Hey all. I have been really appreciating all the help/advice I've read so far. I'm looking to invest my current savings into a long-term portfolio. Have a good paying job and plan to invest more from my paycheck (keep buying during a crash, rebalance each quarter, etc). I'm okay with high volatility and losses year-to-year, this isn't money I need to live off of. Given this, I think it makes sense to have a fairly high-risk portfolio, while well diversified. Do you think that 50% VOO (S&P 500), 20% VXUS (international stocks), 20% VB (U.S. small cap), and 10% BND (US bonds) makes sense? All are very low expense ETFs and seem to give a good mix of diversity, with overall high risk/return (and slight tilt to small cap). Would really appreciate any advice! Cheers.
Hey Garrett, About VXUS, I think you should know that Vanguard is one of the most powerful retail investment houses. It has excellent products for individual investors. Its messages to investors are to keep cost low, diversify, and practice investment discipline. I gained lots of ETF insights from Finstead or related sites. Hope this one will help you. Landon
Not a bad allocation. Why did you go with VOO and VB vs. VTI? VOO is probably 80% of VTI... the rest is small-cap and mid-cap. Where is mid-cap in your portfolio allocation? Read this point #10... mid-cap was just as good of a strategy as small-cap up until now. Your portfolio is pretty aggressive, but I guess that's what you're looking to do. I'd personally do 50% VTI, 40% VXUS (I like international and think US investors are over-rotated towards domestic), and 10% BND. Of course, Schwab and iShares have some excellent/cheap ETFs, so I couldn't discount those either.
I would not stick with Vanguard as the norm. I think Schwab came up with some really interesting ETFs... (dirt cheap... race to the toillette!)
(a) is that in a qualified account? in that case, why not go with a target date fund which will do a lot of allocation and rebalancing work for you (see here for explanation: https://goo.gl/NhDyjp) (b) if it is a regular account, you might want to also engage in some sort of loss harvesting for tax purposes. So instead of a single ETF for each exposure, have a list of identical/related exposure ETFs (e.g. S&P 500 = [SPY, VOO]) so when one is down, you can sell it and buy a related one.
So here is my question on target date funds. They adjust the portfolio with absolutely no regard to market outlook. If you hit an age threshold , selling stocks buying bonds no matter where in the market/economic cycle. If rates are moving up, still getting long duration. Equities just corrected, selling at the relative low. If you say it can be over ridden, then why be in them in the first place ?
No, the idea is not to override them. On average, there is little long term value in trying to time things based on the macro outlook for an average person. Also, TDFs take the work out of rebalancing and other management process, which is good sometimes.