Big Three Index Funds on allocation...

[Spartacus]

What do you guys think of:
VTSMX, Vanguard Total Stock Market index (Wilshire 5000)
VGTSX, Vanguard International Index
VBMFX, Vanguard Total Bond Market

Going for market averages and such.
Why wouldn't this be all ya ever need? Just change allocations.
After all, 95% of actively managed funds do not beat market indexes in the long run.

 

[FIREd]

I have all three as part of my core portfolio. I spice things up with a few other offerings but I think that those three funds alone are great for those who want to keep it simple.

 

[W2R]

Sounds reasonable. I have VTSAX, VBMFX, and VFWIX, and I am perfectly happy with them. Like Firedreamer, I have other holdings but these funds are a good part of my portfolio.

 

[Spartacus]

Congrats on the upcoming retirement!

I too live near New Orleans. Imagine, you get to retire, AND watch the Saints win the Super Bowl this year!

 

[W2R]

I try not to follow the Saints, but it's pretty hard, here! When they play, New Orleans temporarily loses its (collective) mind. But as for me, last week I had to ask somebody what city the Falcons were associated with. I know we are 7-0, though. If the Saints win the Superbowl, then I guess h*ll really WILL freeze over.

Thanks for the congrats.

 

[LOL!]

I prefer the Vanguard FTSE all-world ex-US fund (VFWIX) over the International Index fund.

The 3 funds you listed are missing an important part of the world: namely small cap international. So you have to add VFSVX (FTSE all-world ex-US small cap index) to those 3 funds.

And some folks would say that you need some inflation-protected securities in there as well, such as from VIPSX.

Then there is the question of whether to tilt to small cap and to value, but that's for another thread.

 

[bamsphd]

What do you guys think of:
VTSMX, Vanguard Total Stock Market index (Wilshire 5000)
VGTSX, Vanguard International Index
VBMFX, Vanguard Total Bond Market

If I was starting from scratch and could choose any funds, a 50/50 mix of those equity funds would be my first choice for the equity portion of my portfolio.

I don't like long bonds, because I have read so often that they are too volatile for most individual investors. So on the bond side I would prefer the Vanguard Short-Term Bond Index supplemented with a heavy dose of TIPS.

However, I'll freely admit Total Bond is a purer efficient market choice. A third each of those three funds would make a very fine, very inexpensive, and very simple portfolio.

Edit: I agree with LOL!

I prefer the Vanguard FTSE all-world ex-US fund (VFWIX) over the International Index fund.

 

[easysurfer]

What do you guys think of:
VTSMX, Vanguard Total Stock Market index (Wilshire 5000)
VGTSX, Vanguard International Index
VBMFX, Vanguard Total Bond Market

Going for market averages and such.
Why wouldn't this be all ya ever need? Just change allocations.
After all, 95% of actively managed funds do not beat market indexes in the long run.

Sounds like a good and simple approach to me. Can just focus re-adjusting the allocations when needed.

 

[FIREd]

LOL! and bamsphd,

any particular reason why you prefer VFWIX over VGTSX? I have been looking at both and except for VFWIX's exposure to Canada, I don't see much difference between the two. And now that VGTSX has moved away from the fund of funds model, one can claim the foreign tax credit with both funds. What am I missing?

 

[LOL!]

I actually like ETFs, so I use VEU and VSS. I like that VSS is a completion index for small cap of VEU. And I like Canada as well.

 

[Midpack]

What do you guys think of:
VTSMX, Vanguard Total Stock Market index (Wilshire 5000)
VGTSX, Vanguard International Index
VBMFX, Vanguard Total Bond Market

Going for market averages and such.
Why wouldn't this be all ya ever need? Just change allocations.
After all, 95% of actively managed funds do not beat market indexes in the long run.

The Coffeehouse Investor and the basic Couch Potato portfolio would agree with you, and it would be hard to do much better than a good allocation of these three alone. Not that it matters to you, but 56% of my AA is in these three funds. Many slightly more sophisticated index fund portfolios would have these at their core. If you want a set it and forget it portfolio, and most people in the mainstream do, you've got it.

