How does my portfolio look?

[kgtest]

I'm so confused by this process! @.@ Is this method explained on the Bogleheads website? I'm not sure when to know when a certain withholding exceeds a certain percentage.

WHEN to sell, is all relative to your risk appetite. FOR ME, I interpret owning a bunch of SMALL CAPITALIZATION companies... as a little MORE risky than owning a bunch of LARGER CAPITALIZATION companies (GOOGLE, APPLE, etc).

So when I start owning MORE small cap companies *In my example more than 30% BECAUSE I always try to hold 25% and if I own 30% it is 5% or more outside of my "threshold" aka RISK TOLERANCE I need to correct that course. Some "rebalance" by selling back into the right target A/A or for me, I just slowly DCA into the Target A/A...its *SORT OF like re balancing but I never need to really SELL anything... I don't like selling.

LOTS OF RISK = OWNING JUST GOOGLE
LOTS OF RISK = OWNING JUST LARGE CAPS like JUST VUG
LOTS OF RISK = OWNING NO LARGE CAP STOCKS

SIMPLE AND NOT MUCH RISK = VTI

A LITTLE LESS SIMPLE NOT MUCH RISK = 1/3 VBK 1/3 VOT 1/3 VUG
A LITTLE LESS SIMPLE A LITTLE MORE RISK = 1/4 VBK 1/4 VOT 1/2 VUG

Make sense?

It's just a simple pie at the end of the day. 1/4 of my pie is Small Cap companies, 1/4 of my pie is Mid Cap companies, and 1/2 of my pie is Large Companies (I take more risk by owning 50% LargeCap instead of 1/3, 1/3 and 1/3 equal asset mix)...

IF you are still accumulating, need not worry about bonds...stick to equities like your ETF

 

[MarieL]

WHEN to sell, is all relative to your risk appetite. FOR ME, I interpret owning a bunch of SMALL CAPITALIZATION companies... as a little MORE risky than owning a bunch of LARGER CAPITALIZATION companies (GOOGLE, APPLE, etc).

So when I start owning MORE small cap companies *In my example more than 30% BECAUSE I always try to hold 25% and if I own 30% it is 5% or more outside of my "threshold" aka RISK TOLERANCE I need to correct that course. Some "rebalance" by selling back into the right target A/A or for me, I just slowly DCA into the Target A/A...its *SORT OF like re balancing but I never need to really SELL anything... I don't like selling.

LOTS OF RISK = OWNING JUST GOOGLE
LOTS OF RISK = OWNING JUST LARGE CAPS like JUST VUG
LOTS OF RISK = OWNING NO LARGE CAP STOCKS

SIMPLE AND NOT MUCH RISK = VTI

A LITTLE LESS SIMPLE NOT MUCH RISK = 1/3 VBK 1/3 VOT 1/3 VUG
A LITTLE LESS SIMPLE A LITTLE MORE RISK = 1/4 VBK 1/4 VOT 1/2 VUG

Make sense?

It's just a simple pie at the end of the day. 1/4 of my pie is Small Cap companies, 1/4 of my pie is Mid Cap companies, and 1/2 of my pie is Large Companies (I take more risk by owning 50% LargeCap instead of 1/3, 1/3 and 1/3 equal asset mix)...

IF you are still accumulating, need not worry about bonds...stick to equities like your ETF

Okay, thanks for explaining this! So I'm curious, would I be better off doing your method instead of the 80/20 Core Four method on Bogleheads? Also, why is it bad to invest in bonds while in my 30s? I was under the impression that I should cover every possible thing to help accumulate wealth faster, since I would be diversified in that aspect. I'm just trying to understand!

 

[OldShooter]

@MarieL you're not alone. If it is any consolation @kgtest's system is confusing reading for me as well. Roughly, it looks like @kgtest has a portfolio that somewhat underweights large caps, which are about 80% of the market on a cap-weighted basis but 53.4% in this portfolio. I am not sure about the mid- and small- cap weightings but one or both of them have to be overweight if large caps are underweight.

This type of thing is more investing work than I personally want to do. Also, there is no way to know whether the revised weighting will produce better total returns in the future and it will take 5-10 years to find out. So we stick to simple total market funds, really just the one -- VTWAX.

Another thing to realize is that in investing the word "risk" is commonly used as a synonym for "volatility." That's a big problem because for a long-term investor, particularly one like you who are in the accumulation phase, volatility really doesn't matter much. Really the risk is getting on the wrong boat by trying to pick individual stocks or sectors, then not realizing it for the 5-10 years it will take to test the strategy. All the research and statistics lead to the same conclusion: We should buy "the market portfolio," which is everything.

