Vanguard Advisor's Portfolio Proposal
- Thread starter Goldenmom
- Start date
For this bunch of investment experts could you give me an explanation of why REITS are usually listed at only 5 to 10% of a portfolio? Many good REITS pay 5+ percent with slow growth.
I presently own VER, GNL, NYRT, and O.
I presently own VER, GNL, NYRT, and O.
I'm certainly not an expert, but since REITs are not highly correlated with stocks or bonds, they serve as a good diversification. There are only so many slices you can get out of a pie, and it's just one of them.
Happy Halloween, Forum friends,
Love your feedback and I look forward to reading and pondering every reply.
I'm reading everything I can about Larry's small value tilt in order to limit my stock exposure.
At this time I'm looking for the most effective small value tilt funds which I can buy through our Vanguard accounts. (DFA and some others are not available so I must find ones that will work.)
I'm considering buying these 2 funds based on articles I've read by Larry:
1. VG Small Cap Value ETF (VBR) and
2. iShares Morningstar Small Cap Value ETF (JKL)
What do you think of these two to build the Larry Portfolio?
In his 10/30 email to me Larry Swedroe said:
"As to bonds, first likely better off buying CDs in tax advantaged accounts as they have much higher yields than Treasuries and you don't pay any fund expenses, and if build a ladder of them, say averaging 4-5 years you won't have too much inflation risk and thus have less need for TIPS. Right now the risk premium in TIPS relative to CDs is pretty higher and thus IMO not worth it for most people. Relative to Treasuries they look better. Example, 10 year Treasury yielding about 2%, 10 year TIP about 0.5 but 10 year CD about 3%."
Goldenmom's questions:
Which of these small value funds would you buy?
Vanguard Explorer Value Fund Investor Shares VEVFX .66%
Vanguard International Explorer Fund Investor Shares VINEX .40%
Vanguard Small-Cap Index Fund Admiral Shares VSMAX .09
Vanguard Small-Cap Value Index Fund Admiral VSIAX .09%
Vanguard Strategic Small-Cap Equity Fund Investor Shares VSTCX .38%
What is the policy at Vanguard for oops! purchases? Can I exchange a fund for another with no additional fee? What is the consequence for selling funds if I find I may have made a mistake with a bond or fund and want to get something else? I understand the price may be higher or lower when the sale goes through, but is that the extent of the damage?
Thanks and enjoy the pretty fall leaves when you are not checking your investments. As they say on Game of Thrones, winter is coming. Perhaps that got a smile from you snowbirds in FLA. It was a nippy day in central Virginia and a perfect day for homemade beef barley soup. I enjoyed reading about small value tilting while soup simmered in the slow cooker. I don't see why investing and cooking could not be combined on these forums for added enjoyment. Have a nice Sunday!
I appreciate all your help with preserving and growing our retirement nest egg. Medicare and insurance premiums are going up and our Golden Retriever continues to expect his premium dog food twice a day. We are cutting back lifestyle, but need compounding of our assets so we don't run out of money before we run out of breath.
Goldenmom
Love your feedback and I look forward to reading and pondering every reply.
I'm reading everything I can about Larry's small value tilt in order to limit my stock exposure.
At this time I'm looking for the most effective small value tilt funds which I can buy through our Vanguard accounts. (DFA and some others are not available so I must find ones that will work.)
I'm considering buying these 2 funds based on articles I've read by Larry:
1. VG Small Cap Value ETF (VBR) and
2. iShares Morningstar Small Cap Value ETF (JKL)
What do you think of these two to build the Larry Portfolio?
In his 10/30 email to me Larry Swedroe said:
"As to bonds, first likely better off buying CDs in tax advantaged accounts as they have much higher yields than Treasuries and you don't pay any fund expenses, and if build a ladder of them, say averaging 4-5 years you won't have too much inflation risk and thus have less need for TIPS. Right now the risk premium in TIPS relative to CDs is pretty higher and thus IMO not worth it for most people. Relative to Treasuries they look better. Example, 10 year Treasury yielding about 2%, 10 year TIP about 0.5 but 10 year CD about 3%."
