instead of Small Growth Index. This allowed you to “tilt” to the Fama-French factors, while keeping costs down a bit (5 basis points). Obviously, you could mix this in with some international stock funds and bond funds until you get to something you like.
Portfolio 38: The Coffee House Portfolio
10% Vanguard 500 Index
10% Vanguard Value Index
10% Vanguard Small Cap Index
10% Vanguard Small Cap Value Index
10% Vanguard REIT Index
10% Vanguard Total International Index
40% Vanguard Total Bond Market Index
Popularized by investment author and financial advisor Bill Schultheis in The Coffeehouse Investor, this version of slice and dice is heavy on the REITs, is light on international stocks, and lacks diversity on the fixed income side. But it does weigh in at well under 10 basis points. You want someone to tell you what to do? Bill will do it. Follow his instructions and you'll be fine.
Portfolio 39-48: The Couch Potato Portfolio
50% Vanguard Total Stock Market Index Fund
50% Vanguard Inflation-Protected Securities Fund (TIPS)
Guess who else will tell you what do? Scott Burns will. He offers 9 portfolios, ranging from 2 funds to 10 funds. You just have to choose how much complexity you're willing to deal with for some additional diversification. If there are 5 funds, each fund makes up 1/5 of the portfolio and so forth. He likes TIPS, international bonds, and energy stocks. Given the returns of energy stocks over the last decade (1.6% a year as of January 2020), that idea hasn't aged well.
Portfolio 49-58: The Ultimate Buy and Hold Portfolio
6% Vanguard 500 Index Fund
6% Vanguard Value Index Fund
6% Vanguard Small Value Index Fund
6% Vanguard REIT Index Fund
6% Total International Stock Market Index Fund
6% Vanguard International Value Fund
6% Vanguard International Small Cap Index Fund
6% An International Small Cap Value Fund
6% Bridgeway Ultra-Small Market Fund
6% Vanguard Emerging Markets Index Fund
40% Vanguard Short (or intermediate) Term Bond Index Fund
Paul Merriman will also tell you what to do. 10 equity asset classes and 1 fixed income asset class. Will it work? Sure. Will it be a pain to rebalance and allocate across all your accounts? Absolutely. Will it beat some of the simpler options above over your investment horizon? No one knows. In case you don't like the “Ultimate” portfolio, Paul has three others that are equally complicated, ranging from 100% stocks in 9 assets classes to 40% stock in 12 asset classes.
Portfolio 59: The Talmud Portfolio
1/3 Vanguard Total Stock Market Index Fund
1/3 Vanguard REIT Index Fund
1/3 Vanguard Total Bond Market Index Fund
Apparently, the Talmud, a central text of Rabbinic Judaism, had some portfolio advice, “Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.” This is one author's low-cost vision of that ancient portfolio. A little REIT-heavy for my taste.
Portfolio 60: The Permanent Portfolio
25% Vanguard Total Stock Market Index Fund
25% Vanguard Long-term Treasury Fund
25% Gold ETF (GLD) or, better yet, gold bullion
25% Vanguard Prime Money Market Fund
Here's another popular portfolio, this one from Harry Browne. He felt you wanted a portfolio that would do well in prosperity (stocks), deflation (long treasuries), inflation (gold), and “tight money or recession” (cash). There are lots of variations. There is even a one-stop-shop mutual fund for 84 basis points that's been around since 1982 with 15-year average returns of a little over 6%. Not only did it lose money in 2008, it managed to do so in 2013 as well. Poor performance (4.8%) over the last decade while the US stock market has been roaring demonstrates its severe tracking error.
Portfolios 61-84: FPL Portfolios
12% US Large
12% US Value
12% US Targeted Value Stocks
6% International Value Stocks
6% Global REITs
3% International Small Value
3% International Small Stocks
1.8% Emerging Market Stocks
1.8% Emerging Markets Value Stocks
2.4% Emerging Market Small Stocks
10% One Year Government Fixed Income
10% Short Term Government Fixed Income
10% Two Year Global Fixed Income
10% Five Year Global Fixed Income
FPL, one of the sponsors of this blog, has a whole bunch of model portfolios, made up mostly of DFA funds. This one is 60% stock but there are 9 more ranging from 10% stocks to 100% stock. There are also other folios including 3 fixed income ones (made up from funds of DFA, PIMCO, and various ETFs), a low beta portfolio, and 10 equity portfolios (made up from funds of DFA, Wisdom Tree, and Vanguard). Many other DFA-authorized asset management firms have similar portfolios, many of which they consider proprietary because they're so awesome. A common theme among them is complexity and factor tilts.
Portfolios 85-108: The Sensible IRA Portfolio #4
33% US Stocks
15% International Stocks
6% Emerging Markets Stocks
6% REITs
40% Fixed Income
Darrell Armuth at Sensible Portfolios, who used to advertise with me, runs a financial advisory firm that uses DFA funds. He offers 6 portfolios suitable for IRAs, this is one of them. He also offers 6 more suitable for a taxable account, 6 environmentally friendly portfolios, and 6 “express portfolios” designed for smaller accounts for just $500 a year. Unfortunately, when I went to update this post, I found that these portfolios were no longer listed on the website. I guess you have to hire him now to get the secret sauce.
Portfolios 109-131: Sheltered Sam 60/40 Portfolio
12% Vanguard 500 Index Fund
15% Vanguard Value Index Fund
3% Vanguard Small Cap Index Fund
9% Vanguard Small Cap Value Index Fund
6% Vanguard REIT Index Fund
1.8% Vanguard Precious Metals Fund
3% Vanguard European Stock Index Fund
3% Vanguard Pacific Stock Index Fund
3% Vanguard Emerging Markets Index Fund
4.2% Vanguard International Value Fund
24% Vanguard Short-term Corporate Bond Fund
16% TIPS (he recommends you buy the 2032 ones yielding 3.375% real, good luck with that)
William Bernstein, MD, in his classic The Four Pillars of Investing, had four investors, Sheltered Sam, whose assets were all in IRAs and 401Ks, Taxable Ted, whose assets were not, In-Between Ida who was partially sheltered, and Young Yvonne who didn't have much at all. He listed out 11 portfolios for Ted and 11 for Sam, ranging from 0% stocks to 100% stock. He listed one more for Ida, and then showed how Yvonne could gradually grow into Sam's portfolio. I've just listed one of them. If you want to see the other 22, buy the book or check it out at the library.
Portfolio 132: The Aronson Family Taxable Portfolio
5% Vanguard Total Stock Market Index Fund
15% Vanguard 500 Index Fund
10% Vanguard Extended Market Index Fund
5% Vanguard Small Cap Growth Index Fund
5% Vanguard Small Cap Value Index Fund
5% Vanguard European Stock Index Fund
15% Vanguard Pacific Stock Index Fund
10% Vanguard Emerging Markets Index Fund
15% Vanguard Inflation-Protected Securities Fund (TIPS)
10% Vanguard Long-Term Treasury Fund
5% Vanguard High Yield Bond Fund
This is apparently how Ted Aronson (who manages $25 Billion) invests his family's taxable money. I'm not sure I understand the logic behind some of its components. That said, even it is held for a long period of time, I'm sure it will work just fine. As of January 2o20, it has 10-year returns of around 8.3%, which is 1.4% worse than Balanced Index fund (see portfolio 4).
Portfolio 133: The Warren Buffett Portfolio
100% Berkshire Hathaway Stock
Warren Buffett is admired by all as a great investor. You can have him manage your money if you'd like, and all you have to do is buy a single stock. 15-year returns are about 9.5% per year according to Morningstar. It's a simple solution, and you get a free ticket to the coveted annual meeting.
Portfolio 134: The Unconventional Success Portfolio
30% Vanguard Total Stock Market Index Fund
20% Vanguard REIT Index Fund
15% Vanguard Developed Markets Index Fund
5% Vanguard Emerging Markets Index Fund
15% Vanguard Intermediate Treasury Bond Fund
15% Vanguard Inflation-Protected Securities Fund (TIPS)
This is an example of an implementation of the portfolio put forth by David Swensen, the Yale investment guru, in his classic Unconventional Success. It's fine, like the other 133 portfolios before it. Its main criticism is that it is awfully REIT heavy.
Portfolio 135-137: The Wellesley Portfolio
100% Vanguard Wellesley Income Fund
This actively-managed Vanguard fund has been around since 1970, and despite only being 35% stock, has averaged almost 10% a year, while charging just 16 basis points. The main knock against it, aside from being actively managed, is that it isn't particularly diversified. It holds just 68 stocks, mostly large value stocks, and 1131 bonds. Don't expect 10%, or even 7%, a year out of this bond heavy fund going forward at today's low interest rates.