 

[MarieL]

@MarieL you're not alone. If it is any consolation @kgtest's system is confusing reading for me as well. Roughly, it looks like @kgtest has a portfolio that somewhat underweights large caps, which are about 80% of the market on a cap-weighted basis but 53.4% in this portfolio. I am not sure about the mid- and small- cap weightings but one or both of them have to be overweight if large caps are underweight.

This type of thing is more investing work than I personally want to do. Also, there is no way to know whether the revised weighting will produce better total returns in the future and it will take 5-10 years to find out. So we stick to simple total market funds, really just the one -- VTWAX.

Another thing to realize is that in investing the word "risk" is commonly used as a synonym for "volatility." That's a big problem because for a long-term investor, particularly one like you who are in the accumulation phase, volatility really doesn't matter much. Really the risk is getting on the wrong boat by trying to pick individual stocks or sectors, then not realizing it for the 5-10 years it will take to test the strategy. All the research and statistics lead to the same conclusion: We should buy "the market portfolio," which is everything.

Haha, I hear you! Unfortunately, I don't have access to VTWAX, so I will need to find an alternate Vanguard one that does the same. I'm definitely trying to be as aggressive as I can with my investing right now, knowing the full risks. But as you said, I am in my accumulation phase.

And btw, I just checked out the audiobook of A Random Walk down Wall Street and will listen to this during my work commute!

 

[OldShooter]

... I don't have access to VTWAX, so I will need to find an alternate Vanguard one that does the same. ...

Well, one thing you should probably think about is called "home country bias." Currently the US is about 55% of the world market cap, so a portfolio like VTWAX that has no home country bias will be at about 45% international stocks. I think most people around the forum here do not go that high. Numbers like 30% seem to be more popular. Reasons vary. Here is an 8-minute video on the subject: https://famafrench.dimensional.com/videos/home-bias.aspx

As far as duplicating VTWAX, you can easily do it with 55% in a US total market fund and 45% in an international total market fund. You will have to check the exact percentages and maybe adjust every year or two, but being exact is not critical. Or you can add home country bias by increasing the 55% number. I'm sure someone will be along soon to argue that 45% is too much foreign exposure and give his/her reasons.

Different subject: You mentioned bonds. Basically the bond portion of a portfolio takes reduced total return in exchange for for reduced volatility. This is fairly necessary when a person is drawing on his/her portfolio because of something called "Sequence of Returns Risk." Secret code here is SORR. The reason @kgtest says you don't need bonds (and I agree) is that you are accumulating and really don't care about volatility during this phase. In fact, volatility can even be your friend because whenever the market takes a dive your $100 will buy more shares that it did previously. For you, a dip means that stocks have gone on sale.

 

[pb4uski]

Haha, I hear you! Unfortunately, I don't have access to VTWAX, so I will need to find an alternate Vanguard one that does the same. I'm definitely trying to be as aggressive as I can with my investing right now, knowing the full risks. But as you said, I am in my accumulation phase.

And btw, I just checked out the audiobook of A Random Walk down Wall Street and will listen to this during my work commute!

The ETF VT, which I think the OP probably can buy via SoFi is identical to VTSAX.

I recommended VT as a simple solution in posts #7 and #15.

 

[MarieL]

The ETF VT, which I think the OP probably can buy via SoFi is identical to VTSAX.

I recommended VT as a simple solution in posts #7 and #15.

I looked up what the difference was between VT and VTI and found this site: https://www.askfinny.com/compare/VTI-vs-VT

It seems VTI yields higher returns so I am wondering if VTI would be better for me instead of VT?

 

[OldShooter]

I looked up what the difference was between VT and VTI and found this site: https://www.askfinny.com/compare/VTI-vs-VT

It seems VTI yields higher returns so I am wondering if VTI would be better for me instead of VT?

That's kind of apples and oranges. VT is total international and VTI is total US market. So you probably want to decide on home country bias and then buy a combination of two funds like those two. Fido and Schwab have similar "pairable" funds.

VTI's higher returns reflect the fact that for the last decade the US market has been stronger than the international market. In the prior decade it was the opposite. Lately I have been seeing articles that speculate that it will again be international's turn in the next decade. But that and $5 will get you a fancy coffee. Nobody knows the future.

 

[jazz4cash]

It's a micro-investing app. Kind of like Robinhood, Acorns, and FirstTrade. I like using SoFi because it allows you to invest in fractional shares instead of spending more to buy the whole share. I may eventually move to a place like Vanguard if/when my portfolio value gets large enough, but for now, this has been sufficient for me for my budget, and will help me get a little better understanding of investing.