Goldenmom's questions:
Which of these small value funds would you buy?
Vanguard Explorer Value Fund Investor Shares VEVFX .66%
Vanguard International Explorer Fund Investor Shares VINEX .40%
Vanguard Small-Cap Index Fund Admiral Shares VSMAX .09
Vanguard Small-Cap Value Index Fund Admiral VSIAX .09%
Vanguard Strategic Small-Cap Equity Fund Investor Shares VSTCX .38%
What is the policy at Vanguard for oops! purchases? Can I exchange a fund for another with no additional fee? What is the consequence for selling funds if I find I may have made a mistake with a bond or fund and want to get something else? I understand the price may be higher or lower when the sale goes through, but is that the extent of the damage?
Thanks and enjoy the pretty fall leaves when you are not checking your investments. As they say on Game of Thrones, winter is coming. Perhaps that got a smile from you snowbirds in FLA. It was a nippy day in central Virginia and a perfect day for homemade beef barley soup. I enjoyed reading about small value tilting while soup simmered in the slow cooker. I don't see why investing and cooking could not be combined on these forums for added enjoyment. Have a nice Sunday!
I appreciate all your help with preserving and growing our retirement nest egg. Medicare and insurance premiums are going up and our Golden Retriever continues to expect his premium dog food twice a day. We are cutting back lifestyle, but need compounding of our assets so we don't run out of money before we run out of breath.
Goldenmom
nun
Thinks s/he gets paid by the post
- Joined
- Feb 17, 2006
- Messages
- 4,872
It's good to do your research and understand what you are buying, but as long as you have an AA that you like and achieve that with low cost funds you will be ok. Choose the least expensive index funds in the sectors you want. Don't go "fund happy"......keep it simple.
Which funds does Swedrow recommend?
It is important to realize that Swedrow's "Just buy small and value equities" approach is not mainstream, it's not what most academics or practitioners recommend for their clients. They recommend a broader asset mix. Larry Swedrow's approach will work if the future is like the past. The more "targeted" the approach, the less diversified the approach, the more dependent it is on the particulars of the environment. I believe in the higher volatility-adjusted returns of small and value stocks, and that's why I've tilted my investments that way, but I'm not going "all in" with it because I only get one chance to get this right. If things change and big companies and growth companies are the ones which keep well ahead of inflation for the next 3 decades, I can't afford to totally miss out. So, I have some of them, and I'll be rebalancing across asset classes to take advantage of the times when "growth" and "value" swap places as darlings of the market.
There are a lot of people who confuse "volatility" and "risk." They are absolutely not the same.
It is important to realize that Swedrow's "Just buy small and value equities" approach is not mainstream, it's not what most academics or practitioners recommend for their clients. They recommend a broader asset mix. Larry Swedrow's approach will work if the future is like the past. The more "targeted" the approach, the less diversified the approach, the more dependent it is on the particulars of the environment. I believe in the higher volatility-adjusted returns of small and value stocks, and that's why I've tilted my investments that way, but I'm not going "all in" with it because I only get one chance to get this right. If things change and big companies and growth companies are the ones which keep well ahead of inflation for the next 3 decades, I can't afford to totally miss out. So, I have some of them, and I'll be rebalancing across asset classes to take advantage of the times when "growth" and "value" swap places as darlings of the market.
There are a lot of people who confuse "volatility" and "risk." They are absolutely not the same.
Mulligan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- May 3, 2009
- Messages
- 9,343
That is certainly true, Braumeister. In addition I believe experts want a person to avoid sector concentration of any type. And REITS all collectively will usually have a uniform reaction good and bad to interest rate movements and economic conditions.
Sent from my iPad using Tapatalk
Look at the fees for each fund you want to sell. They should list a short-term redemption fee of x% if you sell within X days. They may also not let you buy back into the same fund for X days after selling shares. Not sure what Vanguard does, but sometimes there is an additional transaction fee if a "no transaction fee" mutual fund is sold short-term. That would only potentially apply to non-Vanguard funds. Each fund might have slightly different rules.
samclem, you have voiced my reservations exactly. For now, I'm limiting small value buys to my smaller IRA and considering a more mainstream approach (3 Fund, Swensen, Coffeehouse, Merriman) for my husband's larger IRA. I'm looking at portfolios that have larger fixed income allocations and are thought to do well in either bull or bear markets.
