I've been spending some time studying various "lazy portfolios" and one of the ones that seems to test out quite well is Paul Merriman's ETF choices from
FundAdvice.com - Suggested Portfolios
I took his recommended balanced ETF portfolio and rebalanced it to 70/30 (versus his balancing of 60/40) to get:
7% each in SPY, VTV, IWC, VBR, VNQ, EFA, EFV, and VWO
14% in DLS
15% in IEF
9% in SHY
6% in TIP
Then I started to think of ways to optimize the individual holdings within each sector. A few ideas there:
1. I don't think I can improve much on the Vipers he chooses, they have a possible tax disadvantage in that they are different classes of VG's regular index funds, but I see that as only a theoretical disadvantage and in any event I feel it is far compensated for by the superior expense ratios sported by the Viper family. Seems like nobody beats VG on cost.
2. I would substitute IVV for SPY. It has a lower expense ratio than SPY, and IVV has an advantage in that they reinvest dividends received from portfolio companies rather than distributing them to the shareholders of the ETF.
3. Instead of purchasing EFA, I would buy VGK / VPL in a 74 / 26 mix (well OK I'd probably buy it 75 / 25). You obtain the same mix that way with lower expenses, at the expense of extra brokerage trade costs.
4. I looked hard at FDM / PZI in place of IWC. But these seem too "actively" managed to me, and in any event IWC has much more liquidity and a lower expense ratio. I'll leave IWC in place.
5. Looked at RWR in place of VNQ, but again VG's lower cost structure wins out for me. They track different REIT indices anyway.
6. Sadly there are no "Government Bond" VIPERS to replace IEF/SHY/TIP with, but each is only 15 bps expenses anyway, so not much to save.
7. The position I'm least comfortable with in the resulting portfolio is DLS. Relatively high expense ratio of 58 bps and its only been out about 14 months. Since Wisdom Tree works off home grown and quasi actively managed indices its not going to be possible to find an exact match. Odd that a "dividend" fund only has a 0.36% yield according to Yahoo finance, but I suspect that the hassle of claiming foreign dividend tax credits would make it painful enough that I'd be happy this fund has a lowish yield. GWX might be an alternative, but its also expensive @ 60 bps and is very new.
Any thoughts to further improve/refine this portfolio?
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