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Rational Investing Portfolio
Old 07-25-2007, 08:12 PM   #1
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Rational Investing Portfolio

Because of the close association this forum has with Bob Clyatt's "Work Less, Live More", I'm surpised I can't find more discussion of "Rational Investing Porfolios." I've tried a bunch of different search words and phrases, but no luck. Maybe someone could point me in the right direction.

In the mean time, I'll go ahead and ask my questions: Has Clyatt's suggested asset classes and fund changed since the book came out in 2005? Has anyone found a single investment company or a small group of investment companies that cover the entire set of asset classes? Does anyone have experience with transferring funds out of TIAA-CREF and into a rational investing portfolio?


(Is there a way to edit the title to fix the misspelled "Portfolio"?)
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Old 07-25-2007, 09:24 PM   #2
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I have not read Clyatt's book and I don't know what a RIP is, but I do have an old TIAA-CREF 403b that I have recently begun to manage differently. You may wish to consider the TIAA Real Estate account is a unique investment according to folks on the Diehard forum. So if it is available to you, you may wish to put some money in it. Do your own research. Full disclosure: I own it.

Link to diehards forum: Bogleheads :: View Forum - Investing and Personal Finance
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Old 07-25-2007, 09:37 PM   #3
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Try "asset classes".
I have outlived most of the people I don't like and I am working on the rest.
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Old 07-25-2007, 09:42 PM   #4
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Originally Posted by WithAllMyHeart View Post
(Is there a way to edit the title to fix the misspelled "Portfolio"?)
No there isn't. But you can send a request to the moderators, and they can fix it for you.

As for searching. The site search engine is very primitive. Try this in google:

Rational Investing site:
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Old 07-25-2007, 11:15 PM   #5
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See Paul's suggested portfolios: - Home
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Old 07-26-2007, 09:08 AM   #6
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For what it's worth, My take on Bob Clyatt's method is that it's a good case of data mining. In other words I am skeptical as to the sustainability and repeatability of Bob's method over tough investment cycles. Looking backwards you will always find some combination that beats out the tried and true.
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Old 08-01-2007, 10:13 PM   #7
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Had a nice long detailed reply which I just accidentally deleted...

To From the Heart's original question, I just updated the book (Work Less Live More) for a new edition and there are no changes to the asset allocation and none are anticipated. Also, no one fund captures this portfolio, but some come close, including Wellington. But adding a few more funds seems so easy that I think most people won't mind in order to get the additional return/diversification benefits.

Rational Investing Portfolios aren't so much a specific asset allocation as they are a low-fee, index and value-oriented, widely diversified and low-volatility portfolio that you rebalance every few years and that you are comfortable holding.

My published ones in the book are not data mining but constrained optimizations based on reasonable bands for 16 recognized asset classes. Real data mining gives you weird portfolios with 90% gold and 10% japanese equities and the like.

Although the portfolio has returned over 10% per year for the past 20 years, my only goal was to do 8% after fees with volatility half that of the sp500, which I felt gave a good mix of risk and reward for me and other long-term retirees.

I get a lot of comfort in this investing approach from the fact that I didn't invent it -- just adapted it from what big institutions have been doing for some time. It's just that now this investing approach is accessible to the little guy for a reasonable <.35% p.a. fee. It's applied Modern Portfolio Theory that just says more diversification into credible but less-correlated asset classes and sub-classes gives you a bit of a free lunch -- a lower level of risk/volatility for a given level of expected return. Stick with a simple 60/40 SP500/TBond mix if you like, but the Rational Investing Portfolio matches that return with consistently less volatility over time for little or no additional effort.

For those who don't have the book, here is the recommended asset allocation -- a place to start tweaking based on your own biases and comfort level. Simpler ones are also listed in the book. (These work out to about 40% stocks, 40% bonds and 20% Other asset classes)

US Large (Value tilt) 12%
US Small (Value tilt) 8.5%
International Large 5%
International Small 10%
Emerging Markets 6.5%
ST Corporate Bonds and MM 4%
LT US Govt Bonds 4%
Medium term US Bonds 10%
Medium Term International 12%
GNMA Bonds 5%
High Yield Bonds 4%
Oil and Gas 3%
Market Neutral Hedge Fund 2%
Commodities 4%
Commercial Real Estate 5%
Venture Capital/Private Equity 5%
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Old 08-02-2007, 06:58 AM   #8
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I have been very impressed with the points made by Solin and Bogle in their respective books. The bottom line advice from them is to own the market in cash, bond and stock indexes. and their arguments are convincing if you stay with low cost index funds and for the long haul. Allocate per personal tolerance and age.

A 50% total stock index (maybe with <=20% stocks [10% total] in international), 40% total bond index, 10% cash for FIRE would fit their bill. My own asset mix is only slightly more slice-and-dice than that.

I think you can milk out a little better return with some of the other strategies suggested elsewhere at the cost of owning lots more funds and watching closely for sea changes in the investment world. But for a Joe Sixpack like me, I don't really understand some of the recommended investments, don't want to spend lots of time doing so, and would feel more vulnerable as a result.

History suggests I'll enjoy similar returns according to the above credible writers.
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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Old 08-02-2007, 08:07 AM   #9
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Thanks, Bob, for your thoughtful response. Currently, all my retirement savings are in two funds, TIAA-CREF and another one associated with my university. I'm trying to decide if I can get a good mix of asset allocations from those two funds (which would be nice) or if I should take my money out of them and put it in Wellington, Vantage, or something similar (which would cause me some pain) that might provide a better asset mix. I guess I'll just have to do more financial homework--something that I traditionally have avoided. DW has always taken care of our finances, and I'm just not eager to get involved. With the high stakes involved, maybe I better.
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