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Big Three Index Funds on allocation...
Old 11-06-2009, 02:10 PM   #1
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Big Three Index Funds on allocation...

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.
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Old 11-06-2009, 02:20 PM   #2
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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.
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Old 11-06-2009, 02:22 PM   #3
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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.
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Congrats on the upcoming retirement!
Old 11-06-2009, 03:00 PM   #4
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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!
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Old 11-06-2009, 03:04 PM   #5
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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.
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Old 11-06-2009, 03:31 PM   #6
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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.
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Old 11-06-2009, 03:42 PM   #7
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Quote:
Originally Posted by Spartacus View Post
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!
Quote:
Originally Posted by LOL! View Post
I prefer the Vanguard FTSE all-world ex-US fund (VFWIX) over the International Index fund.
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Old 11-06-2009, 03:51 PM   #8
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Quote:
Originally Posted by Spartacus View Post
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.
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Old 11-06-2009, 04:54 PM   #9
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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?
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Old 11-06-2009, 05:04 PM   #10
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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.
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Old 11-06-2009, 05:16 PM   #11
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Quote:
Originally Posted by Spartacus View Post
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...
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Old 11-06-2009, 05:27 PM   #12
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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...
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Old 11-06-2009, 05:41 PM   #13
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Even easier, a bond fund and VT for stock holding.
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Old 11-06-2009, 06:07 PM   #14
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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.
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Old 11-06-2009, 06:34 PM   #15
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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.
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But, what if
Old 11-06-2009, 06:49 PM   #16
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But, what if

what if they were the only three I did
about a 50% equities, 50% bond split?
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Old 11-06-2009, 08:47 PM   #17
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Very solid core.

To those funds I'd add exposure to TIPS for sure. Probably REITs. And maybe some commodities, too.
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Old 11-06-2009, 09:36 PM   #18
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How about using one fund as core: Vanguard Total World Stock ETF - VT?
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Old 11-06-2009, 10:15 PM   #19
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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.
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Old 11-06-2009, 10:15 PM   #20
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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.
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