I emailed Larry again this morning for specific help in choosing funds that I can get through Vanguard that are "smaller and more valuey." I listed ones I've seen in his and other articles and asked him for his top picks. I think I can get the iShares funds at Vanguard, for example, but cannot get DFA or the Bridgeway Omni Small Value Fund.
Thanks for the info on the FIRECALC. My husband will have to help me get started with that. I'm not a math person and it looks confusing to me, but he is an engineer and can explain it. It looks like a great planning tool and I thank you for the introduction.
I will report back on what Larry says and keep digging.
I emailed Larry again this morning for specific help in choosing funds that I can get through Vanguard that are "smaller and more valuey." I listed ones I've seen in his and other articles and asked him for his top picks. I think I can get the iShares funds at Vanguard, for example, but cannot get DFA or the Bridgeway Omni Small Value Fund.
Thanks for the info on the FIRECALC. My husband will have to help me get started with that. I'm not a math person and it looks confusing to me, but he is an engineer and can explain it. It looks like a great planning tool and I thank you for the introduction.
I will report back on what Larry says and keep digging.
This is another quibble I have with Swedrow's suggestion that retirees invest their equity holdings solely in small and value stocks. A lot of investors in 2007 - 2008 probably thought they were safe because they weren't loaded up with a lot of frothy growth stocks, they were in value stocks. As they found out, that meant they were heavily invested in the financial industry, and they took a real beating when the housing/subprime bubble burst.
Concentrating in value (or growth) stocks can mean inadvertently concentrating in one or two sectors/industries, with attendant trouble if that sector takes ill.
Last edited:
photoguy
Thinks s/he gets paid by the post
- Joined
- Jun 15, 2010
- Messages
- 2,301
In fairness, if you were following swedroe's fat tail portfolio, you would have a *huge* chunk in treasuries (probably the majority of your portfolio) which had substantial gains during 2007/2008. Vanguard's int treasury fund had 10%+ returns in both 2007/2008 so that would probably negate any loss in your equity portion assuming something like a 70% bond / 30% equity portfolio.
Also do investors generally think value stocks are "less risky"? Even though they don't have sky high PE based on (perhaps unrealistic) growth perceptions, I've always thought of them as substantially more risky.
Thanks samclem and photoguy for those cogent replies. Much food for thought.
I wonder if I will live long enough to see my Vanguard Intermediate-term Treasury fund rebound. Since I have taken the hit already, I (or my heirs) await the bond rally.
"Buy the ticket, take the ride"
~Hunter Thompson
I wonder if I will live long enough to see my Vanguard Intermediate-term Treasury fund rebound. Since I have taken the hit already, I (or my heirs) await the bond rally.
"Buy the ticket, take the ride"
~Hunter Thompson
jkern
Full time employment: Posting here.
It hasn't been brought up, but how would Vanguard Wellington and Wellesley fit into this conversation?
LOL!
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jun 25, 2005
- Messages
- 10,252
What hit is that? The fund is up for the past 12 months almost 2%. Even in the past month it is down less than 1.5%. It is doing what bond funds do: Fluctuate.
This fund dropped about 4% in the summer of 2013 and recovered nicely.
Are you planning to die in the next month or so?
Hi LOL!
I invested $100,000 in Vanguard Intermediate-term Treasury Fund on 10/28 and it's now valued at $9898.03. I wasn't expecting a loss of over 1K from a Treasury fund in November. I bought it because I thought it was safe and secure. Typical rookie mistake, huh?
No more bond funds for me. Too risky. Thought they were supposed to be a buffer. Equities and cash or CDs in the future. Glad I didn't invest more.
Your thoughts? Please be candid. I realize I am in a learning curve and I seek advice of more seasoned investors. I have spent my life teaching primary school and am new to investing especially against robots and high-frequency traders.