This was confusing to me. When you described the rationale for buying fractional shares I was expecting to see a bunch of individual stocks in your portfolio. You have mostly mutual and ET funds which all offer purchase of fractional shares regardless of where you purchase. Maybe this was mentioned by another member but I didn’t see it mentioned.

Fractional shares and diversification is a basic feature of almost any mutual or ET fund.

Congratulations on getting started.

 

[pb4uski]

That's kind of apples and oranges. VT is total international and VTI is total US market. So you probably want to decide on home country bias and then buy a combination of two funds like those two. Fido and Schwab have similar "pairable" funds.

VTI's higher returns reflect the fact that for the last decade the US market has been stronger than the international market. In the prior decade it was the opposite. Lately I have been seeing articles that speculate that it will again be international's turn in the next decade. But that and $5 will get you a fancy coffee. Nobody knows the future.

Agree with all you wrote... but to be clear VT is total world (US and international)... not total international and VTI is total US market.

VT is the ETF versions of VTWAX... Vanguard Total World Stock Index Fund.

VTI is the ETF version of VTSAX... Vanguard Total Stock Market Index Fund.

 

[OldShooter]

Thx for the correction.

 

[MarieL]

This was confusing to me. When you described the rationale for buying fractional shares I was expecting to see a bunch of individual stocks in your portfolio. You have mostly mutual and ET funds which all offer purchase of fractional shares regardless of where you purchase. Maybe this was mentioned by another member but I didn’t see it mentioned.

Fractional shares and diversification is a basic feature of almost any mutual or ET fund.

Congratulations on getting started.

I currently do fractional investing with Tesla, and I did some with a few other individual companies when I first got started. Also, I never got the option to do fractional investing with some of the Vanguard ones when I was first looking into this on the main Vanguard site. You had to buy an entire share outright, which was beyond my budget at the time. Some of the Vanguard ones that are offered to me via SoFi allow me to do fractional investing.

 

[ESRwannabe]

I am using SoFi Invest because I love that you can invest in fractional shares instead of buying a whole share in one lump sum. This has been very budget friendly for me, since I only have $100 per month (for now) to allocate.

I would like to know if I am making the right choices with these stocks or should I consider others? I tried to pick ones that were high dividend yields, REITs, and all the Vanguard ones that I have access to.

Trying to do all the smart things on my path to FI/RE!

Thank you in advance!

Here is a portfolio for you that will cover a lot of asset classes, be globally diversified, generate a high amount of current income, and provide income growth over time.

25% into etf VYM (Vanguard High Div Yield US)
25% into etf VYMI (Vanguard High Div Yield Foreign)
10% into etf REET (iShares Global REITs)
5% into etf QYLD (GlobalX Nasdaq Covered Calls)
5% into etf ALTY (GlobalX Alternative Assets)
5% into etf PCEF (Invesco CEF Income Composite)
5% into etf YYY (YieldShares CEF High Income)
5% into etf BIZD (VanEck BDC Income)
5% into etf MLPX (GlobalX MLP & Energy Infrastructure)
5% into etf XMPT (VanEck Municipal Bond CEFs)
5% into etf PFFA (Virtus Infracap US Preferred Stock)

 

[MarieL]

Here is a portfolio for you that will cover a lot of asset classes, be globally diversified, generate a high amount of current income, and provide income growth over time.

25% into etf VYM (Vanguard High Div Yield US)
25% into etf VYMI (Vanguard High Div Yield Foreign)
10% into etf REET (iShares Global REITs)
5% into etf QYLD (GlobalX Nasdaq Covered Calls)
5% into etf ALTY (GlobalX Alternative Assets)
5% into etf PCEF (Invesco CEF Income Composite)
5% into etf YYY (YieldShares CEF High Income)
5% into etf BIZD (VanEck BDC Income)
5% into etf MLPX (GlobalX MLP & Energy Infrastructure)
5% into etf XMPT (VanEck Municipal Bond CEFs)
5% into etf PFFA (Virtus Infracap US Preferred Stock)

Wow, thanks for this! I noticed VTI is not part of this. Is there a reason why? I have seen more people doing dividend investments as of late, so I'm curious as to why this is a current trend, or is it just better over all?

 

[ESRwannabe]

Wow, thanks for this! I noticed VTI is not part of this. Is there a reason why? I have seen more people doing dividend investments as of late, so I'm curious as to why this is a current trend, or is it just better over all?

VTI is a good etf in general. You could replace VYM with VTI in this example, or replace both VYM and VYMI with the etf VT.

I would actually say that investing for dividend income is what has been done normally historically and that "total return" investing is actually the new trend.

