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Old 04-17-2011, 02:44 PM   #21
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DFA does more work in selecting the components of their funds than is necessary for index funds since they don't match index components and have slices of the market in some of their funds that aren't indexed. Net, I'd think their internal costs would be higher than for those funds that are true indexes. Issue is whether DFA's work is of value. I'm guessing VG has more sales costs in total/share than DFA does given the fewer DFA trades, but VG's total costs - sales + internal transactions + research - are still lower because of DFA's research & greater buying/selling. JMO.
DFA fees are generally higher than VG and if they had to include the customer service, custodian and transaction costs they would be even higher. While DFA fees are lower than many mutual funds, I don't like their sales pitch which emphasizes keeping costs down and they requires you to use fee based advisers and a separate custodian to buy their funds, imposing extra costs on the investor. VG has the lowest fees around on it's funds and I also get a custodian for my taxable investments and IRAs etc without extra expenses. Whether the DFA small cap/value bias and adviser network provide enough, or any edge over VG will always depend on reference periods, asset allocation and adviser fees. If you like the DFA model you could over weight value and small cap in VG easily enough.

My bottom line when comparing DFA and VG is summed up by Bogle's statement that "in investing you get what you DON'T pay for". DFA has shareholders to satisfy as well as customers, with VG the shareholders are the customers. The adviser thing just annoys me as I firmly believe that investing isn't rocket science and they add no value over rebalancing a sensible AA in index funds.
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Old 04-17-2011, 03:17 PM   #22
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DFA fees are generally higher than VG and if they had to include the customer service, custodian and transaction costs they would be even higher. While DFA fees are lower than many mutual funds, I don't like their sales pitch which emphasizes keeping costs down and they requires you to use fee based advisers and a separate custodian to buy their funds, imposing extra costs on the investor. VG has the lowest fees around on it's funds and I also get a custodian for my taxable investments and IRAs etc without extra expenses. Whether the DFA small cap/value bias and adviser network provide enough, or any edge over VG will always depend on reference periods, asset allocation and adviser fees. If you like the DFA model you could over weight value and small cap in VG easily enough.

My bottom line when comparing DFA and VG is summed up by Bogle's statement that "in investing you get what you DON'T pay for". DFA has shareholders to satisfy as well as customers, with VG the shareholders are the customers. The adviser thing just annoys me as I firmly believe that investing isn't rocket science and they add no value over rebalancing a sensible AA in index funds.
I get that you think the lowest fee funds are best and that you don't like the idea of paying for an advisor and in particular, DFA's approach. But, not all of us are interested in the effort, however little you might think that is, to do it ourselves. For me in particular, I don't like the idea of of me a) selecting, and b) deciding when to pull the trigger for changes, be it rebalance or otherwise. I'd rather spend my time and decisions-making and emotions on other subjects. That's not to say I'm not interested in keeping up with what's going on with my investments. DFA didn't sell me on anything, the advisor did with his passive investing philosophy after me reading books someone else than the advisor recommended to me. I didn't pick him because of DFA-access though I admit I like what I hear. I also think about a time when I may not be able to make these investment decisions. My spouse is sharp financially, but she's not interested either. Lastly, as best I know, DFA covers some investment areas VG doesn't and DFA isn't the slave to indexes that VG is; i.e., needing to buy quickly when the index changes which drives up the buying and down the selling prices. Net, to each their own.
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Old 04-17-2011, 04:42 PM   #23
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But, not all of us are interested in the effort, however little you might think that is, to do it ourselves. For me in particular, I don't like the idea of of me a) selecting, and b) deciding when to pull the trigger for changes, be it rebalance or otherwise. I'd rather spend my time and decisions-making and emotions on other subjects.
The issue usually comes up when ERs withdraw 4% of their portfolio and realize how much of that withdrawal is going to their financial adviser. Didn't seem like such a big deal during the accumulation phase, but it's a lot harder to overlook during the distribution phase.
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Old 04-17-2011, 10:06 PM   #24
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But, not all of us are interested in the effort, however little you might think that is, to do it ourselves. For me in particular, I don't like the idea of of me a) selecting, and b) deciding when to pull the trigger for changes, be it rebalance or otherwise. I'd rather spend my time and decisions-making and emotions on other subjects.
Definitely each to his own. If someone wants an advisor that's entirely their choice. I don't like making decisions or spending 1% a year on an advisor which is why I use the couch potato 50/50 index strategy.

