Allan Roth Second Grader Portfolio: Beating The Hell Outa Wall Street?

The Second Grader portfolio is a great example of simplicity that will beat out Wallstreet in the long run. Do you want to beat up Wallstreet too?

Allan Roth Second Grader Portfolios can be built with 3-5 ETFs. They are exposed to between 30% and 100% equities. They are low-risk, medium-risk and high-risk portfolios.

For the past 10 years, the Allan Roth Second Grader High-Risk Portfolio has returned 10.07% with a standard deviation of 15.63%. The dividend yield is 2.16. The 30-year return is 8.67%. Year to date the Allan Roth Second Grader High-Risk Portfolio has returned 5.41%.

How do you build Allan Roth Second Grader Portfolios with ETFs? 

Here is the asset allocation and ETFs you need to build the high risk Second Grader portfolio

  • 60.00%  US Total Stock Market (VTI)
  • 30.00%  International All-World ex-US (VEU)
  • 10.00%  Total US Bond Market (BND)

We cover many more of Allan Roth’s portfolios further below.

What is the return of the Second Grader Portfolios?

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Allan Roth Second Grader High Risk Portfolio35.4125.8110.07%8.6730.05%
Allan Roth Second Grader Medium Risk Portfolio35.9220.118.06%8.0820.04%
Allan Roth Second Grader Low Portfolio36.4414.415.94%7.1910.04%
Allan Roth Second Grader Five-Fund High Risk Portfolio55.2926.119.87%8.8330.07%
Allan Roth Second Grader Five-Fund Medium Risk Portfolio45.1420.038.02%8.1120.05%
Allan Roth Second Grader Five-Fund Low Risk Portfolio46.0514.375.91%7.1910.04%
Allan Roth Second Grader High Risk with CDs Portfolio34.7525.159.75%8.3630.06%
Allan Roth Second Grader Medium Risk with CDs Portfolio33.3117.486.78%6.8420.08%
Allan Roth Second Grader Low Risk with CDs Portfolio31.869.813.71%5.0210.11%

Who is Allan Roth, and who is the second-grader?

Allan Roth is the founder of  Wealthlogic and author of the excellent book How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn.

Allan Roth has written How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn. He has served as CFO and is offering financial solutions through his firm Wealthlogic. His portfolio, the second-grader portfolio, is regarded as a lazy portfolio.

We consider him as one of the good guys in investing due to his insistence of low fees, fiduciary responsibility, and being adamant about keeping investing simple.

Here’s who the second-grader is.

The story goes (in the book) that Allan Roth taught his son how to invest in the stock market. Allan Roth began teaching his son when his son was in second grade. His son has subsequently beaten Wall Street by holding this portfolio!

Dare to be Dull

– Allan Roth

In the book, Allan Roth describes the journey and reasoning for selecting the portfolio. The book is a masterpiece because it builds an ever-expanding foundation from which you can lay your knowledge on investing. It’s like he makes a ladder for you. With each step, you get a little smarter on how to invest and what the stock market is.

The video below is Allan Roth discussing the secrets of investing (which isn’t so secret)

What is unique about the Second Grader Portfolio?

Allan Roth’s Second Grader Portfolio is a close relative to the three-fund portfolio.

The Second-Grader portfolios are built by holding three core asset classes:

  • US Total Stock Market (VTI)
  • International All-World ex-US (VEU)
  • Total US Bond Market (BND)

Some of Allan Roth’s portfolios use more asset classes to diversify more.

If you want an even simpler portfolio, you should check out the balanced portfolios. These portfolios are built using only two asset classes.

Now you might think that easy and simple will make you have lower returns. Not so in investing. Easy and simple is often better in investing.

Building the portfolio(s)

Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.

Asset Allocation of Second Grader Portfolios

Allan Roth Second Grader Five-Fund High-Risk Portfolio

  • 54.00%  US Total Stock Market   (VTI)
  • 6.00%    REITs     (VNQ)
  • 27.00%  International All-World ex-US     (VEU)
  • 10.00%  Total US Bond Market    (BND)
  • 3.00%    Precious Metals (GLTR)

Allan Roth Second Grader Five-Fund Low-Risk Portfolio

  • 18.00%  US Total Stock Market   (VTI)
  • 2.00%    REITs     (VNQ)
  • 10.00%  International All-World ex-US     (VEU)
  • 70.00%  Total US Bond Market    (BND)

Allan Roth Second Grader Five-Fund Medium Risk Portfolio

  • 36.00%  US Total Stock Market (VTI)
  • 4.00%    REITs (VNQ)
  • 20.00%  International All-World ex-US (VEU)
  • 40.00%  Total US Bond Market (BND)

Allan Roth Second Grader High-Risk Portfolio

  • 60.00%  US Total Stock Market (VTI)
  • 30.00%  International All-World ex-US (VEU)
  • 10.00%  Total US Bond Market (BND)

Allan Roth Second Grader High Risk with CDs Portfolio

  • 60.00%  US Total Stock Market (VTI)
  • 30.00%  International All-World ex-US (VEU)
  • 10.00%  Cash (money market fund) (BIL)

Allan Roth Second Grader Low Portfolio

  • 20.00%  US Total Stock Market (VTI)
  • 10.00%  International All-World ex-US (VEU)
  • 70.00%  Total US Bond Market (BND)

Allan Roth Second Grader Low Risk with CDs Portfolio

  • 20.00%  US Total Stock Market (VTI)
  • 10.00%  International All-World ex-US (VEU)
  • 70.00%  Cash (money market fund) (BIL)

Allan Roth Second Grader Medium Risk Portfolio

  • 40.00%  US Total Stock Market (VTI)
  • 20.00%  International All-World ex-US (VEU)
  • 40.00%  Total US Bond Market (BND)

Allan Roth Second Grader Medium Risk with CDs Portfolio

  • 40.00%  US Total Stock Market (VTI)
  • 20.00%  International All-World ex-US (VEU)
  • 40.00%  Cash (money market fund) (BIL)

Note: CDs stands for Certificate of Deposit. It’s a low yield savings vehicle like a money market fund.

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

Alternatives to Second Grader Portfolios

There are a ton of alternatives to the Second Grader Portfolio. The most prominent is the three-fund portfolio – also a Lazy Portfolios. All of Vanguard’s target-date retirement funds use 3-4 funds (they also have an international bond fund). I also consider Rick Ferri’s portfolios to be in the same league as Allan Roth’s Second Grader Portfolio.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

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