Stock buybacks used to be illegal as price manipulation until sometime in the 80s. The only way for a company to return money to shareholders was through dividends.

The US has had a very anomalous history since the end of WW2. The US has around 4% of the world population but US stocks make up almost 50% of the global market cap. There will eventually come a time when investing for capital gains doesn't work for decades (as it had in the past). Once this happens all this total return stuff will be tossed out the window again and people will go back to investing for dividends.

 

[OldShooter]

@MarieL, as you obviously know there is an infinity of possible portfolios. The one that @ESRWannabe has posted is simply one of them. There is a nice tool at https://www.portfoliovisualizer.com that allows fairly easy comparison of portfolios. Here is a run* that compares the @ESRWannabe's portfolio to a portfolio that is 100% VTI:

​

Basically, @ESRWannabe's portfolio reduces relative volatility but provides a significantly lower rate of return (CAGR). There is nothing wrong with this; it is simply a choice. I would submit, though, that it is not a good choice for someone looking for aggressive growth and, in the accumulation phase, relatively unconcerned about volatility.

...There will eventually come a time when investing for capital gains doesn't work for decades (as it had in the past). Once this happens all this total return stuff will be tossed out the window again and people will go back to investing for dividends.

This implies that dividend investing and total return investing are mutually exclusive things. They are not. Total return is simply capital gains plus dividends. So if capital gains go away (which I doubt), then dividends will dominate total return calculations. IOW, whether capital gains exist or not, total return is still the sensible measure of an investment.

__________________________________________
* one problem with Portfolio Visualizer is that it can only go back as far as the shortest asset history file. In this case, PFFA had a very short history so I have substituted a similar fund, PGX, in order to get a three-year comparison. At that point, VYMI's history ends. I did not want to substitute for that one because it is 25% of the portfolio. Ideally this type of comparison will cover five or more years. And, of course, it guarantees nothing about the future performance of any portfolio.

 

[MarieL]

@MarieL, as you obviously know there is an infinity of possible portfolios. The one that @ESRWannabe has posted is simply one of them. There is a nice tool at https://www.portfoliovisualizer.com that allows fairly easy comparison of portfolios. Here is a run* that compares the @ESRWannabe's portfolio to a portfolio that is 100% VTI:

Basically, @ESRWannabe's portfolio reduces relative volatility but provides a significantly lower rate of return (CAGR). There is nothing wrong with this; it is simply a choice. I would submit, though, that it is not a good choice for someone looking for aggressive growth and, in the accumulation phase, relatively unconcerned about volatility.


This implies that dividend investing and total return investing are mutually exclusive things. They are not. Total return is simply capital gains plus dividends. So if capital gains go away (which I doubt), then dividends will dominate total return calculations. IOW, whether capital gains exist or not, total return is still the sensible measure of an investment.

__________________________________________
* one problem with Portfolio Visualizer is that it can only go back as far as the shortest asset history file. In this case, PFFA had a very short history so I have substituted a similar fund, PGX, in order to get a three-year comparison. At that point, VYMI's history ends. I did not want to substitute for that one because it is 25% of the portfolio. Ideally this type of comparison will cover five or more years. And, of course, it guarantees nothing about the future performance of any portfolio.

Thank you so much for sharing that site! This is pretty awesome! I was playing around with some numbers and allocations, comparing some portfolios.

Portfolio 1 is loosely based off the Core 4 80/20 (with Tesla added and bonds taken out)
Portfolio 2 is my own I put together.

It looks like Portfolio 2 would give the higher return in a faster amount of time if I contributed $100 a month (which I currently do). Or am I reading this incorrectly?

Also I did click the box that said 'inflation adjusted'

What do you think? Would Portfolio 2 be good for me?

 

[target2019]

VTI
VNQ
TSLA
and call it a day.

 

[OldShooter]

... What do you think? ...

For all intents and purposes those two are identical.

Also be careful with concluding that one or the other of similar portfolios "would be" anything. All you are seeing is what has happened in the past. The future is unknown. Backtesting is great fun and somewhat useful for comparisons but that is the end of the story. The worst form of backtesting is when someone goes back and cherry picks a bunch of winners, then believes that this is the genius portfolio for the future.

Also, I would not include Tesla in any backtesting portfolio because of its anomolous past price behavior. The only thing to know for sure is that Tesla will, in the future, not come anywhere near its past behavior. You have it at tiny percentages so it probably is not distorting your results much but just as a matter of principle I would not include it.

Sorry there is no magic to investing and there are no secret sauces to find.

 

[Golden sunsets]

Here is a portfolio for you that will cover a lot of asset classes, be globally diversified, generate a high amount of current income, and provide income growth over time.