That said, it's hard to argue with success. Other actively managed funds that could be considered a reasonable portfolio all by themselves include the Wellington Fund (established 1929, 63/37, 10-year returns of 9.9%, ER 0.17%) and Dodge and Cox Balanced Fund (established 1931, 68/32, 10-year returns of 10.33%, ER 0.53%). There are probably more. I'm not a big fan of active management, but it's hard to nitpick funds that survived The Great Depression. Clearly, they're doing something right.
Portfolio 138-146: The Advanced Second Grader Aggressive Portfolio
54% Vanguard Total Stock Market Index Fund
27% Vanguard Total International Stock Index Fund
6% Vanguard REIT Index Fund
3% Precious Metals
10% Total Bond Market Index Fund
Allan Roth, in his excellent How a Second Grader Beats Wall Street, lists a conservative, a moderate, and an aggressive allocation for a second grader portfolio (3 Funds), an advanced Second Grader Portfolio (4-5 funds), and an alternative advanced Second Grader Portfolio (uses CDs instead of the Total Bond Market Fund). That's 9 more portfolios you could use without having to come up with your own!
Portfolios 147-150: The Dan Wiener Income Portfolio
Dan Wiener sells a newsletter to Vanguard investors. For just $100 a year he'll reveal his super-secret portfolios composed of various Vanguard funds. I can't tell you what the portfolios currently hold (there are quite a few actively-managed funds and the allocations change from time to time), but I can tell you the performance hasn't been terrible.
The Growth version has returns of 9.61% since 1999, almost 3.5% a year better than the 3 fund portfolio and about 2% better than a typical slice and dice portfolio like the Sheltered Sam portfolio, although you do expect higher returns due to significantly higher stock allocation. The less-aggressive “Income” version has returns of 5.52% a year. There is also a “Conservative Growth” and an “Index Fund Growth” portfolio whose returns are similar to slice and dice type portfolios.
While I'm certain there is a survivor bias effect here, it's still a pretty decent long-term record of actively-managed mutual fund picking. It helps that he mostly limits himself to low-cost Vanguard funds, of course.
Portfolio 151: The Larry Portfolio
32% DFA Small Value Fund
68% DFA One Year Treasury Fund
Larry Swedroe is smarter than me I'm sure. He is a huge fan of taking your risk on the equity side. He is a true believer in the small and value factors of Fama and French, and carries the idea behind a slice and dice portfolio to the extreme. He holds no fear of tracking error or the lack of traditional diversification, the primary downsides of investing like this. It is more important to him to diversify among “factors” like small, value, and momentum. It's not my cup of tea, but at least he puts his money where his mouth is. [Update: I'm told that Larry actually splits his equities between US Small Value, Developed Markets Small Value, and Emerging Markets Value, but you get the point- a very heavy small value tilt.]
Portfolios 152-165: The Rick Ferri Multi-Asset Class Pre-Retiree Portfolio
23% Vanguard Total Stock Market Index Fund
5% IShares S&P 600 Barra Value (IJS)
2% Bridgeway Ultra Small Company Market (BRSIX)
5% Vanguard REIT Index Fund
3% Vanguard Pacific Stock Index Fund
3% Vanguard European Stock Index Fund
2% Vanguard International Explorer Fund (he'd probably use the Vanguard International Small Index Fund now)
2% DFA Emerging Markets Fund
10% IShares Lehman Aggregate Bond Fund (AGG)
13% Vanguard Investment Grade Short Term Bond Fund
10% Vanguard High Yield Corporate Bond Fund
10% Vanguard Inflation-Protected Securities Fund (TIPS)
5% Payden Emerging Markets Bond Fund (PYEMX)
2% Vanguard Prime Money Market Fund
In another classic book, All About Asset Allocation, Rick Ferri suggests a Basic and a Multi-Asset Class investment portfolio for early savers, mid-life accumulators, pre-retirees/active retirees, and mature retirees, for a total of 8 portfolios. Rick isn't afraid to look for the “best of class” fund for any given asset class. Lots of great portfolio ideas here. See Portfolios 170-173 for more portfolios from Rick Ferri.
Portfolio 166: Frank Armstrong's Ideal Index Portfolio
7% Vanguard Total Stock Market Index Fund
9% Vanguard Value Index Fund
6% Vanguard Small Cap Index Fund
9% Vanguard Small Value Index Fund
31% Vanguard Total International Stock Market Index Fund
8% Vanguard REIT Index Fund
30% Vanguard Short Term Bond Index Fund
You can read more about this one in Armstrong's The Informed Investor. A nice heavy small/value tilt, but only domestically.
Portfolio 167: The 7/12 Portfolio
1/12 Vanguard 500 Index Fund
1/12 Vanguard Mid-Cap Index Fund
1/12 Vanguard Small Cap Index Fund
1/12 Vanguard Developed Markets Index Fund
1/12 Vanguard Emerging Markets Index Fund
1/12 Vanguard REIT Index Fund
1/12 Natural Resources
1/12 Commodities
1/12 Vanguard Total Bond Market Index Fund
1/12Vanguard Inflation-Protected Securities Fund (TIPS)
1/12 Vanguard International Bond Index Fund
1/12 Vanguard Prime Money Market Fund
7 major asset classes, 12 funds, 8.33% a piece. Clever, huh. Craig Israelsen, a professor at prestigious Brigham Young University, advocates for this approach in his book 7 Twelve. He wants you to send him $75 to tell you how to use Vanguard Funds (or those of any other company) to implement the portfolio. Send me $50 and I'll tell you how to do it. If you've read this far, you know more about portfolio design than 95% of “financial advisors” out there.
Portfolio 168: My Parent's Portfolio
30% Vanguard Total Stock Market Fund
10% Vanguard Total International Stock Market Fund
5% Vanguard Small Value Index Fund
5% Vanguard REIT Index Fund
20% Vanguard Intermediate-Term Bond Index Fund
20% Vanguard Inflation-Protected Securities Fund
5% Vanguard Short Term Corporate Index Fund
5% Vanguard Prime Money Market Fund
I help my parents manage their nest egg. I'm twice as smart and 2.5% per year cheaper than the last guy. This 50/50 portfolio is a good balance between keeping it simple and understandable, but still getting the benefit of a multi-asset class portfolio. It lost 18% in 2008, and more than gained it back in 2009. Returns are about 7% over the last 15 years, including the 2008 debacle.
Portfolio 169: The 2014 White Coat Investor Portfolio
17.5% Vanguard Total Stock Market Index Fund
10% TSP S Fund
5% Vanguard Value Index Fund
5% Vanguard Small Value Index Fund
7.5% Vanguard REIT Index Fund
5% Bridgeway Ultra-Small Company Market Fund (BRSIX)
15% Vanguard Total International Stock Market Fund/TSP I Fund
5% Vanguard Emerging Markets Index Fund
5% Vanguard International Small Index Fund
10% Schwab TIPS ETF
10% TSP G Fund
5% Peer 2 Peer Lending Securities (mostly Lending Club)
I'm more than willing to admit that it is unlikely that this portfolio will be the best of the 150 portfolios listed here over my investment horizon. However, since my crystal ball is cloudy, and since I'm convinced that sticking with any good portfolio matters far more than which good portfolio you pick, I'm going to stick with it (and have with minimal changes in the last decade, leading me to an annualized after-tax, after-expense return of around 9.5% [as of 1/11/2013]). See Portfolio 200 for my updated portfolio.
Portfolios 170-173: Rick Ferri's Core-4
48% Vanguard Total Stock Market Fund
24% Vanguard Total International Stock Market Fund
8% Vanguard REIT Index Fund
20% Vanguard Total Bond Market Fund
All four of these portfolios are really just a play off of Portfolio # 26, and range from 80/20 to 20/80. It's basically just three-fund plus a little REIT. It's too much REIT for some, too little real estate for others, but for a precious few, it's just right.
Portfolio 174: The Golden Butterfly
- 20% Vanguard Total Stock Market Index Fund
- 20% Vanguard Small Cap Value Index Fund
- 20% Vanguard Long Term Bond Index Fund
- 20% Vanguard Short Term Bond Index Fund
- 20% SPDR Gold Shares ETF (GLD)
This new-fangled portfolio from Tyler at Portfolio Charts claims to “match the high return of the Total Stock Market [Portfolio # 2] with the low volatility of the Permanent Portfolio [Portfolio # 60]”. I don't think it actually does that given its heavy emphasis on bonds and gold. Since TSM has outperformed all of those other assets classes over the last decade, there is no way this portfolio has matched its return in that time period. But I'm sure it has been less volatile.
