Vanguard Advisor's Portfolio Proposal

[Goldenmom]

Goldenmom -- in a prior thread you asked about making a Swedroe style portfolio with tilts to value, small, and international funds. The vanguard advisor portfolio is significantly different from this. Why the change? If you believe in the benefits of value/size/int diversification, the vanguard advisor portfolio won't give you much exposure to that.

For simple portfolios that are easy to manage, I would look at this page: https://www.bogleheads.org/wiki/Lazy_portfolios and I would consider all of them except the permanent portfolio.

FYI It's hard to recommend a portfolio without knowing about a persons investing goals, timeframe, risk tolerance, interest in investing, ability to self-manage, ability to stay the course, etc. So look at any advice here critically and realize it may not apply to your situation.

Regarding the vanguard advisor suggestions, I would drop all of the different bond funds and stick with VBTLX (US total bond fund) or CDs (for simplicity). I would definitely drop the international bond fund and put that into either VBTLX or increase the allocation to international equities. That would leave you with 3 funds: US total stock, Int total Stock, and US total bond.

I do believe in the benefits of diversifying according to size, value and internationally. So if I was willing to tolerate a more complicated portfolio (which I do personally), I would diversify by adding funds such as US small value (VISVX or VBR), international small (VSS), and international value (iShares EFV).

Photoguy, what do you think about the Vanguard High Yield Corporate bond fund - VWEAX? I have read that it has a low default rate with a moderate amount of risk. As you know, the investment grade bonds have unattractive yields and rate increase risk.

I keep reading that even the riskier bond funds are not anywhere near the risk of stock funds. I'm wondering if I could increase portfolio income by including some riskier high-yield corporate bonds while minimizing equity exposure.

Also, a question about small value tilt. Did you recommend US Small Value - VISVX because Vanguard's International Value Fund - VTRIX has a .44% expense ratio and a risk level of 5?

I seeing where many are moving away from U.S. securities. What international and/or global Vanguard funds would you recommend to replace or supplement Total US Stock Market Index- VTSAX? I see that Vanguard has Total International Stock Index, Total World Stock Index, and Global Minimum Volatility funds.

Thanks for your help. I am carefully considering your suggestions.

 

[target2019]

I use total us, total us bond, total intl as core funds. I then tilt to us mid/small, add reit , and tilt to EM. Also add tax free muni as well as hi yield.

With six investing spaces, this works for us. When I retire, there will be some opportunity to combine a few spaces.

 

[Goldenmom]

I use total us, total us bond, total intl as core funds. I then tilt to us mid/small, add reit , and tilt to EM. Also add tax free muni as well as hi yield.

With six investing spaces, this works for us. When I retire, there will be some opportunity to combine a few spaces.

Can you list fund names and tickers for your tilts? (I know the core funds.) Thanks so much!

 

[Midpack]

I use total us, total us bond, total intl as core funds. I then tilt to us mid/small, add reit , and tilt to EM. Also add tax free muni as well as hi yield.

With six investing spaces, this works for us. When I retire, there will be some opportunity to combine a few spaces.

Exact same strategy and tilts as we are! Great minds...?

 

[target2019]

Can you list fund names and tickers for your tilts? (I know the core funds.) Thanks so much!

Sure. Take a look. Some of the symbols are proxies.

 

[samclem]

Goldenmom,
Would you mind sharing the approximate withdrawal rate you need? The answer to this question allows people to run some models with the historical return data and provide information on how various asset mixes might have performed. Your posts indicate you have jumped to the micro level (ticker symbols) when it is always best to start with a basic foundation: objectives, timeframe, tolerance for volatility, desired/required withdrawal rate, etc.

General: Once you make investing efficient (as you're doing by getting rid of expensive "advisors" and high-cost mutual funds), you've reaped the low hanging fruit (and gone a long way toward making your investments work hard). There are no other substantial "bargains" to be had--expected returns of any particular investment are fairly well linked to volatility/risk. But, you can reduce the volatility of your portfolio as a whole by mixing assets that tend to move independently or even in opposite directions. And, if your timeframe is long enough, the short-term volatility of various assets becomes inconsequential.

