Larry Swedroe Portfolio with Vanguard Funds

[Goldenmom]

Hello Forum Members,
Do any of you have Vanguard tickers for Larry Swedroe's model portfolio on p. 166 in The Only Guide to a Winning Investment Strategy You'll Ever Need?

I would like all of them, but particularly need the Vanguard tickers for International: large, large value, and small.

Has anyone tried to recreate the Larry Portfolio with all Vanguard funds? Is that possible at this time? What funds would be included?

Finally, do you think it is preferable to build my own portfolio rather than using Vanguard balanced funds such as Life Strategy Wellesley or Target Retirement Income and why do you think so?

Thanks a bunch,
Goldenmom

 

[cooch96]

I feel bonds currently offer real return-free risk, and I'm partial to REITs and value index funds. So I've weighted my portfolio accordingly.

Otherwise, I'd likely pick just one of the vanguard target funds and hopefully ride it to victory.

 

[retire2020]

Don't know Larry's but following will give you what you are looking for:

Vanguard

 

[samclem]

Hello Forum Members,
Do any of you have Vanguard tickers for Larry Swedroe's model portfolio on p. 166 in The Only Guide to a Winning Investment Strategy You'll Ever Need?

I would like all of them, but particularly need the Vanguard tickers for International: large, large value, and small.

Has anyone tried to recreate the Larry Portfolio with all Vanguard funds? Is that possible at this time? What funds would be included?

I don't have that book, but here's what a Kiplinger article says:

Swedroe doesn't mince words. Believing in active management is "absurd," he says, calling it "the triumph of hope over wisdom and experience." The wise investor knows that some managers will beat the indexes occasionally, but when they do, Swedroe says, it's "purely out of luck."
Swedroe's simple portfolio reflects these sentiments, as well as the tendency of value stocks and small-company stocks to do better than other stocks over time.
Swedroe's portfolio:
15% Vanguard Value Index (symbol VIVAX) (Tracks an index of undervalued stocks from the largest 750 U.S. companies)
15% Vanguard Small Cap Value Index (VISVX) (Tracks an index of stocks of small, undervalued U.S. companies)
13% iShares MSCI EAFE Value Index (EFV) (Tracks an index of stocks of large, undervalued foreign companies)
13% iShares MSCI EAFE Small Cap Index (SCZ) (Tracks an index of stocks of small overseas companies)
4% Vanguard Emerging Markets Stock Index (VEIEX) (Tracks an index of companies from developing nations)
40% Vanguard Inflation-Protected Securities (VIPSX) (Invests at least 80% of assets in inflation-indexed bonds issued by the U.S. government)

If you've got an account at Vanguard, you can buy the ETFs above (EFV and SCZ) through their brokerage at low cost and not much hassle at all. If you wanted just Vanguard, you could look at VTRIX ( Vanguard International Value fund), but it is a managed fund and not an index fund (still, costs are relatively modest for an international fund, just .44%). A Vanguard fund for International small cap would be Vanguard FTSE All-World ex-US Small-Cap Index Fund symbol VFSVX. It's an index fund. I don't know why Swedrow didn't recommend these from the start, there might be a good reason (VFSVX is relatively new, maybe it wasn't available when he wrote the book, or maybe he likes the holdings in these ETFs better.) I think Larry still visits the Bogleheads board, you might check their site and use the search function to see what his latest thinking is--I'd be surprised if this hasn't come up. Note that this stock portfolio isn't balanced--it tilts heavily toward small stocks and value stocks. It's true that these types of stocks have produced higher returns with less risk than the market as a whole, but there's no guarantee this will continue, and their opposites (big companies and growth stocks) have sometimes done better for many years. (FWIW: While my own portfolio is also tilted to value stocks and slightly to smaller stocks, I don't do it to the extent Swedroe is preaching).

Finally, do you think it is preferable to build my own portfolio rather than using Vanguard balanced funds such as Life Strategy Wellesley or Target Retirement Income and why do you think so?

I think most investors would be better off with the existing balanced products than trying to "roll their own." That way the funds get rebalanced automatically and it takes the hassle and (especially) the emotion out of it. It can be difficult to buy more stocks just as they are going down in value, but that's exactly what has to happen in order for the various asset classes to reduce the overall portfolio volatility. Managers will do it for low/zero cost every day automatically, that seems like a great way to go. The most compelling reason for some investors to create their own portfolios is to maximize tax efficiency (putting tax inefficient assets in tax-favored accounts (IRAs, 401Ks, etc), putting more tax-efficient assets in their after-tax accounts). This also allows more efficient tax loss harvesting. But (IIRC) the vast majority of your assets are in tax-advantaged accounts, so this advantage wouldn't pertain to your situation.
Simple can be very good. But if you are swayed by Swedrow's arguments for small/value stocks, you could just buy a balanced fund (e.g. a Target Date Retirement fund) with the majority of your money as a foundation, and buy a bit of small/value using one or two other funds to tilt as you see fit. But then you'll need to remember to rebalance periodically.

 

[Turn_the_Page]

I really have a soft spot for value funds, but the market tends to go in fairly long growth phases. I think you're better off diversifying into both growth and value.

 

[photoguy]

EFV is often recommended over VTRIX because it's considered more "valuey". I don't have Swedroe's 2006 book but here's what he wrote about choosing funds:

For value and small-cap allocations, choose the funds with the greatest exposure to the risk factors (highest weighted
average BtM or lowest weighted average P/E ratio and smallest weighted average market capitalization). This will not
only provide the purest exposure to the asset class (greater diversification benefits), but allow for a lower overall equity
allocation (due to the greater expected returns).

from The Only Guide You'll Ever Need for the Right Financial Plan (2010), page 79.

You can look up this information on a site like morningstar (BtM, average size, etc.) Just enter the ticker and go to the portfolio tab. He also suggests using criteria like low expense ratios, low turnover, prefer tax managed, and prefer total market (to reduce need and cost of rebalancing. If you want a greater tilt then get an additional fund).