Goldenmom
I invested $100,000 in Vanguard Intermediate-term Treasury Fund on 10/28 and it's now valued at $9898.03. I wasn't expecting a loss of over 1K from a Treasury fund in November. I bought it because I thought it was safe and secure. Typical rookie mistake, huh?
No more bond funds for me. Too risky. Thought they were supposed to be a buffer. Equities and cash or CDs in the future. Glad I didn't invest more.
Your thoughts? Please be candid. I realize I am in a learning curve and I seek advice of more seasoned investors. I have spent my life teaching primary school and am new to investing especially against robots and high-frequency traders.
Goldenmom
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
No disrespect, but it seems to me the rookie mistake that you are about to make is rushing to sell a position that you have had two weeks. Bonds are a valid buffer, but not over two week periods.
If this has you rattled, perhaps CDs are more your speed.
Mulligan
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- May 3, 2009
- Messages
- 9,343
Mom, you have a problem with "loss aversion". Are you sure you can handle 20% plus swings in stocks? Unless you buy specific bonds and stuff them into a vault or buy CDs, fluctuations in principal will occur.
I don't minimize your angst, as I deal with it too. I own no bonds and only a small sliver in common stock. But my personal "loss aversion" solution would definitely not be in your wheel house, so I wont mention it.
Sent from my iPad using Tapatalk
I don't minimize your angst, as I deal with it too. I own no bonds and only a small sliver in common stock. But my personal "loss aversion" solution would definitely not be in your wheel house, so I wont mention it.
Sent from my iPad using Tapatalk
A $1K "loss" on a $100K investment is nothing. You should expect day to day fluctuations like that and learn to ignore short term volatility. Might I suggest you stop looking at investments daily, weekly or even monthly? Looking at your portfolio only once a year will do wonders for your peace of mind.
If you're this panicky about a 1% dip, maybe it is a good idea to just pay the 0.30% fee for VPAS.
If you're this panicky about a 1% dip, maybe it is a good idea to just pay the 0.30% fee for VPAS.
Absolutely.
But paying a manager won't change the fluctuations, and the angst will still be there.
Steps to avoiding stress and improving investment results:
1) Determine the desired asset allocation
2) set up the portfolio
3) Don't check the balance or look at the statements.
4) in December, make a withdrawal for all of the next year's spending, put into a MM fund for monthly transfers to bank account. Rebalance all the investments back to the desired allocation from Step 1.
5) Repeat steps 3 and 4 until dead.
Don't consider daily, monthly, quarterly fluctuations to be gains or losses. All that matters is the price the asset brings on the date you sell it.
Last edited:
You are all correct. I do watch my accounts too much since I'm just getting our accounts funded at Vanguard. I've been investing in small increments instead of in lump sums and I'm very glad I did since the mistakes I've made have been relatively minor ones.
The 1K decline in the bond fund in such a short time did rattle me. I've decided to hold the bond fund since that is what my research has revealed, and I will remind myself that this decline is nothing in the big picture. Seeing that in print actually helped me a lot, so thank you. My new mantra is, "This is nothing--just play the game!"
I actually enjoy watching the ups and downs of my stock funds each day with my morning coffee. I look forward to this with anticipation and the swings in equities don't bother me since they change from day to day (so far). I just didn't realize that Treasury bond funds were so volatile. I am afraid I'm addicted now and even check my Vanguard app when I am away from home to see what the markets are doing.
I am gradually increasing my positions in Total Stock Market, Value Index, Small-Cap Index, Small-Cap Value, and REITS according to my portfolio plan allocations. (My influences have been Coffeehouse, Swensen, Bernstein, Swedroe, and, of course, Jack and the Bogleheads.)
I also have small positions in Vanguard Dividend Growth, Dividend Appreciation Index, Total World Stock Index, and Global Minimum Volatility.
I just exchanged my mid-cap and Total International Stock Market funds, but they were very small holdings, and I just decided to go with Jack Bogle regarding those. I have been puzzled about the value of holding international funds at this time, but that may be the recency effect and my inexperience.