 

[Midpack]

In addition to WR as samclem asks, other income sources (Soc Sec, pensions, other) would be a significant consideration. How much 'floor income' is provided by other income sources would influence portfolio risk tolerance for most people. E.g. if portfolio is entirely above and beyond floor income, more risk may not be a serious concern. If the OP has no other income sources, less risk might be prudent.

 

[target2019]

Exact same strategy and tilts as we are! Great minds...?

Most definitely.

I think OP is in the research stage, and trying to understand why some say 3 funds, VG says 10, and great minds may have other approaches.

So, my path is not right for OP. But revealing my SS of many colors will help establish some baseline understanding.

 

[Animorph]

I seeing where many are moving away from U.S. securities. What international and/or global Vanguard funds would you recommend to replace or supplement Total US Stock Market Index- VTSAX? I see that Vanguard has Total International Stock Index, Total World Stock Index, and Global Minimum Volatility funds.

Thanks for your help. I am carefully considering your suggestions.

I'd go with VFWAX or VEU. All-world ex-U.S.. That should be a nice one fund solution for international. It does seem a little short on small-cap.

 

[Goldenmom]

Goldenmom,
Would you mind sharing the approximate withdrawal rate you need? The answer to this question allows people to run some models with the historical return data and provide information on how various asset mixes might have performed. Your posts indicate you have jumped to the micro level (ticker symbols) when it is always best to start with a basic foundation: objectives, timeframe, tolerance for volatility, desired/required withdrawal rate, etc.

General: Once you make investing efficient (as you're doing by getting rid of expensive "advisors" and high-cost mutual funds), you've reaped the low hanging fruit (and gone a long way toward making your investments work hard). There are no other substantial "bargains" to be had--expected returns of any particular investment are fairly well linked to volatility/risk. But, you can reduce the volatility of your portfolio as a whole by mixing assets that tend to move independently or even in opposite directions. And, if your timeframe is long enough, the short-term volatility of various assets becomes inconsequential.

My husband will be 70 1/2 in Feb. 2016 so there will be a RMD soon. We have cut living expenses drastically and can manage on pensions and SS with an additional 1K per month from our portfolio. If my husband is able to continue working after his surgery next month, we will take nothing from the IRAs except for the RMDs to allow the nest egg to grow. Unexpected health problems related to his surgery could turn our current requirements upside down, however.

 

[Goldenmom]

My husband will be 70 1/2 in Feb. 2016 so there will be a RMD soon. We have cut living expenses drastically and can manage on pensions and SS with an additional 1K per month from our portfolio. If my husband is able to continue working after his surgery next month, we will take nothing from the IRAs except for the RMDs to allow the nest egg to grow. Unexpected health problems related to his surgery could turn our current requirements upside down, however.

I know we will need to take some risks, but I want to take smart risks.

 

[target2019]

I know we will need to take some risks, but I want to take smart risks.

Is this discussion entirely about what is in an IRA? Just checking to see if there are other accounts to take into mind, such as taxable, 401(k), etc.

If all investments are in the IRA, you can easily go from 3 funds to add'l no. of funds for 'smart risk'. I think you know that means 'more risk'. It's easier to go from fewer to more funds.

The original advice from VG is fine in most people's eyes. I think John Bogle (and others) might question the need for foreign investments.

 

[samclem]

Is this discussion entirely about what is in an IRA? Just checking to see if there are other accounts to take into mind, such as taxable, 401(k), etc.

If all investments are in the IRA, you can easily go from 3 funds to add'l no. of funds for 'smart risk'. I think you know that means 'more risk'. It's easier to go from fewer to more funds.

Per an earlier thread, it's virtually all in traditional IRAs (hers and his).

My husband will be 70 1/2 in Feb. 2016 so there will be a RMD soon. We have cut living expenses drastically and can manage on pensions and SS with an additional 1K per month from our portfolio. If my husband is able to continue working after his surgery next month, we will take nothing from the IRAs except for the RMDs to allow the nest egg to grow. Unexpected health problems related to his surgery could turn our current requirements upside down, however.

