Reasonable Portfolio?

[cyclone6]

I think - finally - I've decided to implement the following over the next year:

VB - Vanguard small-cap etf 5%
VO - Vanguard mid-cap etf 5%
VV - Vanguard large-cap etf 5%
VEA - Vanguard Europe-Pacific etf 10%
VWO - Vanguard Emerging Mkt etf 5%
VNQ - Vanguard REIT 5%
RWX - DJ Wilshire Intl Real Estate 5%
HSGFX - Hussman Strategic Grwth 15%
-----------------------------------------
Total stocks/REITS 55%

BND - Vanguard Total bond market 22.5%
HSTRX - Hussman Strat Tot Return 22.5%
------------------------------------------
Total "fixed" income 45%
Total expense ratio (per Morningstar): 0.46%


I like having some managed coverage. While HSTRX is not a true bond-only fund, I like the fact that he can be up to 30% in utilities, gold companies and foreign currencies when he considers them undervalued. So a little extra diversification. Plus he has just cleaned the clock on BND (VBMFX) over the past 5 years...

I am 45 and thinking about pulling the plug next month.

Any thoughts/suggestions/criticisms of the portfolio?

 

[dex]

RWX - DJ Wilshire Intl Real Estate 5% - Why this and Vanguard Real Estate?


Take a look at
Vanguard High Yield bond fund
Vanguard Convertible Security fund
Both very depressed and paying good yields.

 

[cyclone6]

RWX - DJ Wilshire Intl Real Estate 5% - Why this and Vanguard Real Estate?

RWX is an ex-US real estate fund, VNQ is US real estate. Just looking for a little international real estate exposure.

I will look at the high yields (scares me to death at the moment) and convertibles (don't really understand them)...

 

[LOL!]

Your suggested investments are fairly typical with no surprises. I don't understand why you want VB, VO and VV when you could go Total Stock Market VTI. If you want to overweight small cap, then VTI plus VBR to get a slight small value tilt.

Same goes for your VEA + VWO: you could go with VEU instead.

But OTOH, if this is a taxable portfolio, you will be doing some tax loss harvesting and will probably end up owning VTI, VEU and the others anyways as you sell and buy replacement shares.

You should not hold your BND, VNQ, RWX and actively managed funds in a taxable account. Put them in an IRA instead.

Some fixed income afficionados would so don't bother with hi-yield bonds. They are too positively correlated with equities, so you don't get the diversification with them that you think. You might as well buy equities. So make your bonds conservative and take your risks on the equity side of things. Others would also suggest overweighting TIPS to be more than you have in just BND.

 

[cyclone6]

But OTOH, if this is a taxable portfolio, you will be doing some tax loss harvesting and will probably end up owning VTI, VEU and the others anyways as you sell and buy replacement shares.

Thanks for your thoughts. FWIW, the reason I picked VB, VO and VV instead of VTI is twofold:

1) Maximize tax-loss harvesting capabilities. If one particular segment does particularly well, or poorly, then its possible to split out those particular segment(s)

2) According to Morningstar, VTI is weighted quite heavily towards large-cap stocks...almost no small caps at all. Vanguard Total Stock Market ETF Report | VTI | Portfolio

Some fixed income afficionados would so don't bother with hi-yield bonds. They are too positively correlated with equities, so you don't get the diversification with them that you think. You might as well buy equities. So make your bonds conservative and take your risks on the equity side of things. Others would also suggest overweighting TIPS to be more than you have in just BND.

This is one of the reasons I like having actively managed components. HSTRX is holding virtually all TIPS bonds at the moment, as Hussman believes TIPS are significantly undervalued at the moment. I'll let him do the worrying...

Most of the HSGFX and HSTRX will be in an IRA and a small Roth - and thats also where I plan to hold most of the VNQ. But the bulk of what I have is in taxable accounts, so I can't cover all of them.

 

[LOL!]

You may wish to investigate tax-exempt munis instead of BND if you need bonds in taxable and if your marginal income tax bracket warrants it.

 

[DblDoc]

2) According to Morningstar, VTI is weighted quite heavily towards large-cap stocks...almost no small caps at all. Vanguard Total Stock Market ETF Report | VTI | Portfolio

That is because it reflects the total market. If you are going to overweight some segment it is because you believe it will outperform in some way. There is some evidence that value stocks can. As LOL recommended hold the total stock market as the bulk of your allocation and then "tilt" toward value by adding the appropriate value etf's such as VBR and/or VTV.

DD

 

[FUEGO]

Instead of RWX, did you consider WPS? Similar sector with very similar holdings in top 10. 20% less expense ratio. If you don't pick it initially, maybe a good "swap" when tax loss harvesting.

 

[cyclone6]

Instead of RWX, did you consider WPS? Similar sector with very similar holdings in top 10. 20% less expense ratio. If you don't pick it initially, maybe a good "swap" when tax loss harvesting.

WPS is on the list just as you suggested - as a swap for harvesting.

That is because it reflects the total market. If you are going to overweight some segment it is because you believe it will outperform in some way. There is some evidence that value stocks can. As LOL recommended hold the total stock market as the bulk of your allocation and then "tilt" toward value by adding the appropriate value etf's such as VBR and/or VTV.

DD

So those of you who use VTI for your core domestic equity holding and then use a value tilt, what percentages do you assign to each? 80% VTI and 20% VTV/VBR?

Just curious...

 

[DblDoc]

I use 5% VBR and 5% VTV. Anything smaller just adds to complexity and provides little increased yield.

DD