We are exploring different portfolios looking for ideas to help improve returns for retirement investors. We believe that it is vital for the individual to be more involved with their retirement investing to see better results.
We recently reviewed the Harry Browne Permanent Portfolio which has defied conventional thinking with a lazy portfolio of four assets, Cash, Gold, US Equities and Long term treasury bonds.
|US Equities||25%||VFINX, FSKMX||VTI, SPY|
|Long Term Treasury||25%||VUSTX||TLT|
|Precious Metals||25%||VIPSX, VUSTX, VWEHX||GLD|
SeekingAlpha readers asked whether the Mutual Fund (PRPFX) that follows this portfolio might not be the simplest and best lazy portfolio where you have a good portfolio managed for you.
We are going to test this theory comparing it with an ETF portfolio for the same thing, which would have a lower cost but with more work against two other luminary lazy portfolios -- Aronson and Swensen.
Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds.
|US Equities||40%||VFINX, VEXMX, VISGX, VTSMX, VISXX||VTI, TMW, VBK, VBR|
|International Equity||20%||VPACX, VEURX||VEA|
|US Bonds||30%||VIPSX, VUSTX, VWEHX||TIP, LQD, HYG|
David Swensen, the Yale Endowment Investment Manager, proposed this portfolio for individual investors. Swensen was one of the first to diversify and this portfolio has four asset classes: US, international including emerging market equities and real estate trusts. Even today, many diversified portfolios would have a much higher US concentration and less outside the US. This makes this a well rounded portfolio.
The portfolio consists of the following:
- 30% in Vanguard Total Stock Market Index (MUTF: (VTSMX), (NYSE: VTI)
- 20% in Vanguard REIT Index (MUTF: (VGSIX), (NYSE: VNQ)
- 15% in Vanguard Inflation Protected Securities (MUTF: (VIPSX), (NYSE: TIP)- 15% in Vanguard Long Term Treasury Index (MUTF: (VUSTX), (NYSE: LQD)
When we look at the returns over five years, we see that the SeekingAlpha contributors have a very good point. PRPFX looks to be a very good long term investment choice.
|Portfolio/Fund Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|P David Swensen Yale Individual Investor Portfolio Quarterly Rebalancing||19%||131%||3%||15%||6%||23%|
|Harry Browne Permanent Portfolio||12%||169%||7%||76%||8%||78%|
Given these historical results, those looking for a lazy portfolio with good risk/return properties should take a close look at this alternative. You get a proven approach managed for you. The expense of the mutual fund appears to deliver value for money and really leaves you nothing else to do.
Disclosure: We do not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. We have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.