Portfolio 175: The All Weather Portfolio
- 30% Vanguard Total Stock Market Index Fund
- 40% Vanguard Long Term Bond Index Fund
- 15% Vanguard Intermediate Term Bond Index Fund
- 7.5% Commodities
- 7.5% SPDR Gold Shares ETF (GLD)
A Ray Dalio creation, this one is also an attempt at improving the returns of the Permanent Portfolio while still improving bear market performance. The idea is that Growth can be up or down and inflation can be up or down, so you should pick something that does well in all four combinations of those factors. Of course, he seems to think Gold will do well in 3 of those 4 situations, but it makes for pretty fancy charts. If you really can get similar performance with lower volatility, that would allow you a higher withdrawal rate in retirement.
Portfolios 176-178: Kiplinger Portfolios
- 20% Dodge & Cox Stock Fund
- 20% Primecap Odyssey Growth
- 15% DoubleLine Total Return Bond
- 15% Parnassus Mid Cap
- 10% Fidelity International Growth
- 10% Oakmark International
- 10% T. Rowe Price QM U.S. Small-Cap Growth Equity Fund
Kiplinger published 3 portfolios for various time horizons. This one is the long-term (11+ years) one but they are all composed of actively managed funds, so I don't really like any of them. I included them because they're a good example of what you get from the financial media and many crummy 401(k)s. There's usually lots of back-testing involved and as a rule, these types of portfolios had great performance in the years prior to them being published.
Portfolios 179-183: Fidelity Index Focused Models
- 35% Fidelity 500 Index Fund
- 3% Fidelity Mid Cap Index Fund
- 4% Fidelity Small Cap Index Fund
- 18% Fidelity Ex-US Global Index Fund
- 35% Fidelity US Bond Index Fund
- 3% Fidelity Conservative US Bond Fund
- 2% Fidelity Core Money Market Fund
Fidelity has published lots of portfolio models, including 5 using index funds from 20/80 to 80/20. The one above is the 60/40 one. I think it's overly complicated. Not only are there four asset classes with less than 5% of the portfolio in them, but it uses a less diversified 500 index fund instead of a total stock market fund. In reality, this is just a fancied-up three fund portfolio. That said, it's low-cost, broadly-diversified and better than the vast majority of portfolios I've seen.
Portfolios 184-188: Betterment Portfolios
- 15% Vanguard US Total Stock Market Index Fund
- 15% Vanguard Value Index Fund
- 15% Vanguard Developed Markets Index Fund
- 6% Vanguard Emerging Markets Index Fund
- 5% Vanguard Mid Cap Index Fund
- 4% Vanguard Small Cap Value Index Fund
- 20% Vanguard Inflation-Protected Securities Fund
- 20% Vanguard Short Term Treasury Index Fund
This one comes from Betterment, at least back in 2012. They don't list their portfolios out now on their website, but they're basically variations of the above with different stock:bond ratios. You'll notice the heavy value tilts, a significant small tilt, and previously focus on safety on the bond side. It looks like they also include junk bonds and international bonds now in their portfolios.
Portfolios 189-197: SoFi Portfolios
- 28% Vanguard US Total Stock Market Index Fund
- 24% Vanguard Total International Stock Market Index Fund
- 8% Vanguard Emerging Markets Index Fund
- 20% Vanguard Total Bond Market Index Fund
- 10% Vanguard Short Term Bond Index Fund
- 5% SPDR Short-Term High-Yield Bond ETF
- 5% Vanguard Emerging Markets Government Bond Index Fund
SoFi also runs a roboadvisor like service that offers 9 portfolios from conservative to aggressive, for retirement and taxable accounts. This is the moderate one for retirement accounts. I'm not sure exactly what funds they use, so I added appropriate funds for each listed asset class. It's a little odd to have EM bonds without developed markets bonds.
Portfolio 198: The Physician on FIRE Portfolio
- 60% US Stocks (with a tilt to small and value)
- 22.5% International Stocks (50 / 50 developed and emerging markets)
- 7.5% REIT (Real Estate Investment Trust)
- 10% Bond & Cash (mostly bond plus cash emergency fund)
Very aggressive, especially for a retiree. Low allocation to real estate too, although I keep hearing he may be increasing this a bit.
Portfolio 199: The Physician Philosopher Portfolio
- 45% Vanguard Institutional Index Fund
- 20% Vanguard Mid Cap Index Fund
- 20% Vanguard Small Cap Index Fund
- 15% International Stocks
This is what he had in his 403b a couple of years ago. More info on this portfolio here. Aggressive, but otherwise pretty Plain Jane aside from a small tilt.
Portfolio 200: The New White Coat Investor Portfolio
- 25% Vanguard Total Stock Market Fund
- 15% Vanguard Small Cap Value Index Fund
- 15% Vanguard Total International Stock Market Fund
- 5% Vanguard FTSE Ex-US Small Index Fund
- 10% Vanguard Inflation-Protected Securities Fund
- 10% TSP G Fund
- 5% Vanguard REIT Index Fund
- 5% Debt Real Estate (primarily private hard money lending funds)
- 10% Equity Real Estate (primarily private funds and syndications)
I simplified our asset allocation about three years ago. Aside from consolidating asset classes, the major change was swapping out peer to peer loans for hard money lending and adding a bit more real estate. But basically it's 60% stock (2/3s of which is US, 1/3 International), 20% bonds, and 20% real estate.
A good investment portfolio is broadly diversified, low-cost, mostly or completely passively managed, regularly rebalanced, and consistent with its owner's need, ability, and desire to take risk. Every portfolio (except the Kiplinger ones) in this post meets those qualifications. Pick one you like, or design your own. Just don't go looking for the best one. As Prussian General Karl Von Clausewitz said, “The enemy of a good plan is the dream of a perfect plan.”
What do you think about all these portfolios? Do you use one of these, or have you designed your own? Comment below!
I believe that Tyler at Portfolio Charts is the one who created the Golden Butterfly portfolio, not Ray Dalio.
You are correct.
I’ve beeb using a modified version that I call Golden Value.
Large value 20%
Mid Value 20%
Intermediate treasury 20%
Long term treasury 20%
Gold 20%
Running the monte carlo simulator at 1% interval (worst case scenario) it has the highest return and lowest drawdown.
So you’ve perfectly optimized your portfolio to perform well in the past. So as long as the future is exactly like the past, you’ll do fine. Do you plan to repeat this every few years and change your portfolio accordingly? Because I can assure you that is a recipe for underperformance.
I think that you’re being unnecessarily harsh here. That’s a perfectly plausible portfolio. It’s just tilted toward value, slightly toward smaller firms, and has a longer bond duration than TBM. If you don’t have a big problem with portfolios with gold, then Carlos’ should be fine. The key to any investment strategy working reasonably well is sticking with it.
I agree it’s a reasonable portfolio. What I disagree with is Carlos’s use of the present tense. I see it frequently and it is inaccurate. If someone doesn’t recognize that inaccuracy, they are likely to be disappointed when a portfolio does something different in the future than it did in the past.
The biggest limitation of any Monte Carlo tested performance is that simulation is entirely reliant on retrospective data. Physicians readily understand the limitations of retrospective data. How many trials have you seen in your life where the validation trial didn’t produce the same results as the derivation study? Happens all the time, and that’s in a far less complex and more reproducible system than the world economy.
You’re right according to this: https://www.thesimpledollar.com/investing/retirement/why-i-chose-this-controversial-all-weather-portfolio-for-my-life-savings/
And the PM I just got from Tyler:
Hi WCI / Jim.
I’ve long been a fan of your “150 Portfolios Better Than Yours” post on the blog, as it has been an inspiration for my own portfolio research. So I was really excited when I saw that you just added the Golden Butterfly portfolio to the list (#174)! But I noticed one factual error that I believe merits a correction.
The Golden Butterfly is my own creation (I’m the author of Portfolio Charts) and I have no affiliation at all with Ray Dalio. You can read about it here: https://portfoliocharts.com/portfolio/golden-butterfly/ You’re not the first person to make the association with Dalio and I haven’t tracked down the origin of that myth, but I definitely don’t want anyone to get the wrong impression.
Cheers!
Tyler
Longtime lurker finally getting confidence to do this on my own. Does this asset allocation seem reasonable?
VTSAX Total Stock Market 30%
VSIAX Small Cap Value 9%
VGSLX REIT 9%
VTIAX Total Int. SM 24%
VEMAX Emerging Markets 8%
VBLTX Total Bond 20%
Not sure if the tilts are worth it long term or if one or two of them may just be over-complicating things
Not sure what you mean by “Tot Int. SM” but if you’re just talking about total international, then yes, I think it looks reasonable. I also don’t know if your tilts will be worth it. Darn crystal ball is cloudy.
