Picking Individual Assets for "Ultimate Buy & Hold"

[studbucket]

I'm considering following Merriman's Ultimate Buy & Hold strategy, and I had some questions about determining which individual funds fall into each category.

The best resource I found online was US News's Money site, where they have listings and rankings of various fund types. This leads me to 4 questions:

1. Are these lists good representations of those fund types?
2. Are these rankings something I should pay attention to?
3. If a single asset type has multiple links, do you think 1 is more representative than another?
4. Is there a better resource somewhere, or somewhere else you'd recommend I look?

Bonds

• Intermediate-term
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
  • Best Intermediate-Term Government Mutual Funds | US News
• Short-term
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• TIPS
  • Best Mutual Funds Search: Research, Ratings and Insight from US News

Equities

• REITs
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• Emerging Markets
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• Domestic Large Value
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• International Large Value
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• Domestic Small Value
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• International Small Value
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• Domestic Large Cap
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• International Large Cap
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• Domestic Small Cap
  • Best Mutual Funds Search: Research, Ratings and Insight from US News
• International Small Cap
  • Best Mutual Funds Search: Research, Ratings and Insight from US News

Thanks!

[LOL!]

Nope, you have been led down the wrong path. You should select only index funds and the ones you should select are all listed in one place: DFA vs. Vanguard when you click on the "here" links.

Furthermore, you don't need all the different funds that Merriman says you do. Studies show that you can get essentially the same results with 4 equity funds and a bond fund. See, for example, Bogleheads :: View topic - Ultimate Buy and Hold - 8 slices vs 4 and read it VERY CAREFULLY.

Also note that some new products have been introduced this year, so some of what you have read needs updating. Here's a model portfolio:
VTI
VBR
VXUS
VSS
BND
VCSH

That's all you need. What do you think after you have researched those ticker symbols? You can even have equal amounts of each of those 6 investments and do rather well, I would think.

[studbucket]

Thanks for the great reply. That's why I post here, to make sure I understand my options and don't just go down a path because 1 resource made it look good

I'll check out your links and check back in.

[studbucket]

I now see why you said to read that thread very closely...there's a lot of information in there. I've spent the last 3 days going through it, and would stop whenever what I was reading just turned into a bunch of words I wasn't comprehending. That happened a lot. I'll probably need to go through it again.

However, the primary point of the original poster stuck with me, and that makes sense. I like the 6 funds you recommend, and it seems like they could work well.

For the sake of contrasting this to the UB&H, it appears the only 2 asset classes not represented in your recommended ETFs are REITs and TIPS. Is there a reason to exclude these? A compelling reason to include them?

[LOL!]

Just saw these questions from 6 weeks ago. REITs are included in the total market indices. You can add more of them if you want; I do.

I do not believe TIPS are a good buy right now. They are not paying that well with real interest rates at 1% or lower. You can do just as well or better in nominal bond funds. However, some folks really like TIPS. I only buy them when they pay more.

[Surewhitey]

I have only common stock in the following; most dividend plays. All between 4-14% based on purchase price.

TOT
NLY
CTL
T
DUK
BMY
ABT
PBI
Just sold MSFT & INTC...made like 7% in 4 & 2 weeks respectively.

I also hold PNRA & just sold CMG for a 30% gain in 4 months

My major dog is TGT (down 7% since buying).

I also got in last week in a small cap mutual fund in my 401k; made an extra $1k and went back to the "safe money"...

[DoraM]

Quote:

Originally Posted by Surewhitey Just sold MSFT & INTC...made like 7% in 4 & 2 weeks respectively. I also hold PNRA & just sold CMG for a 30% gain in 4 months ...

Hah! Funny. I just shorted CMG and bought MSFT. CMG provides the downside protection if we get a big market downtrend and MSFT provides the upside if markets start acting with any type of reason. (54 PE for a mexican fast food joint is ridiculous)

CMG dropping to 290 nets me a 250% gain, MSFT getting to foward PE of 10 nets me a 130% gain.

[Surewhitey]

Quote:

Originally Posted by DoraM Hah! Funny. I just shorted CMG and bought MSFT. CMG provides the downside protection if we get a big market downtrend and MSFT provides the upside if markets start acting with any type of reason. (54 PE for a mexican fast food joint is ridiculous) CMG dropping to 290 nets me a 250% gain, MSFT getting to foward PE of 10 nets me a 130% gain.

I would generally agree on CMG, but they're still growing at 20-30%, stores still opening, no debt & increasing same store sales. I just thought my 30% gain was a little too much, too fast. I'll wait for a 10% or so pull back.

You may be right on MSFT, but I think it will pull back as well after a 6% gain on the S&P in only 6 days...kind of crazy week. I figure there was some window dressing in the 401k's of the world as the quarter was ending, maybe a drop over the next couple weeks.

p.s. It is pretty awesome Mexican "fast food"...organic to boot.

[temsike]

An excellent 60/30/10 portfolio using Vanguard ETFs, IMHO, would be 15%VEU, 15%VTI, 10%VWO, 10%VBR, 10%VSS, 30%BND, and 10%MMF.

[sailfish]

I use the Merriman model of Vanguard funds for my wife's IRA and have been pleased with the results. Buy and hold for her account with reinvesting the divis and interest.
Once a year reallocating to keep the %'s close to recommendations.

[Animorph]

I have essentially the Merriman B&H portfolio, but with mostly active funds that I like, an extra category or two, and no bonds. If you are unsure as to which funds to select, stick with the index versions described on the website. That also ensures better "style purity" than you are likely to get selecting active funds.

[PaddyMac]

You might want to check out Morningstar's ratings and analysts reports, and even get their Premium service for a bit as you make big decisions. Also use their Chart feature to compare one fund to another over various years (esp. the 2008 dip) and the Xray feature to analyze your portfolio. You can even pick dummy portfolios to track. The charts take the expense ratios into account.

I do believe in indexing, but we have quite a few active funds as well. We can easily see that over the past 5-10 we've had them, they have been earning their keep. As soon as we see they are not doing better than the index, we sell and move into the equivalent index.

Remember that 70% of managers don't beat the index. That leaves 30% that do, just not over the long-term. Where people fall down is that they have lousy choices in their 401ks AND they make the problem worse by not even researching the funds they do have to choose from. If you do your homework, there are plenty of good active funds around. Start with the Analysts Picks on Morningstar. You can also run very detailed searches for funds based on sectors, expense ratios, etc.

[Queenie]

I agree with Paddymac... Morningstar has a 14 day free trial on their premium subscription that you (actually everyone) should take advantage of. I have been on non-stop for the last 3 days since jIMOh suggested it in my very first post here. It is actually an amazing tool, although my eyes are now buggered out and am not sleeping much! It is helping me and teaching me lots, just wish my brain could absorb more than it does.

Queenie