The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments and the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.
We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.
- 25% in Vanguard 500 Index VFINX (IVW)
- 25% in Vanguard Small Cap NAESX or VTMSX (VB)
- 25% in Vanguard Total International VGTSX or VTMGX (EFA, VEA)
- 25% in Vanguard Total Bond VBMFX or VBISX (BND)
This SIB plan has the following candidate index funds and their ETFs equivalent: US Equity: SPY or VTI
Foreign Equity: EFA or VEU
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
click to enlarge
|Bernstein No Brainer||10%||73%||4%||23%||5%||21%|
|Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate||10%||71%||9%||73%||13%||91%|
|Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate||13%||103%||3%||20%||7%||35%|
The Bernstein No-Brainer portfolio is a simple three asset class portfolio that has performed remarkably well over the past year and reasonably over five years. When compared with a six asset buy and hold portfolio it is only a couple of points behind. We can see that with the bull market in US equities over the past few months, it has continued to perform well.
However, the lack of access to real estate and commodities has caused it to drop underneath the more diversified portfolios.
- The Bernstein No-Brainer lazy portfolio has good returns for such a simple instrument but can be beaten
- Having broader diversification pays off as market conditions change
- ETFs can readily be used to implement these portfolios with good performance
- A 8% spread on five year ARs means that it’s worth looking at alternatives