What a great post! Can’t imagine the time that went into this originally. Thank you.
Just listened to my first WCI Podcast today (Millionaires)!!
Loved hearing the familiar pattern that led to their success as well as some of the mistakes (yup, I made a bunch).
Passing all WCI links and info on to my son-in-law (3rd year Med Student).
Keep up the great work.
We are a variation of three fund plus one. I know there are many roads… but I think the ones that include a sizable holding of gold bullion or single stock probably ought to be avoided…
The biggest mistake investors make is looking back at performance and thinking it will recur in the future-MR BOGLE
the goal in retirement is not to seek the highest return but to maintain lifestyle and preserve capital
No way is this a better post than the Colored Gem’s post….But it holds up ok and thanks for adding to make it 200!
thanks for compiling this crazy list.
my eyes glazed over at anything that had more than a few holdings.
there is somewhat of a divide between good financial planning advice and advice for choosing investments, or so it seems.
best advice i’ve seen is to just pick a few index funds, regularly put money into them, and let time work its magic.
also, can somebody explain to me the value of investing in international or emerging markets? seems like a sure path to poor returns, as the US makes the global market under most circumstances. I’ve never seen any international funds that had even close to the returns of a decent US index fund under any market conditions.
Bogle felt the same way as you about international stocks. But there’s a bit of recency bias in the data that you need to account for. It’s been a little while since international stocks outperformed, but outperformed they have. Take a look at this:
https://www.whitecoatinvestor.com/periodic-table-of-investment-returns/
Similar returns and lower correlation is a winning formula in a portfolio.
It should probably be noted that the Vanguard Precious Metals fund recommended by Dr. Bernstein no longer exists (2018). I’m unable to find anything that’s an acceptable fit either (mining / exploration of multiple metals)…
Thanks for pointing that out. Vanguard has made changes to that fund from time to time over the years. The latest one was pretty substantial.
How effective is it?
is what?
Is there a tool to determine where these portfolios fall in relation to the efficient frontier curve. Are they all designed to fall exactly on the curve to give the most efficient historical return for historical risk.
No. the problem with the “Efficient Frontier” is it can only be known in retrospect.
What would your current portfolio (#200) look like if you didn’t have access to TSP?
If I didn’t have access to the G Fund I’d either have Vanguard intermediate bond index fund in a 401(k) or more intermediate tax-free bond index fund in taxable.
Thanks for the reply – years ago I had a very small amount in TSP, but had to burn that due to poor financial choices. I’m graduating from residency this year, and trying to gain control of our financial future – your site has always been a huge help!
In a follow-up, I tried finding a hard answer on the site and in your book WCI Financial Boot Camp, but haven’t found it yet.
Regarding tax-efficiency, in theory if you could max out a solo 401k as ~25% of your portfolio (56k in solo 401k representing 25% of goal annual investment of 204k), what would the most tax efficient way to distribute that be (using modification of your portfolio as example). I’m leaning towards this, but correct me if wrong.
Portfolio:
Vanguard Total Stock Market Fund – 25%
Vanguard Small Cap Value Index Fund – 15%
Vanguard Total International Stock Market Fund – 15 %
Vanguard FTSE Ex-US Small Index Fund – 15%
Vanguard Inflation-Protected Securities Fund – 10 %
Vanguard REIT Index Fund – 10 %
Real Estate (Investment Properties) – 10%
Equity Real Estate (primarily private funds and syndications) – 10%
56k in Vanguard Total Stock Market Index Fund
12k in Vanguard Small Cap Value Index Fund
Remainder in Taxable Accounts
Thanks,
Doug
I’m not sure what you’re asking but your percentages add up to 110%. 2020 401k contribution limit is $57K too. But if 3/4 of my money was going into taxable with that portfolio I’d put the REITs and TIPS into the tax protected account.
Thank you. It was a convoluted way of asking what should go into tax-protected accounts. Got the answer I was looking for (I’ll review my math – this why I should’ve used a calculator lol).
good morning WCI
i’ve contributed to my roth($7000) i have about $250,000 in there
i do not have a workplace 401k
i have a recently rolled over IRA at Fidelity (FFNOX-4 in One Index) from an old employer ($80,000)
i also have about $150,000 in a 3% CD which will be free in about 7 months.
i’m pretty much debt free. can I add to my rollover IRA or do i have to open a new acct.? and this would be a taxable acct.? Yes? Any suggestions? Thanks
love your podcasts!!
If you’re doing Backdoor Roth IRAs you have a big issue with that IRA. It’s probably going to cause you to be pro-rata’d. But I don’t have enough info to know for sure.
But yes, your annual IRA contribution can go into a rollover IRA if you want. But you only get one contribution a year and if it went into a Roth IRA, it can’t go into a traditional (rollover) IRA too.
Hi WCI!
Could you possibly post the ticker symbols for Portfolio 200, “The New White Coat Investor Portfolio”
Sorry to ask this….it’s just that I see so many Vanguard tickers, and so many of them seem the same….in other words, for example for total stock market, there seems to be 10 or more Vanguard tickers.
It would be helpful to see which of the various Vanguard funds you picked.
Thanks in advance!
There is only one Vanguard Total Stock Market Index Fund. It has three commonly used “share classes”, VTSMX (Investor shares, now basically discontinued), VTSAX (admiral shares, the mutual fund version) and VTI (the ETF version.) I’ve used all of them and they’re all fine. I’ve also used other total stock market funds in “Portfolio 200”.
Thanks!
If you don’t mind, could you possibly put the tickers for all the funds in your portfolio?
Also, what is a TSP G fund?
Thanks
I often have different funds making up those asset classes, so tickers change. But if you have no idea how to find a ticker for something like a “total stock market index fund” you probably need more than just someone giving you a ticker to help you manage your own money. Here is a good example of a total stock market fund for instance:
https://investor.vanguard.com/mutual-funds/profile/overview/vtsax
Here’s another:
https://fundresearch.fidelity.com/mutual-funds/summary/31635T708
And another
https://www.morningstar.com/etfs/arcx/itot/quote
The G Fund is available to federal employees. More info here:
https://www.tsp.gov/InvestmentFunds/FundsOverview/comparisonMatrix.html
Let me know if there is an asset class you need a fund suggestion for.
Thanks so much!
I already have 401Ks and a 529 deployed in various diversified funds.
I have individual stocks in my taxable account and in my Backdoor Roth IRA….I would like to start adding some ETFs.
From what I have read so far on your blog, I should pick an asset allocation, and write down what I already have in my 401Ks and 529s. Then with the money in taxable and Backdoor Roth, pick funds that aren’t already represented in the 401Ks or 529. Is this correct?
Also, I am nervous to put money in with the stock market so high!!! Do you recommend just dollar cast averaging during pull backs? I have TD Ameritrade, so commissions are now free.
Thanks very much
I separate my asset allocations by goals, then look at all accounts directed at that goal together. 529 money is for a different goal than 401k and taxable money so I treat them separately. But yes, that’s how portfolio construction works- determine goals, choose an overall asset allocation, then select investments.
I invested almost all of my monthly investment amount (it was a good month, os it was probably 5-10% of my total portfolio value) into stocks earlier today. I remain fully invested. I’ve been buying at market highs for years and been glad I did so. If the market goes down, I’ll ride it down and back up the other side.
People always say on these forums, you should be 100% invested in your asset allocation and I know you can make a cash position part of that. But, most will say no cash (inflation yada yada, which I no longer fear whatsoever after this week). How can you take advantage of real estate plummeting when at all time highs? Markets tanking after all time highs previously (yes I know its always at market highs). A guy who owns one of the nicest resorts in my city purchased it during the depression at rock bottom prices. He always believed in having a heathy position of cash for such opportunities and took over the town after the market crash. It got me thinking. You can’t time the market, but should you position yourself to at least have the opportunity at times? I mean after a market crash of 50%, I’m all about totally going all in on your 80/20 or what have you asset allocation and buying any depressed real estate. Given an 11 year bull market I had a large cash position and I’m glad I held it. Not that it makes me feel much better as my brokerage accounts are still not small, but I am in a great position to capitalize on any dramatic movements in stocks, CRE, or residential RE. Maybe if one has a high income they can be all in the market and real estate, but keep a lifestyle that allows them to put all earned income into such opportunities if they arise and maybe you consider that your opportunity fund? Any thoughts?
My portfolio has been devastated due to small value tilt. Worst mistake I’ve make in stock investing. These companies will be even further devastated in the recession to come. The data from fama french means nothing in this dramatically different world. I doubt the weakest companies will thrive after such a dramatic test. Question is to stay with it or not?