Since I'm still funding my accounts, I do tend to watch my accounts daily to see if it is a good day to add more. Interestingly, they are up one day and down the next. This pattern makes it hard to time my buys, so I just buy a little bit a day now. I fancy that I am value averaging and in fact have noticed that I have bought at lower prices by buying incrementally across days due to the volatility. My REITS have gotten cheaper lately! I figure my strategy is better than sitting in cash.
I've read it is fatal to tinker too much, but that you shouldn't buy at the top of the market. Hence, I am buying small amounts across days until I get my asset classes funded and am keeping the rest in cash. I fancy I am working with the volatility and going with the flow.
Thank you for your comments. I mull over everything I read and I certainly see myself in discussions of the behavioral aspects of investing especially being influenced by recent events.
I advise any brand new investors reading this to invest a little at a time while you are learning (and you will always be learning), and to read a lot of investment books and participate in investment forums like this to learn from the pros. It IS rocket science!
I have not presumed to give advice before, but I think what I used to tell my young students applies here: Slow and steady wins the race! Good luck with your investing!
Goldenmom
The 1K decline in the bond fund in such a short time did rattle me. I've decided to hold the bond fund since that is what my research has revealed, and I will remind myself that this decline is nothing in the big picture. Seeing that in print actually helped me a lot, so thank you. My new mantra is, "This is nothing--just play the game!"
I actually enjoy watching the ups and downs of my stock funds each day with my morning coffee. I look forward to this with anticipation and the swings in equities don't bother me since they change from day to day (so far). I just didn't realize that Treasury bond funds were so volatile. I am afraid I'm addicted now and even check my Vanguard app when I am away from home to see what the markets are doing.
I am gradually increasing my positions in Total Stock Market, Value Index, Small-Cap Index, Small-Cap Value, and REITS according to my portfolio plan allocations. (My influences have been Coffeehouse, Swensen, Bernstein, Swedroe, and, of course, Jack and the Bogleheads.)
I also have small positions in Vanguard Dividend Growth, Dividend Appreciation Index, Total World Stock Index, and Global Minimum Volatility.
I just exchanged my mid-cap and Total International Stock Market funds, but they were very small holdings, and I just decided to go with Jack Bogle regarding those. I have been puzzled about the value of holding international funds at this time, but that may be the recency effect and my inexperience.
Since I'm still funding my accounts, I do tend to watch my accounts daily to see if it is a good day to add more. Interestingly, they are up one day and down the next. This pattern makes it hard to time my buys, so I just buy a little bit a day now. I fancy that I am value averaging and in fact have noticed that I have bought at lower prices by buying incrementally across days due to the volatility. My REITS have gotten cheaper lately! I figure my strategy is better than sitting in cash.
I've read it is fatal to tinker too much, but that you shouldn't buy at the top of the market. Hence, I am buying small amounts across days until I get my asset classes funded and am keeping the rest in cash. I fancy I am working with the volatility and going with the flow.
Thank you for your comments. I mull over everything I read and I certainly see myself in discussions of the behavioral aspects of investing especially being influenced by recent events.
I advise any brand new investors reading this to invest a little at a time while you are learning (and you will always be learning), and to read a lot of investment books and participate in investment forums like this to learn from the pros. It IS rocket science!
I have not presumed to give advice before, but I think what I used to tell my young students applies here: Slow and steady wins the race! Good luck with your investing!
Goldenmom
Loved your comment, samclem!
I am very glad I did not let the Vanguard advisor lump sum me into Total Stock Market, Total International Stock Market, and numerous bond funds. I would be having a fit right now! Ha!
I am very glad I did not let the Vanguard advisor lump sum me into Total Stock Market, Total International Stock Market, and numerous bond funds. I would be having a fit right now! Ha!
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
+1
I associate luck with gambling, not investing. You need time, patience and self-discipline to be a successful investor. Being lucky helps but it isn't a fundamental element of long-term portfolio growth.
I generally agree with you, but retirees can be lucky in that they retire during a bull market or during a bear market. That, I think, is the luck of the draw, but the skills you outlined may make luck irrelevant. "Time, patience, and self-discipline" is going on a post-it on my mirror. Great words to invest by!
Similar threads