The issue I have with DFA is that they talk about keeping costs low and then have a sales structure that imposes extra costs on the investor.
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New Performance Data for Clyatt Work Less Live More Portfolios
Old 04-24-2011, 08:36 AM   #25
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New Performance Data for Clyatt Work Less Live More Portfolios

Great thread.
Can't resolve the DFA question -- there are lower-cost advisors out there who can get you access - Evanson Asset Mgmt charges about 2k a year -- but that may still be a high % of assets. There are definitely good ETFs and alternatives out since the book was first written in 2005 that make DFA less compelling.

In the book there is an 8-fund "Sandwich Portfolio" which substantially mimics the full slice-and-dicers-only-need-apply RIP Portfolio with much less hassle.

I've just posted the 2007-2010 results for that on the book's website so people can see how this portfolio has fared through the downturn. Funds and percents are listed there, too, but the performance data, taken from the individual funds' historical performance data on Morningstar and Vanguard's sites is:

2007 7.58%
2008 -20.34%
2009 23.10%
2010 13.36%

We've been living as ERs on 4.3% withdrawals from something very close to this portfolio for nearly 10 years now and are well-ahead through all the ups and downs. It's allowed me to focus on a 2nd 'career' as a sculptor which has been a ton of fun (and kept me from posting here much lately I'm afraid). Hope this update helps and feel free to re-post the performance data wherever people think it should best be seen.

Bob Clyatt
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Old 04-24-2011, 09:35 AM   #26
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Bob, nice to hear from you! Thanks for the updated info.
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Old 04-25-2011, 08:36 AM   #27
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Bob, thanks for checking in! Still love the book and have the original edition. Have recommended it many times...
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Old 01-09-2012, 06:48 PM   #28
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The Work Less Live More "Sandwich Portfolio" managed to eke out a .72% positive return in 2011. Funds, weights, returns and weighted return for 2011 are:

VFINX sp500 20% 1.89% 0.38%
VTMSX Txmgsmal 8% 1.22% 0.10%
VGTSX Tot Int' 6% -14.56% -0.87%
VINEX Int'l Explor 10% -19.74% -1.97%
VEIEX Emerging 6% -19.18% -1.15%
VBIIX Intmed Bond 30% 10.62% 3.19%
BEGBX Foreign Bond 11% 5.72% 0.63%
VGSIX Reit index 5% 8.47% 0.42%
Vmmxx Prime MM 4% 0.05% 0.00%

Total Weighted Return 0.72%



This portfolio closely tracks the full Rational Investment Portfolio in the book but can be done with 8 readily available mutual funds and has the added benefit of allowing me to personally calculate return (the sub-index returns in the more complex RIP Portfolio are done for me by a service when the book gets revised) International kinda got clobbered this year, but that's what slicers & dicers need to accept sometimes.

Returns for recent years since the book was published are:

2007 7.58%
2008 -20.34%
2009 23.10%
2010 13.36%
2011 0.72%

Hope everyone is having a great year! My ER avocation, sculpture, is finally starting to take off after 11 years; I have a new studio in the back yard, and enough galleries wanting any new work I can make that I am staying comfortably busy and even putting some $ in the bank this year.
Stay the course, it is well worth it.
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Old 01-09-2012, 06:54 PM   #29
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Hey Bob! Nice to hear from you again.
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Old 01-09-2012, 10:30 PM   #30
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I second that. Bob, your "Work Less, Live More" books remain among my favorites on the retirement shelf, and if I were to slice and dice, I'd follow your portfolio recommendation.