Congratulations, you've already figured out something that many people never catch on to...

 

[JustNtime]

Is their an ETF or index fund that mimics the AMEX vice S&P/DOW/etc.?

I'm down to my dirty baker dozen of individual stocks. I only bought eight of them, the rest are spinoffs. I wish they wouldn't do that - just increases the commission to sell them...

 

[yakers]

Even easier, a bond fund and VT for stock holding.

 

[Lusitan]

VTSMX, Vanguard Total Stock Market index (Wilshire 5000)
VGTSX, Vanguard International Index
VBMFX, Vanguard Total Bond Market

Three great tastes that taste great together.

All of these are a big part of my portfolio. Other than the Target Retirement route, these are probably the easiest funds to build your asset allocation with in a simple, cost-effective way.

 

[target2019]

Those three funds are 38% of my overall allocation.

Vanguard Total Bond Market Index Fund Inv 18.4%
Vanguard Total Stock Market Index Fund Inv 7.6%
Vanguard Total International Stock Index Fund 10.8%

Throughout the last bear I did not reallocate these. I am still 10% off their previous high.

I also have built/reallocated small cap and small cap value to a 14% overall allocation. Since 10% of this was new contributions, it has done very well, and improved the overall total.

 

[Spartacus]

But, what if

what if they were the only three I did
about a 50% equities, 50% bond split?

 

[Gone4Good]

Very solid core.

To those funds I'd add exposure to TIPS for sure. Probably REITs. And maybe some commodities, too.

 

[Spanky]

How about using one fund as core: Vanguard Total World Stock ETF - VT?

 

[samclem]

Why wouldn't this be all ya ever need? Just change allocations.
After all, 95% of actively managed funds do not beat market indexes in the long run.

This approach is a solid one, and could produce results better than those achieved by most investors. But here's why some folks might add funds in addition to those:
1) To add other asset classes (REITs, TIPs, etc.). Adding asset classes with historically low correlations to each other helps reduce the overall volatility of the portfolio. This can allow an investor to still include holdings with high volatility (and therefore generally higher returns) while having the overall portfolio value remain as steady as if less volatile assets had been used. It's almost a free lunch. Except it doesn't always work well--during the latest dip almost everything went down at once.
2) To "tilt" the portfolio toward assets that have produced greater returns for a given level of risk (e.g. small stocks and value stocks). Such an investor might choose the funds you've cited as te "core" of their portfolio, but add other funds (maybe VGD index funds) to get the added exposure they want in these areas.
3) To increase tax efficiency. The Vanguard Tax Managed funds handle their trades slightly differently to reduce the taxable distributions they generate. An investor holding accounts outside of an tax-advantaged account might end up with greater net returns by using these funds rather than the ones you've listed.

Again, these are minor "tweaks." Your approach would work fine.

 

[Spartacus]

I'm gonna carry a 50/50 split:

The 50% stock will come from:
29% us total stock market vanguard index
2% us large value vanguard index
2% us small value vanguard index
2% REIT vanguard index
15% vanguard total international stock market index

The 50% bond will come from:
50% total bond vanguard index

I did the math, this is cooking about a 14% ytd return.

It's easy, I won't drive myself crazy watching it, and I can rebalance cheaply twice a year. The funds are virtually free of expenses.
It's user friendly. Will hopefully grab the averages, and pick up a little spike in the long run with the "value" and "reit" tiny poppers.

What do you guys think? I've spent all week on this crap, and I've got about a month to kick this in.

12/18/09 is D-Day, and I'm so ready for this all to work. Your advice is greatly appreciated more than words could express.

 

[samclem]

I'm gonna carry a 50/50 split:

The 50% stock will come from:
29% us total stock market vanguard index
2% us large value vanguard index
2% us small value vanguard index
2% REIT vanguard index
15% vanguard total international stock market index

The 50% bond will come from:
50% total bond vanguard index

I did the math, this is cooking about a 14% ytd return.

