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Old 02-13-2020, 10:10 AM   #41
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@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.


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Originally Posted by ESRwannabe View Post
...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.
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Old 02-13-2020, 12:21 PM   #42
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Originally Posted by OldShooter View Post
@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?
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Old 02-13-2020, 12:42 PM   #43
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and call it a day.
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Old 02-13-2020, 12:47 PM   #44
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... 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.
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Old 02-13-2020, 01:08 PM   #45
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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.
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Old 02-13-2020, 01:42 PM   #46
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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.
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Old 02-13-2020, 01:52 PM   #47
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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
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Old 02-13-2020, 01:58 PM   #48
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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.
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Old 02-13-2020, 02:12 PM   #49
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... 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.
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Old 02-13-2020, 02:23 PM   #50
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Quote:
Originally Posted by ESRwannabe View Post
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!
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Old 02-13-2020, 03:20 PM   #51
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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
What an awesome video! Watched the whole thing and I am reading articles from his blog.
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Old 02-18-2020, 08:28 PM   #52
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Old 02-19-2020, 02:15 AM   #53
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Too many holdings. If it were me I would buy one portion of a US total stock market fund, one portion of an international stock market fund and the final portion of a total bond fund. I would probably do 65/20/15.
+1


You are probably paying a lot of hidden fees for that many holdings.
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Old 02-19-2020, 02:19 AM   #54
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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.
Donít know what your annual spending or lifestyle is, but seems like youíre really going to need to save hard to FIRE in 12 years. Push hard if thatís your goal!
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