As you’ve probably read, there are two “pure’ ways to take your withdrawals: 1) As a starting amount adjusted each year for inflation, or 2) as a percent of the year-end portfolio value every year. The first method gives you a very predictable income stream, but it’s possible that you’ll run out of money if your investments don’t keep up with inflation. It’s impossible to entirely run out of money using the second method (since you’ll always be taking just, say, 4% off the top of the portfolio, it can’t be run dry), but if the withdrawal rates are higher than the real growth of the portfolio, you’ll slowly kill the goose that is laying the eggs and your annual withdrawal amounts will be worth less and less. Obviously using the second method will give you variable withdrawal amounts every year—it goes up when your accounts grow, it goes down when they decline. Most people increase the annual percentage withdrawn as they get older to increase the chances they’ll spend as much of it as possible (unless they deliberately want to leave a “legacy” to an heir, etc)

There are all kinds of variations between these two extremes—a particularly popular one is “VPW”—you can search this forum and Bogleheads for more on that, it allows higher withdrawal rates. Another popular withdrawal method is Bob Clyatt’s “95% rule”, which uses the “year end %” approach, but smooths out the bumps so you always get to withdraw at least 95% of the nominal dollars you had the previous year.

I recommend you try to find the time to explore FIRECalc (here: FIRECalc ). You can try different mixes of assets, try a couple different withdrawal methods (Fixed dollar amount adjusted for inflation, % of year end portfolio, Bob Clyatt's 95% rule, etc). I think you'll find a couple of things:

1) Stocks >really< improve a portfolio's ability to continue to keep up with inflation, and grow, over time.

2) If you can accept a varying amount of withdrawals each year (95% rule, etc), it ultimately results in higher average total withdrawals and it significantly improves the portfolio's survival prospects (because the portfolio has a chance to recover from the occasional dip).

I can do some illustrative FIRECalc runs for you if you'd like, but I'd be shooting in the dark without knowing your portfolio size (because the withdrawal rate is fundamental to getting meaningul results). That's a bit of information you may be reluctant to share, which is fine. But if you try FIRECalc and havre any questions, just post them here, as there are a lot of people who know how to make the program sing.

 

[Goldenmom]

Is this discussion entirely about what is in an IRA? Just checking to see if there are other accounts to take into mind, such as taxable, 401(k), etc.

If all investments are in the IRA, you can easily go from 3 funds to add'l no. of funds for 'smart risk'. I think you know that means 'more risk'. It's easier to go from fewer to more funds.

The original advice from VG is fine in most people's eyes. I think John Bogle (and others) might question the need for foreign investments.

We have 2 IRAs totaling nearly 800K and a small individual 401k with 24K. I'm researching the lazy portfolios and am interested in adding a small value tilt. The only fund I have bought so far is Vanguard Intermediate-Term Treasury Fund Admiral Shares in my husband's account. I like the idea of a lazy portfolio that will do OK if the bear is growling. Coffeehouse?

 

[Goldenmom]

Per an earlier thread, it's virtually all in traditional IRAs (hers and his).


As you’ve probably read, there are two “pure’ ways to take your withdrawals: 1) As a starting amount adjusted each year for inflation, or 2) as a percent of the year-end portfolio value every year. The first method gives you a very predictable income stream, but it’s possible that you’ll run out of money if your investments don’t keep up with inflation. It’s impossible to entirely run out of money using the second method (since you’ll always be taking just, say, 4% off the top of the portfolio, it can’t be run dry), but if the withdrawal rates are higher than the real growth of the portfolio, you’ll slowly kill the goose that is laying the eggs and your annual withdrawal amounts will be worth less and less. Obviously using the second method will give you variable withdrawal amounts every year—it goes up when your accounts grow, it goes down when they decline. Most people increase the annual percentage withdrawn as they get older to increase the chances they’ll spend as much of it as possible (unless they deliberately want to leave a “legacy” to an heir, etc)

There are all kinds of variations between these two extremes—a particularly popular one is “VPW”—you can search this forum and Bogleheads for more on that, it allows higher withdrawal rates. Another popular withdrawal method is Bob Clyatt’s “95% rule”, which uses the “year end %” approach, but smooths out the bumps so you always get to withdraw at least 95% of the nominal dollars you had the previous year.

