• (NYSEARCA:VTI) Vanguard Total Stock Market VIPERs
• (NYSEARCA:EFA) iShares MSCI EAFE Index
• (NYSEARCA:EEM) iShares MSCI Emerg Mkts Index
• (NYSEARCA:VNQ) Vanguard REIT Index VIPERs
• (NYSEARCA:AGG) iShares Lehman Aggregate Bond
He did not suggest percent allocations, but we took his starting point and ran some plausible scenarios to see how that those portfolio holdings might have been allocated and might have performed. To generate long-results that exceed the lifetime of the ETFs, we used proxy indices as follows:
• VTI 50% (Russell 3000)
• EFA 20% (MSCI EAFE)
• EEM 10% (MSCI emerging markets)
• VNQ 5% (MSCI REITs)
• AGG 15% (Lehman Aggregate Bonds)
Looking at a 15 year period 1992-2006 (11 mos YTD 2006), here is how that portfolio allocation among the five recommended ETFs performed.
The portfolio was somewhat more volatile than the often mentioned 60/40 split of stocks and bonds, and experienced less damage in the 2000-2002 period.
On a cumulative basis over 15 years the “Forsyth” portfolio underperformed a 100% stock portfolio, but outperformed a 60/40 portfolio. However, from 1992 – 1999 the portfolio was no better than a 60/40 allocation, and during the 2000-2002 period it underperformed a 60/40 portfolio. Then in the last several years the “Forsyth” portfolio accelerated and bypassed the 60/40 portfolio, but did not catch the 100% broad stock market portfolio.
On a 5 year basis the “Forsyth” portfolio looks a lot better.
(Disclosure: Author owns EFA and EEM)