Your Smartest Low-Risk Fund Portfolio

by: Lowell Herr

This is the first of four portfolios that run from low-risk to high-risk or aggressive growth. One Quantext Portfolio Planner analysis is already available for a medium-risk portfolio. That is the fifth portfolio in this series of analysis. In the following example, I make a few changes in the ETFs, as I prefer using low-cost Vanguard funds when possible. In addition, many of the investments in the following portfolio are found in the stable of TDAmeritrade's commission-free ETFs.

Note the heavy emphasis toward bonds and Treasuries in this portfolio. A full 80% is allocated to what I call the bond/income asset class.

Special note: The percentages allocated to each of the nine ETFs comes directly from Daniel R. Solin's fine book, "The Smartest Portfolio You'll Ever Own." I highly recommend all serious passive-oriented investors purchase and study this book.

If one is looking for protection against market uncertainty, this portfolio has a lot going for it. Note the low 8.15% standard deviation. This results in a Return/Uncertainty ratio of 0.66. One pays a price for this with a low 5.4% projected return. Scrolling down the page we see a very high Diversification Metric. Anything over 40% in this market is a plus. In addition, the Portfolio Autocorrelation is extremely low. This is directly related to the 80% allocation to BIV and TLT.

While the projected return lags the 7.0% projection for the S&P 500 by 1.6%, this portfolio provides a lot of protection if one wants to avoid a volatile market.