I recommend you try to find the time to explore FIRECalc (here: FIRECalc ). You can try different mixes of assets, try a couple different withdrawal methods (Fixed dollar amount adjusted for inflation, % of year end portfolio, Bob Clyatt's 95% rule, etc). I think you'll find a couple of things:

1) Stocks >really< improve a portfolio's ability to continue to keep up with inflation, and grow, over time.

2) If you can accept a varying amount of withdrawals each year (95% rule, etc), it ultimately results in higher average total withdrawals and it significantly improves the portfolio's survival prospects (because the portfolio has a chance to recover from the occasional dip).

I can do some illustrative FIRECalc runs for you if you'd like, but I'd be shooting in the dark without knowing your portfolio size (because the withdrawal rate is fundamental to getting meaningul results). That's a bit of information you may be reluctant to share, which is fine. But if you try FIRECalc and havre any questions, just post them here, as there are a lot of people who know how to make the program sing.

I'd be delighted for you to run the FireCalc. Thanks for taking the time. Hope guests on this forum will benefit as well. Can you remind me what portfolio(s) you favor?

 

[target2019]

We have 2 IRAs totaling nearly 800K and a small individual 401k with 24K. I'm researching the lazy portfolios and am interested in adding a small value tilt. The only fund I have bought so far is Vanguard Intermediate-Term Treasury Fund Admiral Shares in my husband's account. I like the idea of a lazy portfolio that will do OK if the bear is growling. Coffeehouse?

The 401k is 3% of total. That could be a good fit for a REIT fund or small/midcap tilt. Have to evaluate the choice for expenses, though.

You have three spaces to invest in, and can take that into account when laying out the overall AA. With doing that, you'll have options for rebalancing, without needing to add funds in a given space when you need to rebalance.

 

[Goldenmom]

Great suggestions. Thanks!

 

[photoguy]

Photoguy, what do you think about the Vanguard High Yield Corporate bond fund - VWEAX? I have read that it has a low default rate with a moderate amount of risk. As you know, the investment grade bonds have unattractive yields and rate increase risk.

I'm not a fan of high yield or junk bonds. If I wanted more risk in my portfolio I would simply increase the percentage of equities and correspondingly reduce the amount of bonds.

I keep reading that even the riskier bond funds are not anywhere near the risk of stock funds. I'm wondering if I could increase portfolio income by including some riskier high-yield corporate bonds while minimizing equity exposure.

I would say HY bond funds can be very risky, even approaching that of equity funds. Take a look at the performance chart I included from morningstar and decide for yourself (VFINX = vanguard S&P 500, VBTLX = vanguard total bond).

When I look at the graph, I see Vanguard's HY fund taking a huge dive in 2008 right when I would want my bond funds to do well. In contrast, the total bond fund, which is heavily US gov based, had an up year which is exactly what I want to happen when my equities tank.

Also, a question about small value tilt. Did you recommend US Small Value - VISVX because Vanguard's International Value Fund - VTRIX has a .44% expense ratio and a risk level of 5?

I don't see VISVX and VTRIX as competing funds because one is US and the other is international. For US funds, I mostly use VISVX to cover small value simply because there are not a lot of other options if you want to stay with vanguard.

For international, VTRIX is vanguard's only choice for a value fund but I use iShares EFV for this slot instead. This is due to several reasons which include VTRIX being actively managed, EFV being more "valuey" on measures like price/book, and EFV is slightly cheaper (expense ratio of 0.4%).

I seeing where many are moving away from U.S. securities. What international and/or global Vanguard funds would you recommend to replace or supplement Total US Stock Market Index- VTSAX? I see that Vanguard has Total International Stock Index, Total World Stock Index, and Global Minimum Volatility funds.