That brings me to this. There could potentially be increased return with SCV, but this will likely come with increased risk. Why not increased your stock allocation rather than add a tilt to an asset class that “might” after many decades beat the broad market? If you are 100% stocks and want increased risk and return then fine, but if there are bonds and cash, why not just increase broad market index fund exposure and reduce bonds instead? Equivalent risk and possibly improved returns without waiting 20 years for something to happen when it hasn’t happened in the last 15.
The argument tilters make is that rather than load up on market risk, diversify your risks by adding small risk and value risk.
The question you have to answer is whether the SCV outperformance in the past was simply randomness, or if it will turn in the next 5 or 10 years and continue to have long term outperformance. But there’s no doubt there will be long periods like the last 10+ years when it will underperform the markets.
Yes, but it leads to a more risky portfolio overall at the same percentage of stock for a theoretical possibility of profit. I’m sure your loses are massive as are mine with a 15% tilt. These loses are probably equivalent to a much more stock heavy portfolio than what you are I hold (our portfolios are very similar).
This leads me to a new line of reasoning. This is not the same world anymore. If one were to tilt, best to tilt to QQQ , a large cap growth minus financials index. Has beaten total market for 15 years and has a place in the future economy. I believe small value has dramatically increased my risk and volatility with a small performance edge possibly….never.
Yes, it is a riskier portfolio. Thus the higher long-term expected return.
I disagree that a technology tilt is a better tilt than a value tilt, but the data from the 1990s and the 2010s might lead you to believe that.
You make your bets and you takes your chances. Don’t tilt more than you believe.
Your total market fund is technology tilted, that is why it has done so well.
If you exclude to .com bust, something that will never happen again, then it has consistently outperformed Vanguard 500 by a wide margin for almost the last 20 years. The reason the stock market is booming is because of the QQQ companies. Calling it performance chasing is like investing in US stocks in January, was that performance chasing? It was common wisdom to not time the market, one that has risen for last 11 years. If you owned QQQ, you would have taken a smaller haircut. The index also quickly changes as the weaker companies lose their edge. The S and P does not change at the same pace.
I don’t own QQQ, but I’m considering if it has a place somewhere in your portfolio. Maybe if I run out of tax harvesting partners…
I have an IRA at Vanguard with the following allocation (see below). The YTD (Jan 1, 2020 thru March 23, 2020) return for this account has been negative 16% while the S&P 500 has returned negative 25.44% for the same period.
I am thinking that WCI readers, myself included, would be interested in knowing the YTD percent return for the same period (Jan 1, 2020 thru March 23, 2020) for three of the portfolio mentioned. Specifically, the following three:
Portfolio 168: My Parent’s Portfolio
Portfolio 169: The 2014 White Coat Investor Portfolio
Portfolio 200 The New White Coat Investor Portfolio
BND VANGUARD TOTAL BOND MARKET ETF
BNDX VANGUARD TOTAL INTL BOND INDEX ETF
VXUS VANGUARD TOTAL INTL STOCK INDEX FUND ETF
VTI VANGUARD TOTAL STOCK MARKET ETF
41% Stocks 59% Bonds
Stocks
17.3% U.S. large-cap
7.4% U.S. mid/small-cap
16.0% International
Bonds
16.6% U.S. short-term
16.6% U.S. intermediate-term
8.3% U.S. long-term
17.6% International
0.2% Short-term reserves
Would you mind calculating those returns and posting it here for them?
I have just recently started paying attention to investing finances fresh out of residency as a 37 y/o. My previous income went to paying off student loans. I just read your bootcamp book over the weekend am getting things in line!
My Solo 401k (rolled over my SEP-IRA) and taxable investing accounts just opened up last week, right as the market changed. So would you make any different recommendations if starting a brand new portfolio in this current market (investing this week)? I have about $80k in my 401k and $80k in my taxable. Invest it in increments or doesn’t really matter in the long run? I will have more each month to contribute in the taxable.
Was thinking of a 3+1 approach:
40% Total Stock Market Index Fund
20% Total International Stock Market Index Fund
10% VITAX (Vanguard Information Technology Index Fund)
30% Total Bond Market Index Fund
Thanks for the book and website!
Doesn’t matter in the long run. You’re getting a better price than 2 months ago, but not as good as last week.
That’s a big chunk in an IT fund. You sure you believe in it that much in the long run? Feels like performance chasing.
Appreciate it. I’ll drop that sector fund to 2 or 3% and increase the TSM. thanks!
Have you discussed the location (i.e., taxable and tax-deferred accounts) of the funds in your portfolio?
Ad nauseum. This is one of the better ones:
https://www.whitecoatinvestor.com/asset-location/
This one is older but specific to me:
https://www.whitecoatinvestor.com/how-i-currently-implement-my-asset-allocation/
I have backtested 9 portfolios beginning in July 1982. I believe I have discovered the best 100% equity portfolio and the best glide path portfolios. I am happy to share my data for free. This is just a hobby of mine. I am not looking for any form of financial incentive. I can send my spreadsheets with all my monthly data if anyone is interested.
I’m interested. Thank you!
You mean you calculated what was the best in the past. Were you under the impression that the future would exactly mirror the past? Or else why do you think that calculation is helpful?
It’s fine to share the data. It’s interesting to look at it. But I think investors need to be VERY aware of the limitations of retrospective data.
Yes, I am aware that past results to not reflect future performance. Otherwise, I would just tell everyone to buy large cap growth or technology funds. But there are some givens with long-term historical performance data. For example, does anybody believe that bonds will some day be better long-term holdings than stocks? My backtested portfolios consist of:
1) S&P 500 Index
2) Total Stock Market Index
3) Small Cap Value Index
4) Total World Stock Index
5) A portfolio with equal parts large blend, large growth, large value, mid cap blend, mid cap growth, mid cap value, small blend, small growth, small value
6) A portfolio with equal parts large growth, large value, mid cap growth, mid cap value, small growth, small value
7) A sector portfolio with equal parts Communication Services,
Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Real Estate, and Utilities.
Each portfolio with multiple funds was rebalanced monthly. Portfolio # 6 was the best performer from July 1, 1982 through March 31, 2020.
Put it into portfoliovisualizer.com monte carlo simulator financial forecast. (If you’re not sure how to do it I can run a simulation for you but you’ll have to provide the allocations)
Put 3 worst years at retirement and test it at the 1st percentile.
If it survives that then you’ll know you’re on to something that may survive.
Don’t seek the best return, because you aren’t going to find it. Just find something that that you can tolerate through all the downs that are cunning your way.
Yes, small and value has outperformed large and growth in the long run, so slice and dice portfolios tend to do well in backtests. Thus why there are so many SV tilters. But that hasn’t been the case the last decade or more. Who knows what will outperform going forward, but I have a significant bet on SV in my portfolio.
Small value is an example of what has worked well long-term but has lagged over the last 10 years or so. My theory is that the popularity of indexing has led to the outperformance of the large growth stocks. There are not many stock pickers any more. It’s almost like a giant pyramid or Ponzi scheme.
I think there are enough stock pickers still to make the markets efficient enough that indexing is still the right way to invest. The small value tilt is a completely separate discussion though. A small value tilter, even one who benefits in the long run from tilting, should expect long periods of underperformance. It’s a life long decision to tilt your portfolio. Personally, I think it’ll still pay off, but only time will tell.
Anyone have any suggestions for a total international stock market fund?? I am using Vanguard’s VTIAX currently, but I have not really seen much written about this fund. I am still early in my accumulation, so I just wanted to make sure I am on the right track.
Thank you!
I’ve owned that fund for years. It’s great.
So you condensed your old portfolio by cutting out mid-cap? Wouldn’t you want exposure to all the sectors?
Also I see some portfolios with international small-cap value funds, however I don’t see one on Vanguard? Thoughts on whether you think this is a good index to own and where the best one can be found?
If you do a Morningstar XIRR of my old portfolio versus my new one, you will find the new one has a similar amount of mid-cap in it. There is some in TSM and about half of the Vanguard small value fund and REIT index fund is composed of mid-caps. I had “exposure” to all segments and sectors of the market already via total stock market. I’m overweighting small/mid value.
Vanguard does not have an international small value fund. They do have an international small fund which I bought the month it came out.
I think it is reasonable to include an international small value fund if you so desire, yes. DFA has a nice one. Consider also the ETFs DLS (wisdom international small dividend) and AVDV (Avantis international small vaue).
After further research, I’ve discovered that the best portfolio you could have owned over the last 40 years is a Health Care fund. I’m not saying that will be best going forward but an aging baby boomer population makes for a great argument. Small value has underperformed over that period. To put it into perspective, a 20 year old investing in small value 40 years ago would now be 60 and still waiting for small value to make a comeback with a tiny portfolio to show for it. I backtested every equity fund in existence at the time to determine this unsettling fact. Fama French must have discovered the small value effect during its peak.
