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I would go with 2 or 3 ETF's. Make sure to include a bond fund like AGG or VBMFX. This way you have the ability to rebalance if the markets go haywire in either direction -- example stock PE ratio goes up to 25 and yo want to shift more into bonds, or stock market drops 50% and you want to favor stocks more.
I would go with 2 or 3 ETF's. Make sure to include a bond fund like AGG or VBMFX. This way you have the ability to rebalance if the markets go haywire in either direction -- example stock PE ratio goes up to 25 and yo want to shift more into bonds, or stock market drops 50% and you want to favor stocks more.
This is market timing and I wouldn't recommend it, as it's likely to hurt more than it helps. Set your asset allocation and keep it steady. Rebalancing to your desired asset allocation is a way of buying low and selling high anyway - as stocks drop you buy more stocks and sell your bonds to rebalance your asset allocation.
with bonds on the edge of ending a 40 year old bull run where a static portfolio was no problem for just as long , that is likely to end.
adjusting and nudging the allocations to fit the big picture is my opinion as to where we are headed with portfolio mgmt.
i have been doing just that for 26 years but going forward i believe sitting with conventional bonds which have no where to go but down may not be the best way. in fact i would likely say cash and stocks would outperform if you wanted to stay static and controlling volatility was not a goal..
with the historic average being in the 6% range a trip back to the norm could be filled with quite alot of losses for bonds.
shorter term bonds would do little more than a money market so they would be a poor choice as well.
any holdings devoted to bonds has to be well thought out as to why you want them and the type of bond or bond funds at this stage.
in the short term the extra income bonds may give you vs the downside losses make make cash the better deal if controlloing volatility is not a reason you want bonds.
if bullet-proofing a portfolio is your plan than only long term treasury bonds will work well and have enough ooomph to pull against a big drop in stocks . but those need to be offset with an inflation hedge like gold or commodities.
going forward i believe good portfolio construction specifically geared to meet your own goals and stomach are going to count more than ever.
like everything else today things are going in the direction of being more and more specialized and focused .
the days of sitting static with some 60/40 mix and getting good performance may be ending after 40 years as bonds work against the other asset classes and not with them making sitting static not the best way anymore..
Last edited by mathjak107; 12-09-2014 at 02:51 AM..
with bonds on the edge of ending a 40 year old bull run where a static portfolio was no problem for just as long , that is likely to end.
adjusting and nudging the allocations to fit the big picture is my opinion as to where we are headed with portfolio mgmt.
i have been doing just that for 26 years but going forward i believe sitting with conventional bonds which have no where to go but down may not be the best way. in fact i would likely say cash and stocks would outperform if you wanted to stay static and controlling volatility was not a goal..
with the historic average being in the 6% range a trip back to the norm could be filled with quite alot of losses for bonds.
shorter term bonds would do little more than a money market so they would be a poor choice as well.
any holdings devoted to bonds has to be well thought out as to why you want them and the type of bond or bond funds at this stage.
in the short term the extra income bonds may give you vs the downside losses make make cash the better deal if controlloing volatility is not a reason you want bonds.
if bullet-proofing a portfolio is your plan than only long term treasury bonds will work well and have enough ooomph to pull against a big drop in stocks . but those need to be offset with an inflation hedge like gold or commodities.
going forward i believe good portfolio construction specifically geared to meet your own goals and stomach are going to count more than ever.
like everything else today things are going in the direction of being more and more specialized and focused .
the days of sitting static with some 60/40 mix and getting good performance may be ending after 40 years as bonds work against the other asset classes and not with them making sitting static not the best way anymore..
You have absolutely no data to back what you're saying. "Likely". "May". "I believe". "May be ending". It's all pure speculation. You sound like someone trying to sell something.
I'll stick with my 80/20 index portfolio through because I recognize the futility of market timing. No one knows where the market is headed. Trying to predict it will hurt you more than help you.
really? we are not talking about timing the equity markets here. we are talking about the likely hood rates on bonds will be higher in the future and are talking about sitting with conventional bonds or bond funds regardless..
well where do you see bond rates headed from here looking out a few years or longer ,up or down?
what makes the most sense to you from these levels ?
if you think sitting static like you could when bonds were in a bull market for the last 40 years makes sense than do it.
on the other hand i prefer to go with what has the greatest likely hood of playing out and that is bonds will eventually rise towards their historical norm and hurt you not add to the party as in the past.
these are not conventional times anymore and conventional methods stand a good chance of not working out as in the past.
if you think you will hold those bonds until the tide turned and sell them then you would be doing just what i said and adjusting to fit the big picture.
there are better choice to be had in bond types when rates and inflation pick up and that isn't market timing it is just basics of investing.
what i wouldn't sit with once things heated up are conventional bonds. why would you? what i would shift to is TIPS- reit income funds and floating rate high yield funds as subs for conventional bonds..