25% into etf VYM (Vanguard High Div Yield US)
25% into etf VYMI (Vanguard High Div Yield Foreign)
10% into etf REET (iShares Global REITs)
5% into etf QYLD (GlobalX Nasdaq Covered Calls)
5% into etf ALTY (GlobalX Alternative Assets)
5% into etf PCEF (Invesco CEF Income Composite)
5% into etf YYY (YieldShares CEF High Income)
5% into etf BIZD (VanEck BDC Income)
5% into etf MLPX (GlobalX MLP & Energy Infrastructure)
5% into etf XMPT (VanEck Municipal Bond CEFs)
5% into etf PFFA (Virtus Infracap US Preferred Stock)

I don't know why Marie would want a portfolio with high income. At such a young age, I would think it would be the exact opposite. She would want more growth and dividends to be taxed at lower capital gains rates. Income portfolios are for those who need the income to live off of. She is in the accumulation phase and is looking for growth. I also think this is way too many holdings. Two or three at most of broad based index funds is all you need and if she sticks to that logic, she would hopefully not need to deal with fractional shares.

Marie; Take out a copy of "The Four Pillars of Investing" by Bernstein, from the local library and read it. I will give you a broad brush without too much minutia.

 

[MarieL]

I don't know why Marie would want a portfolio with high income. At such a young age, I would think it would be the exact opposite. She would want more growth and dividends to be taxed at lower capital gains rates. Income portfolios are for those who need the income to live off of. She is in the accumulation phase and is looking for growth. I also think this is way too many holdings. Two or three at most of broad based index funds is all you need and if she sticks to that logic, she would hopefully not need to deal with fractional shares.

Marie; Take out a copy of "The Four Pillars of Investing" by Bernstein, from the local library and read it. I will give you a broad brush without too much minutia.

Thank you for the book recommendation! I will look for it.
And yes, I am in my late 30s trying to build wealth fast and responsibly so I can reach FIRE before 50.

 

[Go-NoGo]

I wish this Youtube video existed 30 years ago when I started investing, I made a lot of mistakes by picking individual stocks, trying to pick hot mutual fund managers and so on.

Jcollins did a talk at Google where he talks about the simple path to wealth, pick 3 ETFs or index funds, put as much as you can each month into it on autopilot, check back again in 20 years when you are ready to retire.

JL Collins: "The Simple Path to Wealth" | Talks at Google

 

[MarieL]

For all intents and purposes those two are identical.

Also be careful with concluding that one or the other of similar portfolios "would be" anything. All you are seeing is what has happened in the past. The future is unknown. Backtesting is great fun and somewhat useful for comparisons but that is the end of the story. The worst form of backtesting is when someone goes back and cherry picks a bunch of winners, then believes that this is the genius portfolio for the future.

Also, I would not include Tesla in any backtesting portfolio because of its anomolous past price behavior. The only thing to know for sure is that Tesla will, in the future, not come anywhere near its past behavior. You have it at tiny percentages so it probably is not distorting your results much but just as a matter of principle I would not include it.

Sorry there is no magic to investing and there are no secret sauces to find.

Thanks for the tips! I was looking at patterns and just making my own deductions, but I understand what you mean. I am not looking for the magic pill. I just want to build a portfolio that will help me reach FIRE before 50.

 

[OldShooter]

... I just want to build a portfolio that will help me reach FIRE before 50.

Pick two or three broad equity funds with total 30-50% international exposure and take a look at the portfolio every year or two. If you hear that the market has taken a dive, stop looking for a couple of years.

One of the things that I learned in my first 30 years of investing is that the more I played with my food, the less food I had.

 

[pb4uski]

Here is a portfolio for you that will cover a lot of asset classes, be globally diversified, generate a high amount of current income, and provide income growth over time.

25% into etf VYM (Vanguard High Div Yield US)
25% into etf VYMI (Vanguard High Div Yield Foreign)
10% into etf REET (iShares Global REITs)
5% into etf QYLD (GlobalX Nasdaq Covered Calls)
5% into etf ALTY (GlobalX Alternative Assets)
5% into etf PCEF (Invesco CEF Income Composite)
5% into etf YYY (YieldShares CEF High Income)
5% into etf BIZD (VanEck BDC Income)
5% into etf MLPX (GlobalX MLP & Energy Infrastructure)
5% into etf XMPT (VanEck Municipal Bond CEFs)
5% into etf PFFA (Virtus Infracap US Preferred Stock)

Too many tickers... too much complexity! Read the OP.... we're talking about less than $1k right now..... why would you recommend 11 tickers for a portfolio less than $10k? Actually, even if it was $1m you don't need that many tickers!