# 1 I think you overexaggerate a bit.
# 2 Are you seriously considering tilting to health care because of 40 years of backtested data and “baby boomers are getting older”?
I am curious to see your research though.
Even without aging baby boomers, there will always be a need for and advances in health care. And I’m just looking at the data and sharing what I find. Would you like for me to email the spreadsheet to you? I used the Morningstar growth charts with dates from 7-1-1982 through 4-30-2020.
“Relative Strength Strategies for Investing”, by Mebane Faber.
In it he discusses sector rotation as a strategy. In the paper Faber shows returns for each sector back to the the 1920s.
Of interest is the top 3 performing sectors during that period is technology, health care, and consumer staples (in that order). All 3 best the S&P.
He then applied Sharpe ratio as a risk measure. Health care and consumer staples beat technology on a risk adjusted basis (slightly). The two are categorized as defensive in Morningstar.
Health care has ~100 years of history. Its not limited to a recent 40 year trend. Tilting toward defensive sectors appears to be reasonable approach.
Thank you Carlos. I had not heard of sector rotation before. I will definitely look into it.
The problem with that strategy is that like market timing it requires a functioning crystal ball to know when to rotate.
Below are the equity mutual funds in existence as of July 1, 1982 that are still operating today. The $ amount is based on an initial $10,000 investment as of July 1, 1982 through April 30, 2020. I used the Morningstar growth charts for the research. The funds are in order from best to worst performing over the test period. I cut and pasted it from Excel so I apologize for the data not being properly aligned. And yes, I know that past performance does not guarantee future results. I had the NASD Series 7 license before becoming a teacher.
Fidelity Select Health Care FSPHX $2,672,426.37 Health
Alger Spectra ASPZX $1,581,975.21 Large Growth
Fidelity Contrafund FCNTX $1,337,307.46 Large Growth
Fidelity Select Technology FSPTX $1,183,396.93 Technology
Columbia Acorn LACAX $1,058,146.20 Mid-Cap Growth
Mairs & Power Growth MPGFX $1,044,664.42 Large Blend
American Century Ultra TWUIX $949,697.85 Large Growth
American Funds Growth Fund of America AGTHX $911,224.84 Large Growth
Dodge & Cox Stock DODGX $882,607.15 Large Value
Davis New York Venture DNVYX $880,236.99 Large Blend
Sequoia SEQUX $878,547.29 Large Growth
MainStay MAP Equity MUBFX $860,784.06 Large Blend
American Funds Fundamental Investors ANCFX $852,664.06 Large Blend
Congress Large Cap Growth CMLIX $843,696.15 Large Growth
Fidelity Magellan FMAGX $842,506.17 Large Growth
AllianzGI Mid-Cap DRMCX $835,241.29 Mid-Cap Growth
PGIM Jennison Utility PRUZX $798,656.03 Utilities
Wells Fargo Omega Growth EOMYX $765,571.10 Large Growth
American Funds New Perspective ANWPX $760,959.32 World Large Stock
Franklin DynaTech FKDNX $725,992.94 Large Growth
T. Rowe Price Growth Stock PRGFX $720,070.32 Large Growth
American Funds Washington Mutual AWSHX $702,253.93 Large Blend
Invesco Oppenheimer Global OPPAX $675,280.25 World Large Stock
Royce Pennsylvania PENNX $653,236.37 Small Blend
American Funds AMCAP AMCPX $653,207.62 Large Growth
American Funds Investment Company of America AIVSX $651,530.65 Large Blend
Vanguard 500 Index VFIAX $644,001.56 Large Blend
Putnam Global Health Care PHSTX $643,135.49 Health
Voya Corporate Leaders LEXCX $636,816.74 Large Value
American Century Growth TWGIX $627,892.09 Large Growth
Franklin Growth FKGRX $627,601.83 Large Growth
Selected American Shares SLASX $613,433.95 Large Blend
Touchstone Large Cap Focused SICWX $610,546.79 Large Blend
DWS Science and Technology KTCIX $608,598.99 Technology
Fidelity FFIDX $598,692.53 Large Growth
ClearBridge Appreciation SAPYX $597,949.96 Large Blend
Neuberger Berman Mid Cap Growth NBMLX $588,938.21 Mid-Cap Growth
Nicholas NICSX $587,849.26 Large Growth
MFS Massachusetts Investors Growth MIGFX $586,297.95 Large Growth
AB Sustainable Global Thematic ALTFX $571,854.01 World Large Stock
Ivy Accumulative IATAX $569,978.66 Large Growth
ClearBridge Value LMNVX $569,241.14 Large Blend
American Century Select TWSIX $548,038.61 Large Growth
Fidelity Trend FTRNX $546,301.53 Large Growth
Neuberger Berman Guardian NGDLX $538,439.51 Large Growth
Vanguard Windsor VWNDX $535,368.10 Large Value
Victory RS Large Cap Alpha RCEYX $533,983.60 Large Blend
Virtus KAR Mid-Cap Growth PICMX $532,586.79 Mid-Cap Growth
American Funds American Mutual AMRMX $528,074.53 Large Value
Eaton Vance Dividend Builder EVTMX $526,297.02 Large Blend
FMI Common Stock FMIUX $524,142.62 Mid-Cap Blend
DFA US Micro Cap DFSCX $517,750.86 Small Blend
MFS Research MFRFX $511,946.64 Large Blend
MFS Massachusetts Investors MITTX $509,904.99 Large Blend
William Blair Growth WBGSX $508,597.16 Large Growth
Federated MDT Large Cap Value FMSTX $507,116.29 Large Value
Pioneer PYODX $506,159.89 Large Blend
AB Small Cap Growth QUASX $502,086.46 Small Growth
ClearBridge Large Cap Value SAIFX $488,015.12 Large Value
Invesco Oppenheimer Rising Dividends OARDX $486,636.05 Large Blend
BlackRock Basic Value MABAX $483,591.32 Large Value
Invesco Oppenheimer Capital Appreciation OPTFX $480,061.14 Large Growth
Vanguard International Growth VWIGX $475,995.66 Foreign Large Growth
Fidelity Select Utilities FSUTX $474,848.16 Utilities
AB Relative Value CABDX $474,619.90 Large Value
AB Discovery Growth CHCLX $471,535.92 Mid-Cap Growth
Franklin Mutual Beacon FMBRX $471,403.54 World Large Stock
Fidelity Value FDVLX $469,994.36 Mid-Cap Value
Eaton Vance Large-Cap Value EILVX $467,713.71 Large Value
Fidelity Select Financial Services FIDSX $449,849.90 Financial
Invesco Comstock ACSTX $446,117.39 Large Value
Lord Abbett Developing Growth LAGWX $444,725.02 Small Growth
Invesco Growth and Income ACGIX $443,193.22 Large Value
Value Line Larger Companies Focused VLLIX $441,256.76 Large Growth
Neuberger Berman Large Cap Value NBPIX $435,452.23 Large Value
Nationwide NWFAX $428,485.00 Large Blend
Fidelity Equity-Income FEQIX $425,921.97 Large Value
PGIM Jennison Blend PEQZX $419,000.72 Large Growth
Vanguard U.S. Growth VWUSX $418,844.04 Large Growth
Neuberger Berman Focus NFALX $415,986.28 Large Blend
Franklin Utilities FKUQX $410,369.98 Utilities
Lord Abbett Affiliated LAFFX $409,190.56 Large Value
Principal Equity Income PEIIX $408,409.86 Large Value
BlackRock Asian Dragon MAPCX $400,131.90 Pacific/Asia ex-Japan Stock
PGIM Jennison Small Company PSCZX $394,160.03 Small Growth
Sterling Capital Stratton Mid Cap STRGX $392,332.71 Mid-Cap Blend
Madison Investors MINVX $390,366.59 Large Blend
Vanguard Explorer VEXPX $388,964.31 Small Growth
Value Line Premier Growth VALSX $386,780.02 Mid-Cap Growth
RMB Fund RMBGX $381,118.79 Large Growth
Evercore Equity EWMCX $367,064.60 Large Growth
Putnam Equity Income PEYAX $364,595.35 Large Value
BlackRock Advantage U.S. Total Market MASPX $364,112.30 Large Blend
Guggenheim StylePlus Large Core GILIX $364,105.00 Large Blend
FPA Paramount FPRAX $363,564.08 World Large Stock
Asset Management Large Cap IICAX $358,298.89 Large Blend