This is not a recommendation but here is a partial list of the funds that I have in my portfolio. Some of these funds are extremely volatile. I think the emerging market fund was down 60-70% in 2008/9 from it's prior peak.

VEA - Vanguard developed market
VSS - Vanguard international small cap
VWO - Vanguard emerging market
VNQI - Vanguard ex-US real estate
EFV - iShares international value

Note that my own portfolio is a big mess with far too many funds that were collected in too many investing accounts.

 

[pb4uski]

....Note that my own portfolio is a big mess with far too many funds that were collected in too many investing accounts.

I have one of those too! I could easily straighten it out if it were not for capital gains taxes.

 

[nun]

I've been slowly adjusting my portfolio by selling bond funds and funds with bonds (bye-bye Wellesley) and buying equities as I get closer to the time when my pension income will start. I will soon have the following asset allocation. I plan to reinvest dividends and let the equity percentages increase as I get older. I might take interest of 4% from TIAA-Traditional each year.

VTSAX (Total Stock Index) 50%
VTIAX (International Stock Index) 16%
VBIAX (Balanced Index - this has bonds, but I'm keeping it as an experiment) 4%
TIAA-Traditional 30%

 

[samclem]

I'd be delighted for you to run the FireCalc. Thanks for taking the time. Hope guests on this forum will benefit as well.

Goldenmom,
As previously mentioned, I recommend that you step back from consideration of individual funds right now and instead look at the big picture—your desired withdrawal strategy and rate, some consideration of macro asset allocations (e.g. approx percentage in bond, stocks, “cash” etc). FIRECalc is a >great< tool for just trying things out. It’s got many decades of data from the most significant asset classes. It doesn’t have everything , e.g. good long-term historical data on emerging market stocks just doesn’t exist, FIRECalc doesn’t break down the US market into the smallest of subcategories, etc. But you really don’t need any of that. FIRECalc can help you answer this very big question: “Over the entire modern history of equity markets, if I had invested my money in X mix of assets and if I had withdrawn it using X method, what would the results have been?”
I strongly urge you to go to the link and spend some time trying out various withdrawal methods and asset mixes. Don’t try to optimize the mix to the nearest nit--understand that the future won’t be exactly like any of these past sequences.
So, here’s something to get you started. We’ll start with the “given” that your portfolio is $800K and that you are interested in a 35 year timeframe (when your husband will be 105). You’ve said that your baseline requirement might be $12K per year in withdrawal from the portfolio, though circumstances could change and you’d need more.
Approach: Fixed withdrawals adjusted annually for inflation. Very predictable withdrawal amounts, but if the withdrawal rate exceeds the growth rate of the portfolio, it can go to zero.
[FONT=&quot] Scenario 1: $12K starting withdrawal, invested 100% in 5 year US Treasuries. Treasuries are a very safe investment. The chart below shows that there was not a single case in the 110 different starting years when the portfolio would have gone broke supporting this level of spending. In fact, the historic success rate for 35 years (invested in 100% 5 year US treasuries) would still be 100% if the withdrawals had started at $27k per year, though the average ending balance would be a lot less. Now, we know that Treasuries today aren’t yielding very much above inflation, but this isn’t the first time that has happened, either. In every previous case, they would have supported the given level of spending with the given starting balance—that’s good to know. (click on the graph to enlarge it. Also note that the scales on the various charts are not the same, so you'll need to look at the [FONT=&quot]labe[FONT=&quot]ls[/FONT][/FONT]). Don't get bogged down looking at individual lines, the important thing is the general trend and the extremes.
[/FONT]
[FONT=&quot] Scenario 2. Fixed $12K withdrawals (adjusted for inflation) from a portfolio of 50% US Stocks and 50% 5-year Treasuries. The graph below shows the results of 110 different starting years at this asset mix and withdrawal rate. It had a 100% success rate. The average ending balance is about 2.6 million (present year) dollars. The success rate remained at 100% at a starting withdrawal value of up to $28K per year. So, compared to 100% treasuries, having half the portfolio in stocks improved the average ending balance >and< allowed (slightly) higher withdrawals with the same 100% historical portfolio success rate. Did stocks increase the annual volatility of the portfolio—yes. Did that matter at all? It doesn’t seem that it did--no increase in "failures", slightly higher withdrawals supported.