A question: If one wanted to stay entirely within Vanguard, would you say that a viable replacement for BEGBX Foreign Bond would be the new Vanguard Total International Bond Index Fund?
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Old 01-09-2012, 10:36 PM   #31
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Bob, welcome back. It's great to get an update on how the "Sandwich Portfolio" did last year. BTW, I love your sculptures! You are a gifted artist.
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Old 01-09-2012, 10:41 PM   #32
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US Large Stocks Value Tilt 12%
US Small Stocks Value Tilt 8.5
International Large Stocks 5%
International Small Stocks 10%
Emerging Markets Stocks 6.5%
ST Corp Bonds/Money Market 4%
US Govt Bonds-Long 4%
Med-Term US Bonds 10%
Med Term Int Bonds 12%
GNMA Bonds 5%
High Yield Bonds 4%
Oil and Gas 3%
Market Neutral Hedge Fund 2%
Commodities 4%
Comm Real Estate 5%
Venture Cap/Private Equity 5%
All these funds make me think one is creating one's own Total World Everything Index fund. My 2 cents.
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Old 01-10-2012, 11:10 AM   #33
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Thanks for the update Bob and congrats on the sculpture!!!
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Old 01-10-2012, 11:28 AM   #34
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Hope everyone is having a great year! My ER avocation, sculpture, is finally starting to take off after 11 years; I have a new studio in the back yard, and enough galleries wanting any new work I can make that I am staying comfortably busy and even putting some $ in the bank this year.
Stay the course, it is well worth it.
Thanks, Bob, I was wondering about your propane & electricity bills!
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Old 01-10-2012, 01:04 PM   #35
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Nords, the electricity bills are definitely climbing -- doing my part to make the Northeast the next Florida. 45 degree sunny January days are pretty nice!
Actually the glass studio is fairly energy efficient with double panes and cellular pleated shades, but my main heating is from a wood pellet stove -- love it. Fill the hopper with 'rabbit food' (pressed sawdust I think), turn on the thermostat, and it feeds itself, starts and stops the fire etc all with a little help from electricity. Keeps the place warm round the clock in freezing weather with less than a bag a day ($4), supplemented with a Mitsubishi Split heat pump.

Kiln firings are another matter, but in principle the things coming out of the kiln get sold for a lot more than the cost of the clay and heat, so it's all good. Maybe $10-$15 per firing for an 9 cubic foot kiln? How does that compare to surfboard wax, suntan lotion and advils?

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Old 01-10-2012, 08:07 PM   #36
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Maybe $10-$15 per firing for an 9 cubic foot kiln? How does that compare to surfboard wax, suntan lotion and advils?
Um, that'll last me at least six months if I stay out of the big waves and don't run into anything! But this year I need to invest in a 3mm neoprene high-neck long-sleeve top. Not enough body fat to survive those bitter 75-degree surf temps.

I really like the minimalist look of your studio's steel & glass design. I guess your spouse likes having her house back?

Check your e-mail-- I just sent you an update on the book sales. I'll post the report on the blog at 5 AM HST Wednesday (in about 13 hours).
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Thanks Bob...
Old 04-16-2012, 01:39 PM   #37
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Thanks Bob...

Bob,

Thanks for the update...went looking for it today on your website, but 2011 isn't up there yet.

I've made the switch from an active advisor (.8% advisor + ave 1.1% funds) to a low cost advisor, passive index advisor (low fixed + .3% funds). Trying to figure out what rolling my own looks like.

I like your sandwich w/8 funds...but started thinking about the exposure to intermediate term bonds with our current rate environment.

I'm not into market timing, but it does seem to me, taking into account extreme circumstances seems prudent...

Any thoughts on how one might handle an intermediate term bond holding that could drop (post 2014) as rates rise?
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Old 04-16-2012, 05:01 PM   #38
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Hope everyone is having a great year! My ER avocation, sculpture, is finally starting to take off after 11 years; I have a new studio in the back yard, and enough galleries wanting any new work I can make that I am staying comfortably busy and even putting some $ in the bank this year.
Stay the course, it is well worth it.
I've been (mostly) replicating Bob's RIP inside my Roth account with the following funds/stocks/etfs... expenses are all less than 0.5% except where noted. The only pricey sectors are VC and Market Neutral...not sure why everyone thinks they need to beat a path to an 'advisors' door to assemble this portfolio:

US Large Stocks Value 12% VTV
US Small Stocks Value 8.5% VBR, IWN
International Large Stocks 5% VGK/VPL
International Small Stocks 10% SCZ
Emerging Markets Stocks 6.5% VWO
ST Corp Bonds/Money Market 4% VFSTX
US Govt Bonds-Long 4% VIPSX
Med-Term US Bonds 10% BIV, (others) VBIIX , CDs
Med Term Int Bonds 12% FNMIX, BWX
GNMA Bonds 5% VFIX
High Yield Bonds 4% VWEHX, BKLN
Oil and Gas 3% VDE, (others) OIL, GASFX
Market Neutral Hedge Fund 2% MERFX, ARBFX, RYMSX
Commodities 4% PCL, (others) QRAX, PCRIX (.74), DBC(0.8), GSG(.75)
Comm Real Estate 5% VNQ, PDM, (others) GOV, VNO
Venture Cap/Private Equity 5% PSP(.7), (others) CSWC, MVC
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Old 04-16-2012, 07:07 PM   #39
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US Large Stocks Value 12% VTV
US Small Stocks Value 8.5% VBR, IWN
International Large Stocks 5% VGK/VPL
International Small Stocks 10% SCZ
Emerging Markets Stocks 6.5% VWO
ST Corp Bonds/Money Market 4% VFSTX
US Govt Bonds-Long 4% VIPSX
Med-Term US Bonds 10% BIV, (others) VBIIX , CDs
Med Term Int Bonds 12% FNMIX, BWX
GNMA Bonds 5% VFIX
High Yield Bonds 4% VWEHX, BKLN
Oil and Gas 3% VDE, (others) OIL, GASFX
Market Neutral Hedge Fund 2% MERFX, ARBFX, RYMSX
Commodities 4% PCL, (others) QRAX, PCRIX (.74), DBC(0.8), GSG(.75)
Comm Real Estate 5% VNQ, PDM, (others) GOV, VNO
Venture Cap/Private Equity 5% PSP(.7), (others) CSWC, MVC
That is a nice AA, wish I had thought of it. I prefer to keep things simpler (have DWs IRA in Wellesley) but this looks like a case where the complexity could actually pay off.
Which funds are in tax deferred/free and which taxable?
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Old 04-16-2012, 09:19 PM   #40
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The Work Less Live More "Sandwich Portfolio" managed to eke out a .72% positive return in 2011.

Returns for recent years since the book was published are:

2008 -20.34%
2009 23.10%
2010 13.36%
2011 0.72%
Quote:
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I've been (mostly) replicating Bob's RIP inside my Roth account with the following funds/stocks/etfs...

US Large Stocks Value 12% VTV
US Small Stocks Value 8.5% VBR, IWN
International Large Stocks 5% VGK/VPL
International Small Stocks 10% SCZ
Emerging Markets Stocks 6.5% VWO
ST Corp Bonds/Money Market 4% VFSTX
US Govt Bonds-Long 4% VIPSX
Med-Term US Bonds 10% BIV, (others) VBIIX , CDs
Med Term Int Bonds 12% FNMIX, BWX
GNMA Bonds 5% VFIX
High Yield Bonds 4% VWEHX, BKLN
Oil and Gas 3% VDE, (others) OIL, GASFX
Market Neutral Hedge Fund 2% MERFX, ARBFX, RYMSX
Commodities 4% PCL, (others) QRAX, PCRIX (.74), DBC(0.8), GSG(.75)
Comm Real Estate 5% VNQ, PDM, (others) GOV, VNO
Venture Cap/Private Equity 5% PSP(.7), (others) CSWC, MVC
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...but this looks like a case where the complexity could actually pay off.
The last quote got me thinking...and I took a flyer at comparing the sandwich with the Full RIP mentioned by ejw93 to see if it was worth it.....
  1. I looked through the RIP list and found ones I liked given what they were and long term performance. I also tried to use ETFs instead of MFunds when possible.
  2. I don't like VC/PE in general. I do like PCL (Timber), GLD and DBC (broad commodities) so I took out VC/PE, added those $ to Commodities and split it between the 3.
  3. The shortest living fund started in 2007. So I got starting prices Dec 31, 2007.
  4. I distributed $1mm per the RIP portfolio percentages.
  5. I put all the information into a morningstar portfolio as if I purchased everything before the open on Jan 1, 2008.
  6. Morningstar allows you to then apply all dividends and distributions over the holding period to reinvest. I did that.
Here is what I got.

Comparing results from the Sandwich:
YearSandwichRIP
2008-20.34%-19.74%
200923.10%29.61%
201013.36%15.13%
20110.72%2.01%
Looks like there may be some upside to slice and dice, but is it worth it? [obviously fund fees are included, but I didn't include transaction fees]

Attached is the spreadsheet results from Morningstar...which shows which funds I chose.....

Yeah it is only a short term exercise, but was fun and interesting to go through the thought exercise.....

Bob, forgive me what I did with the VC/PE $...I know it's not pure RIP.

YMMV
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