Sterling Capital Stratton Real Estate STMDX $355,645.37 Real Estate
Templeton World TEMWX $354,816.44 World Large Stock
Vanguard Small-Cap Index VSMAX $335,675.84 Small Blend
Templeton Growth TEPLX $335,230.11 World Large Stock
ClearBridge All Cap Value SFVYX $330,999.16 Large Value
Invesco Charter CHTRX $323,576.12 Large Blend
Nationwide Mellon Dynamic U.S. Core NMFAX $317,936.95 Large Blend
BNY Mellon Research Growth DWOAX $313,163.78 Large Growth
Natixis Oakmark NEOYX $295,127.06 Large Blend
BNY Mellon Sustainable U.S. DTCAX $289,371.12 Large Blend
USAA Aggressive Growth USAUX $287,951.97 Large Growth
DWS Core Equity SUWIX $279,906.09 Large Blend
Guggenheim StylePlus Mid GIUIX $273,043.96 Mid-Cap Growth
Templeton Global Smaller Companies TEMGX $271,265.79 World Small/Mid Stock
T. Rowe Price International Stock PRITX $255,557.86 Foreign Large Growth
Value Line Mid Cap Focused VLMIX $252,791.40 Mid-Cap Growth
BNY Mellon Large Cap Securities DREVX $250,571.86 Large Growth
Crossmark Steward Small-Mid Cap SCECX $249,775.87 Small Blend
T. Rowe Price New Era PRNEX $241,953.11 Natural Resources
USAA Growth USAAX $219,379.88 Large Growth
Selected International SLSSX $214,346.34 Foreign Large Blend
Virtus Vontobel Global Opportunities WWOIX $199,304.09 World Large Stock
DWS CROCI International SUIIX $191,527.97 Foreign Large Blend
Delaware Global Equity FIITX $189,838.84 World Large Stock
WPG Partners Small/Micro Cap Value WPGTX $189,497.88 Small Value
Eaton Vance Special Equities EISEX $186,974.12 Mid-Cap Growth
Nationwide Bailard International Equities NWHJX $158,868.53 Foreign Large Blend
Guggenheim Large Cap Value GILCX $131,593.28 Large Value
Fidelity Select Energy FSENX $114,436.54 Equity Energy
Franklin Gold and Precious Metals FKRCX $112,481.20 Equity Precious Metals
U.S. Global Investors All American Equity GBTFX $100,188.81 Large Blend
VanEck International Investors Gold INIYX $99,013.49 Equity Precious Metals
U.S. Global Investors Gold and Precious Metals USERX $10,012.92 Equity Precious Metals
You’re only looking at the winners due to the severe survivorship bias. I certainly wouldn’t base my portfolio composition based on the fact that the Fidelity Health Care Fund is the best of the 38+ year old funds out there. The second best health care fund underperformed the market.
It’s interesting to me that you could only find 26 funds that beat the Vanguard 500 Index Fund over that time period. How many funds were there in 1982 counting all of those that have since closed? I bet there were several thousand.
1982 is also an interesting starting point given it was the beginning of the longest bull run in history. Not sure that means a lot, but it does feel a little cherry picked.
I chose July 1982 because that was the year I graduated from high school. I was curious how much money I could’ve made if I had invested in various funds from the time I started earning a paycheck. Nothing more. And the survivor bias is interesting. Not many small caps survived. DFA Micro Cap is on the list. It is an inexpensive index fund and its long-term performance is underwhelming. I bought into the whole Index Fund Advisors strategy using DFA funds after reading the book by Mark Hebner but it just hasn’t come to fruition. Notice even after 38 years how badly the international funds have performed. Anyway, like politics and religion, we all have our unshakable beliefs.
International and small value funds will look bad using your method simply because the last 10 years they have performed worse than US stocks, especially use large growth stocks. If you would have stopped your analysis in 2008 or even 2010, you would have come to a different conclusion.
I’ll look into that. But should the last 10 years erase the prior 28? I’ll start that research on Monday and let you know what I’ve found if you like.
I bet it does. It’s just a math thing. The later years make a bigger difference in the dollars because there is more money for the returns to be multiplied by. The more recent returns make a bigger difference.
That makes sense. I’ll check it out.
The point of my post was not to advocate Sector rotation. It was to show that the research into sectors has already been done and that tilting toward health is reasonable.
I don’t use sector rotation. You’ll see that it gets old being appraised of the stock markets movement on a monthly basis. Its nice when things are going well but anxiety provoking when its not. My advice is not to go down that rabbit hole.
ASIDE:
I do believe in a buy and hold strategy for taxable accounts. No discussion there because taxes will eat away at your returns.
Your 401k is going to have rules limiting your trades. So buy and hold makes sense there as well.
And if you’re not sure about which portfolio to use, then pick 2 and use one for taxable and one for 401k.
You seem to enjoy being a trader (speculator). Nothing wrong with that. Limit it to your IRA (if you are able to save in the other accounts first). My IRA accounts for <5% of my money and thats where I speculate. And I lose. A lot. It would be wiser to buy and hold but I don't want to. Some like to sky dive, some like water sports, others like to garden. To each their own.
I've done sector rotation, AGG3&6, VAA, GPM, PAA, Benjamin Graham value investing doing net nets & enterprising, dual momentum, growth stock investing, buy and hold with leveraged ETFs, SMA systems, etc.
I use folio for my IRA because it let's you create 10 sub-accounts (called folios) per account and invest however you want. So you can run 10 strategies. It allows you to buy fractional shares so you just divide your $6000 into the number of strategies you want to run. Then the $600 in a folio can be assigned on a percentage basis (you assign 13.5% to any ETF and you get that amount allocated. No rounding).
If your IRA is more than 5% of your annual savings, then only allocate 5% to your speculation.
I also use folio for my taxable account which is buy and hold. It allows you to buy each month by buying only, by buying and selling, by re-balancing, by buying at targeted holdings or current holdings.
I have another account with them for vacation, charity, emergency account, and auto expenses. You can open as many accounts with them as you want and trade as much as you want. I also have 2 UTMA accounts.
They also have a watch account which allows you to play with fake money so you can see how well you will do. Play with that for a few years. It might be enough to show you what works.
Thanks again Carlos. I Just want to clarify, I am not a speculator. I am a rebalancer. I set an allocation and rebalance back into it monthly.
That’s an awful lot of investing methods for one investing career.
Below is a list of the equity mutual funds that have been in existence since July 1, 1982 according to the Fidelity Investments mutual fund screener. The $ amount is the total return of the fund based on a $10,000 initial investment from 7/01/1982 through 4/30/2020 using the Morningstar growth charts for each fund. And yes, I understand that past performance does not guarantee future results. I’m just publishing results.