[/FONT] Variable withdrawals: Let’s assume that you are willing to vary the amount that you take out of the portfolio every year based on how well it has done, rather than sticking with a fixed withdrawal amount. In the real world, most people would probably do this—tightening their belts if their investments are down, and taking that nicer vacation if the portfolio is gaining against inflation. With your $800K portfolio and a need to spend only $12K per year, you would have a withdrawal rate of just 1.5%. As a general reference, most people on this site are probably planning to withdraw between 2.5% and 5% per year, so your “baseline” withdrawal rate is very conservative. We already saw that very conservative investments have historically been sufficient to meet that $12K requirement. But if your spending requirements/desires went up (medical costs, a desire to travel, etc), what would historically have been safe?

Scenario 3: Withdraw 4% of end-of year balance each year, “95% rule”, invested in 50% 5 year Treasuries, 50% total US stock market: Each year you’d withdraw 4% of your portfolio balance (so, $32K in the first year), or 95% of the amount you withdrew the previous year (whichever is greater). The graph below is different from the ones above, it doesn’t show account balances, it shows the amount we would be withdrawing under this rule, and the amounts are adjusted for inflation (so, everything is in 2015 dollars). You can see that, historically, 50% stock/50% treasuries portfolio starting at $800K would have supported 4% withdrawals and in no case would annual withdrawals dipped below the $12k baseline you’ve described. FIRECalc also shows the graph of annual account balances, I just didn’t include it here, but the average ending portfolio value after 35 years was $853K. Since this is inflation-adjusted to 2015 dollars, we can see that portfolio generally did a good job of supporting this withdrawal rate while not being drawn down.

[FONT=&quot]

Scenario 4: Maybe the 4% withdrawal rate of Scenario 3 is attractive, but the idea of having 50% in stocks isn't. How would things have worked out with the same 4% variable withdrawal rate (and using the "95% rule") with the entire portfolio invested in 5 Year treasuries (as in Scenario 1)? Here's the chart of annual withdrawals:

Hmm. The general path of the lines is a lot different from Scenario 3, with annual withdrawals generally declining. Yes, those Treasuries had low annual volatility and were very "safe", but a retiree using only treasuries and needing to take 4% per year would generally have faced a hit in the real spending power of their annual withdrawals. The Treasuries just haven't generated sufficient returns. A look at the annual balances tells the tale. The average ending portfolio value was $385K, [FONT=&quot]l[/FONT]ess than half the starting value[FONT=&quot].[/FONT]



That's probably enough to give you an idea of how the program works. I'm far from an expert in FIRECalc, but there are plenty of people here who are, and who can answer any questions you might have. Finally, keep in mind that the data in FIRECalc is [FONT=&quot]largely for the US[FONT=&quot] and the most detailed data for [FONT=&quot]asset classes begins in 1927. This is [FONT=&quot]a [FONT=&quot]period of[FONT=&quot] prosperity i[FONT=&quot]n the US, and the US was the most prosperous economy in the world over much of this span. So, [FONT=&quot]some p[FONT=&quot]eople [FONT=&quot]might urge caution when using the data to build plans for the future. Still, [FONT=&quot]a tool like this at least gives you something to use as a starting point. [FONT=&quot]And, if you want, there are ways to "trick[FONT=&quot]"[/FONT] FIRECalc if you want to see the impact of returns that were a few percentage points less than they have been historicall[FONT=&quot]y. Enjoy.[/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT]

[/FONT]
[FONT=&quot]

Can you remind me what portfolio(s) you favor?