there are far better choices in bond types than just watching your conventional bonds fall lower and lower when rates and inflation head upward.but if you want to buy and die with a forever portfolio ,than thats your choice .
you have to realize your allocations will determine your over all return more than anything else. it isn't a case of picking index funds and you will be fine. it is a case of picking the right types of funds and utilizing them in the right allocations to fit the world around you
the index/etf model i track monthly is performing poorly because its allocation to commodities and tips now do not fit the big picture. that model portfolio would be doing so much better without that dead weight. that is what i am saying , every asset class has times to be in it and times not to be based on the big picture and not daily noise. ...
what wouldn't i own now? international funds , commodity funds and tip funds.
their day will come but for now i see no reason to own them. that is why i prefer buy and manage your portfolio vs buy and die in some static mix.
been using a buy and manage method of adjusting portfolio allocation for 26 years now. 100k without a penny added is worth 2 million today just by swapping funds
infrequently for other funds that fit the time frame better. . and none of those funds were ever an index fund but in this case that is irrelevant as it is all about your allocations fitting the time frame regardless of whether active or passive funds.. .
Last edited by mathjak107; 12-09-2014 at 04:00 AM..
I would like to invest $10,000 for about 25 years. Where do you suggest?
I would say pick one or two of the following balanced funds:
Vanguard Wellington
Dodge Cox Balanced
Oakmark Equity & Income
Mairs & Power Balanced
These are balanced funds that own about 60% - 70% stocks & 30% - 40% bonds & cash most of the time.
I don't believe in being 100% in stocks because most people can't handle the volatility. The good news is these funds have all been around a long time and have often matched or beaten the returns of the stock market with less volatility. The lower volatility makes them easier to stick with.
I am leaning towards Vanguard Target 2040. What do you think? Healthcare has faired well but it is not included in this balanced fund. See below.
89.98% Stocks
9.97% Bonds
0.05% Short-term reserves
Allocation to underlying funds as of 10/31/2014
Ranking by Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund Investor Shares 63.2%
2 Vanguard Total International Stock Index Fund Investor Shares 26.9%
3 Vanguard Total Bond Market II Index Fund Investor Shares* 8.0%
4 Vanguard Total International Bond Index Fund 1.9%
Total — 100.0%
I am leaning towards Vanguard Target 2040. What do you think? Healthcare has fared well but it is not included in this balanced fund. See below.
89.98% Stocks
9.97% Bonds
0.05% Short-term reserves
Allocation to underlying funds as of 10/31/2014
Ranking by Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund Investor Shares 63.2%
2 Vanguard Total International Stock Index Fund Investor Shares 26.9%
3 Vanguard Total Bond Market II Index Fund Investor Shares* 8.0%
4 Vanguard Total International Bond Index Fund 1.9%
Total — 100.0%
It's a little too heavy on stocks for me. Also, I don't like the international stock indexes. I think active management does better for international stocks, provided you don't pay too much for it (I like Dodge & Cox International Stock for this reason).
As far as health care goes, health care stocks are well represented in both the US and International stock indices in the fund. I also don't like the international bond market index. It is heavily represented by countries like Japan, Germany, & the US. Japan's debt situation is even worse than America's, yet their interest rates are even lower. Germany's position is better, but not great, but their interest rates are also very low (as in less than 1% for 10 year government bonds). But the international bond index is a small part of the fund, so it won't hurt it much.
You could certainly do worse than a fund like this, but I like Vanguard Wellington better. I know the target date fund will get more conservative with time, but 10% in bonds isn't much of a cushion if there's a major bear market. Wellington is more like 30% or 35% bonds.
i have already voiced my displeasure with target funds and all the issues they present so i won't go through it again other than to say they would be my last recommendation.
I am leaning towards Vanguard Target 2040. What do you think? Healthcare has faired well but it is not included in this balanced fund. See below.
89.98% Stocks
9.97% Bonds
0.05% Short-term reserves
Allocation to underlying funds as of 10/31/2014
Ranking by Percentage Fund Percentage
1 Vanguard Total Stock Market Index Fund Investor Shares 63.2%
2 Vanguard Total International Stock Index Fund Investor Shares 26.9%
3 Vanguard Total Bond Market II Index Fund Investor Shares* 8.0%
4 Vanguard Total International Bond Index Fund 1.9%
Total — 100.0%
be aware you really only have s&p500 coverage in that total market index. the way it is weighted the s&p 500 dominates the return to the point that the last 5 years saw the midcaps and small caps beat the s&p 500 by 5-6% a year while the total market fund in most cases picked up less that 1% difference vs just an s&p 500 fund.
it really is not enough extra diversification to even bother in my opinion.
unless you are going to use an s&p500 fund and an extended market fund you will have littler diversification between just large caps and everything else.
the name "total market fund" can be deceiving .
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