Fund Ticker Return Category
Fidelity Select Health Care FSPHX $2,672,426.37 Health
Alger Spectra ASPZX $1,581,975.21 Large Growth
Fidelity Contrafund FCNTX $1,337,307.46 Large Growth
Fidelity Select Technology FSPTX $1,183,396.93 Technology
Columbia Acorn LACAX $1,058,146.20 Mid-Cap Growth
Mairs & Power Growth MPGFX $1,044,664.42 Large Blend
American Century Ultra TWUIX $949,697.85 Large Growth
American Funds Growth Fund of America AGTHX $911,224.84 Large Growth
Dodge & Cox Stock DODGX $882,607.15 Large Value
Davis New York Venture DNVYX $880,236.99 Large Blend
Sequoia SEQUX $878,547.29 Large Growth
MainStay MAP Equity MUBFX $860,784.06 Large Blend
American Funds Fundamental Investors ANCFX $852,664.06 Large Blend
Congress Large Cap Growth CMLIX $843,696.15 Large Growth
Fidelity Magellan FMAGX $842,506.17 Large Growth
AllianzGI Mid-Cap DRMCX $835,241.29 Mid-Cap Growth
PGIM Jennison Utility PRUZX $798,656.03 Utilities
Wells Fargo Omega Growth EOMYX $765,571.10 Large Growth
American Funds New Perspective ANWPX $760,959.32 World Large Stock
Franklin DynaTech FKDNX $725,992.94 Large Growth
T. Rowe Price Growth Stock PRGFX $720,070.32 Large Growth
American Funds Washington Mutual AWSHX $702,253.93 Large Blend
Invesco Oppenheimer Global OPPAX $675,280.25 World Large Stock
Royce Pennsylvania PENNX $653,236.37 Small Blend
American Funds AMCAP AMCPX $653,207.62 Large Growth
American Funds Investment Company of America AIVSX $651,530.65 Large Blend
Vanguard 500 Index VFIAX $644,001.56 Large Blend
Putnam Global Health Care PHSTX $643,135.49 Health
Voya Corporate Leaders LEXCX $636,816.74 Large Value
American Century Growth TWGIX $627,892.09 Large Growth
Franklin Growth FKGRX $627,601.83 Large Growth
Selected American Shares SLASX $613,433.95 Large Blend
Touchstone Large Cap Focused SICWX $610,546.79 Large Blend
DWS Science and Technology KTCIX $608,598.99 Technology
Fidelity FFIDX $598,692.53 Large Growth
ClearBridge Appreciation SAPYX $597,949.96 Large Blend
Neuberger Berman Mid Cap Growth NBMLX $588,938.21 Mid-Cap Growth
Nicholas NICSX $587,849.26 Large Growth
MFS Massachusetts Investors Growth MIGFX $586,297.95 Large Growth
AB Sustainable Global Thematic ALTFX $571,854.01 World Large Stock
Ivy Accumulative IATAX $569,978.66 Large Growth
ClearBridge Value LMNVX $569,241.14 Large Blend
American Century Select TWSIX $548,038.61 Large Growth
Fidelity Trend FTRNX $546,301.53 Large Growth
Neuberger Berman Guardian NGDLX $538,439.51 Large Growth
Vanguard Windsor VWNDX $535,368.10 Large Value
Victory RS Large Cap Alpha RCEYX $533,983.60 Large Blend
Virtus KAR Mid-Cap Growth PICMX $532,586.79 Mid-Cap Growth
American Funds American Mutual AMRMX $528,074.53 Large Value
Eaton Vance Dividend Builder EVTMX $526,297.02 Large Blend
FMI Common Stock FMIUX $524,142.62 Mid-Cap Blend
DFA US Micro Cap DFSCX $517,750.86 Small Blend
MFS Research MFRFX $511,946.64 Large Blend
MFS Massachusetts Investors MITTX $509,904.99 Large Blend
William Blair Growth WBGSX $508,597.16 Large Growth
Federated MDT Large Cap Value FMSTX $507,116.29 Large Value
Pioneer PYODX $506,159.89 Large Blend
AB Small Cap Growth QUASX $502,086.46 Small Growth
ClearBridge Large Cap Value SAIFX $488,015.12 Large Value
Invesco Oppenheimer Rising Dividends OARDX $486,636.05 Large Blend
BlackRock Basic Value MABAX $483,591.32 Large Value
Invesco Oppenheimer Capital Appreciation OPTFX $480,061.14 Large Growth
Vanguard International Growth VWIGX $475,995.66 Foreign Large Growth
Fidelity Select Utilities FSUTX $474,848.16 Utilities
AB Relative Value CABDX $474,619.90 Large Value
AB Discovery Growth CHCLX $471,535.92 Mid-Cap Growth
Franklin Mutual Beacon FMBRX $471,403.54 World Large Stock
Fidelity Value FDVLX $469,994.36 Mid-Cap Value
Eaton Vance Large-Cap Value EILVX $467,713.71 Large Value
Fidelity Select Financial Services FIDSX $449,849.90 Financial
Invesco Comstock ACSTX $446,117.39 Large Value
Lord Abbett Developing Growth LAGWX $444,725.02 Small Growth
Invesco Growth and Income ACGIX $443,193.22 Large Value
Value Line Larger Companies Focused VLLIX $441,256.76 Large Growth
Neuberger Berman Large Cap Value NBPIX $435,452.23 Large Value
Nationwide NWFAX $428,485.00 Large Blend
Fidelity Equity-Income FEQIX $425,921.97 Large Value
PGIM Jennison Blend PEQZX $419,000.72 Large Growth
Vanguard U.S. Growth VWUSX $418,844.04 Large Growth
Neuberger Berman Focus NFALX $415,986.28 Large Blend
Franklin Utilities FKUQX $410,369.98 Utilities
Lord Abbett Affiliated LAFFX $409,190.56 Large Value
Principal Equity Income PEIIX $408,409.86 Large Value
BlackRock Asian Dragon MAPCX $400,131.90 Pacific/Asia ex-Japan Stock
PGIM Jennison Small Company PSCZX $394,160.03 Small Growth
Sterling Capital Stratton Mid Cap STRGX $392,332.71 Mid-Cap Blend
Madison Investors MINVX $390,366.59 Large Blend
Vanguard Explorer VEXPX $388,964.31 Small Growth
Value Line Premier Growth VALSX $386,780.02 Mid-Cap Growth
RMB Fund RMBGX $381,118.79 Large Growth
Evercore Equity EWMCX $367,064.60 Large Growth
Putnam Equity Income PEYAX $364,595.35 Large Value
BlackRock Advantage U.S. Total Market MASPX $364,112.30 Large Blend
Guggenheim StylePlus Large Core GILIX $364,105.00 Large Blend
FPA Paramount FPRAX $363,564.08 World Large Stock
Asset Management Large Cap IICAX $358,298.89 Large Blend
Sterling Capital Stratton Real Estate STMDX $355,645.37 Real Estate
Templeton World TEMWX $354,816.44 World Large Stock
Vanguard Small-Cap Index VSMAX $335,675.84 Small Blend
Templeton Growth TEPLX $335,230.11 World Large Stock
ClearBridge All Cap Value SFVYX $330,999.16 Large Value
Invesco Charter CHTRX $323,576.12 Large Blend
Nationwide Mellon Dynamic U.S. Core NMFAX $317,936.95 Large Blend
BNY Mellon Research Growth DWOAX $313,163.78 Large Growth
Natixis Oakmark NEOYX $295,127.06 Large Blend
BNY Mellon Sustainable U.S. DTCAX $289,371.12 Large Blend
USAA Aggressive Growth USAUX $287,951.97 Large Growth
DWS Core Equity SUWIX $279,906.09 Large Blend
Guggenheim StylePlus Mid GIUIX $273,043.96 Mid-Cap Growth
Templeton Global Smaller Companies TEMGX $271,265.79 World Small/Mid Stock
T. Rowe Price International Stock PRITX $255,557.86 Foreign Large Growth
Value Line Mid Cap Focused VLMIX $252,791.40 Mid-Cap Growth
BNY Mellon Large Cap Securities DREVX $250,571.86 Large Growth
Crossmark Steward Small-Mid Cap SCECX $249,775.87 Small Blend
T. Rowe Price New Era PRNEX $241,953.11 Natural Resources
USAA Growth USAAX $219,379.88 Large Growth
Selected International SLSSX $214,346.34 Foreign Large Blend
Virtus Vontobel Global Opportunities WWOIX $199,304.09 World Large Stock
DWS CROCI International SUIIX $191,527.97 Foreign Large Blend
Delaware Global Equity FIITX $189,838.84 World Large Stock
WPG Partners Small/Micro Cap Value WPGTX $189,497.88 Small Value
Eaton Vance Special Equities EISEX $186,974.12 Mid-Cap Growth
Nationwide Bailard International Equities NWHJX $158,868.53 Foreign Large Blend
Guggenheim Large Cap Value GILCX $131,593.28 Large Value
Fidelity Select Energy FSENX $114,436.54 Equity Energy
Franklin Gold and Precious Metals FKRCX $112,481.20 Equity Precious Metals
U.S. Global Investors All American Equity GBTFX $100,188.81 Large Blend
VanEck International Investors Gold INIYX $99,013.49 Equity Precious Metals
U.S. Global Investors Gold and Precious Metals USERX $10,012.92 Equity Precious Metals
I do want to emphasize that I am very aware that past performance does not reflect future performance. My conclusion was, with perfect hindsight, that I wish I would have invested in the Fidelity Health Care fund back in 1982. I don’t necessarily believe that it will always outperform going forward. My point is, you believe that small cap value will outperform In the future based on historical performance. You are just as guilty as I am of perfect hindsight. I don’t necessarily believe small value will come back because of the advent of index funds, which are dominated by the S&P 500. The Fama/French research went back to 1928 and ended in the early 1980s, when the Vanguard 500 was the only index fund in existence. Most individuals today invest through their 401k plans which are dominated by S&P 500 and Target Date funds. There is not a lot of money flowing into Small Cap Value on a relative basis. The Fama/French research covered a time period when investing involved active management except for the Vanguard 500 fund. Small stocks outperformed large stocks simply because they had more room to grow and value outperformed growth because of active stock selection. That era may have passed us by due to index and target date investing. Only time will tell.
Fama/French research has certainly been updated after the 1980s and shown to be robust across time periods and countries.
If you’re going to wish, why not wish you’d bought Amazon or Alphabet on the day it hit the market? With leverage. Why stop with a mere mutual fund with a few points of outperformance.
I don’t have a problem with someone having a health care tilt in their portfolio so long as it is reasonable. Lots of Bogleheads have been doing that for decades.