Not to be a wiseacre, but I favor everyone building a portfolio that suits their needs. [FONT=&quot]My personal portfolio has a high stock allocation ([FONT=&quot]85+ %)[FONT=&quot], and the stocks in it are slightly tilted to value stocks[FONT=&quot]. We have a higher-th[FONT=&quot]an-market weighting to small cap stocks, too. So, it's "Swedrow-esqe[FONT=&quot]", but far [FONT=&quot]less radical than [FONT=&quot]his "only small and value" proposal. [/FONT] [/FONT][/FONT]Our [FONT=&quot]withdrawals will be made using a[FONT=&quot] "per[FONT=&quot]cent of [/FONT]end-of-year balance" method. [FONT=&quot]But [FONT=&quot]that fits our requirements, and it might be a very bad choice for someone else[FONT=&quot].[/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT][/FONT]
[/FONT]

 

[Goldenmom]

Photoguy, Samclem, and other forum friends,
Imagine my surprise when I opened my email this morning to find a long email from Larry Swedroe in response to questions I emailed him last night about the "Larry" portfolio. I thought it was incredibly nice of him to take time to help a non-client.

I've made a few buys this week--Intermediate-term Treasury Fund and TSM for my husband's IRA and some small-cap and small cap value funds for my smaller IRA. I also got some International Explorer Investor (VINEX) for my account which has a higher ER than my other funds. It invests in foreign small cap and made me think of Larry. Hope that wasn't a mistake!

It's difficult to find Vanguard funds for U.S small value and International small to build the Larry portfolio so I may not get the desired effect. Apparently, Vanguard funds are not "valuey" enough.

I'd love to know what the rest of you have used for these classes if you are including small value funds. Photoguy, thanks for the fund suggestions you gave me earlier in this thread.

I continue to study the lazy portfolios and will start Larry's Black Swan book next. I'm holding off on REITS & TIPS & EM for now and will wait on any more bonds until I see what Janet does in December. I may follow Larry's advice and do a CD ladder.

I'm looking at the Value Index Fund (VVIAX) and Developed Markets Index (VTMGX), but need to read more about those to see if they would boost the portfolio or just complicate it and add expense. I'm steering away from the other bond funds and the Total International Stock Index Fund for now. I'm only holding one fund from the Vanguard advisor's "canned" portfolio so far--TSM (VTSAX).

I'm not all in yet, but my ship has left the shore.

 

[nun]

These lazy portfolios and the Vanguard advisors suggestion that have a high percentage of intermediate bond index funds would have been great 10 or 20 years ago. But given the low rate environment right now are they good things to include in the portfolio of someone at the beginning of retirement. It seems to me that they will be a drag on any portfolio for the next 10 years and if you use them for income you are stepping right into a sequence of returns problem. If you want capital preservation what about TIPS.

 

[photoguy]

I'd love to know what the rest of you have used for these classes if you are including small value funds.

If you really want to dig deeper into this, it may help to do a google search on bogleheads for small value funds (e.g. type "site:bogleheads.org small value funds" into google).

It will turn up threads that discuss various options outside of DFA. For example,

https://www.bogleheads.org/forum/viewtopic.php?t=157992 (poll on best small cap value funds)

Note that the funds discussed may have significant drawbacks like tiny AUM and low trading volumes. Or a fund may have good value loadings but negative momentum. Posters on bogleheads will discuss the pros and cons of these funds endlessly and and will even run the regressions to calculate various factor loadings.

It's been a while since I looked at this but I ended up using primarily vanguard & iShares funds even if there were others that were "more valuey" or better on some other metric. If I had access to DFA, I would use those funds.

I continue to study the lazy portfolios and will start Larry's Black Swan book next. I'm holding off on REITS & TIPS & EM for now and will wait on any more bonds until I see what Janet does in December. I may follow Larry's advice and do a CD ladder.

Keep in mind that value funds and EM/REITS tend to be very volatile. These types of funds are also not typically covered in the data used by retirement calculators like FireCalc.

 

[wyecrabber1]

Samclem thanks for the detailed post. Goldenmom good luck with your choices. Everyone else thanks for the knowledge.

Situation is similar to Goldenmom's and will post after discussion with Vanguard's portfolio advisor.