It's easy, I won't drive myself crazy watching it, and I can rebalance cheaply twice a year. The funds are virtually free of expenses.
It's user friendly. Will hopefully grab the averages, and pick up a little spike in the long run with the "value" and "reit" tiny poppers.

What do you guys think? I've spent all week on this crap, and I've got about a month to kick this in.

12/18/09 is D-Day, and I'm so ready for this all to work. Your advice is greatly appreciated more than words could express.

You probably won't go far wrong.

You are young and so you have a long time horizon. Given that, if I were in your boots I'd probably want to have more equities (maybe 55% or 60% instead of 50%).

I would also add a 10% position in "cash" (money market funds, CDs, etc). This is your "cushion" and will give you 3+ years of living expenses at your planned withdrawal rate. If stocks and bonds both go down, you can use this money and avoid selling when your share prices are lower. (This would be "bucket one" in Ray Lucia's "three bucket" approach).

You have a long time horizon and no "institutional" safeguard against inflation (COLA'd pension, SS in the near-term, etc). Equities often keep up with inflation, but not always. You might give this some consideration. Here's a recent thread where we talked about inflation "insurance."

Of the points above, I think adding "cash" is the most important.

As I'm sure you appreciate, you are taking some risk by jumping off the career track and into lower-paying work. Your plan includes a stated willingness to go back to work. I'd recommend you keep enough term life insurance to get the kids through college and to fill in for that income if you get hit by a bus.

 

[samclem]

Another thought: If you are temperamentally suited to it, a small piece of income property (a duplex or a single family home) that you could manage and maintain yourself might not be a bad addition to your holdings. Why?
- Houses are cheap right now. It might be many years before they go back up, but the bargains are there today (and will be for awhile).
- Loan rates are at historic lows. Also, if inflation does take off, you'll be paying off that loan with ever-more-worthless dollars.
- Diversified source of monthly income: The income from rent would remain steady if stocks dive.
- Inflation hedge: If inflation takes off, you may be able to raise rents (depending on other factors).

I consider buying income real estate to be buying a job. If you are going to screen tenants yourself, do the maintenance yourself, collect the rents yourself, etc, then you'll be earning this monthly rental check. Still, you've said you still want to be employed, and this is one way to do it.

 

[target2019]

2% positions (REIT, SC, LV) will not bring much to the party.

 

[Midpack]

I'm gonna carry a 50/50 split:

The 50% stock will come from:
29% us total stock market vanguard index
2% us large value vanguard index
2% us small value vanguard index
2% REIT vanguard index
15% vanguard total international stock market index

The 50% bond will come from:
50% total bond vanguard index

I did the math, this is cooking about a 14% ytd return.

It's easy, I won't drive myself crazy watching it, and I can rebalance cheaply twice a year. The funds are virtually free of expenses.
It's user friendly. Will hopefully grab the averages, and pick up a little spike in the long run with the "value" and "reit" tiny poppers.

What do you guys think? I've spent all week on this crap, and I've got about a month to kick this in.


12/18/09 is D-Day, and I'm so ready for this all to work. Your advice is greatly appreciated more than words could express.

• Looks like Bernstein among others, US & Intl Eq plus Bonds as core holdings with a Small & Value Tilt plus REIT.
• I didn't catch your age, but 50% equities is pretty conservative, but may be just what you're comfortable with - and that's what's most important.
• And finally, IMO (and many others) holding a 2% position in any fund is almost pointless, they won't have any significant impact on your returns. Almost looks like you've read about the small, value, REIT tilt - but you're not sold on the idea. Best of luck, you're certainly on the same track as most of us here and your choices are solid.

 

[Gone4Good]

I consider buying income real estate to be buying a job. If you are going to screen tenants yourself, do the maintenance yourself, collect the rents yourself, etc, then you'll be earning this monthly rental check. Still, you've said you still want to be employed, and this is one way to do it.

Depending on where you live you may be able to outsource this "job". We're going to be renting our place out while we travel for the next several years. We've found a property management company that will manage the place in our absence for $55 per month. Money well spent, in my view.