55 Best Investing Books: Boost Your Money and Awesome Brain

December 12, 2018 Leave a Comment

The best investing books can ease the learning to invest which can be daunting. There’s just so much stuff to keep track of right?

You got asset classes, compound returns, standard deviations, multi-tiered fees, 401k and I haven’t even started on derivatives like options and ETNs.

I got just the thing to cure all that.

I thought long and hard how to structure an overview of education of an aspiring superior investor like you.

I believe the best approach is to be blunt and honest about all the books out there on investing.

Best Investing Books – Boost Your Money and Awesome Brain

Let’s divide best into four categories

So I divide the books into four categories according to their usefulness. Category 1 is the most useful. The usefulness of the books decreases as you move down the categories. The 4^th category still holds some very interesting books, however! I haven’t put any books on here that I don’t personally have found useful.

I could have. I could have put Michael Covel’s Trend Following (one of my pet peeves) or the Market Wizards series – these are just financial porn books but are not at all helpful in actual investing.

If you want a list of really good financial porn books, let me know in the comments – I got recommendations on these by the truckload! Tchu-Tchu.

I define usefulness as a book that has some sort of practical advice. A book that urges you to do something about the long-term you, but doesn’t excite you so much that it urges you to do something all the time.

The four categories

The best investing books are divided into the following 4 categories:

Best investing books that you should read right now! These are the books that I highly recommend. Books that are written by authorities on investing and that will help you invest both theoretically and practically.
Best investing books that will actually help you invest better. These are the books that explain what investing is, maybe cover an asset allocation and steers you away from all the F.U.D out there.
Best investing books that give you intelligent insight into investing. They may also provide well thought out evergreen general investing advice.
Best investing books that seem like they would help you but really don’t, but that you are glad you read nonetheless. When you look up “best books on investing” this category are by far the largest. These are books that are theoretical. These are books that tout one strategy over another (often outdated or outcompeted). These are also the books without any strategy at all in them. They can also be vanity projects disguised as an actual book.

Ok, let’s get on with it.

(The lists are mostly sorted mostly alphabetically)

Category 1 – Best investing books that you should read right now!

Category 2 – Best investing books that will actually help you invest better.

Category 3 – Best investing books that give you a great overview of all things investing

Category 4 – Best investing books that seem like they would help you but really don’t, but that you are glad you read nonetheless

What are you reading?

That’s a lot of books right?

If you’re just starting out, don’t let that scare you. Just pick up Alan Roth’s book or one of John C. Bogle’s and go from there. You won’t be disappointed and your wallet will thank you!

Which books do you think are the best investing books?

What Is An Asset Class? Get Higher Returns From Your Portfolio

October 26, 2018 Leave a Comment

Understanding what asset classes are means getting higher returns, so if you want to be an above-average investor you need to get the basics of assets classes. Fortunately, it is not hard. Let’s give you an overview.

Asset classes are like the pieces of a puzzle. The puzzle is your entire portfolio. Together the puzzles form your portfolio. All portfolios have asset classes. And all portfolios can be broken down into their respective asset classes.

So why are asset classes important to understand?

This is because some asset classes like “value” have performed better in the past than other asset classes. That means you should consider adding a portion of the best historical performing asset classes to your portfolio if you want to be an above average investor.

But what is an asset class? We’ll cover that next.

What Is An Asset Class? Get Higher Returns From Your Portfolio

What is an asset class?

There are many definitions of asset classes. Here’s one from Investopedia:

“An asset class is a group of securities that exhibits similar characteristics, behaves similarly in the marketplace and is subject to the same laws and regulations.”

The 3 major asset classes are:

Stocks,
Bonds
Cash.

They each behave very differently to each other in the marketplace. For example, bonds typically go up when stocks go down. There are many more asset class to be considered. See below for a much larger list.

Larry Swedroe of BAM alliance has an even better one in his educational and fantastic book Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today. Here he lists the requirement for how an asset class must behave to be considered an asset class:

Persistent — It holds across long periods of time and different economic regimes.
Pervasive — It holds across countries, regions, sectors,
Robust — It holds for various definitions (for example, there is a value premium whether it is measured by price-to-book, earnings, cash flow, or sales).
Investable — It holds up not just on paper, but also after considering actual implementation issues, such as trading costs.
Intuitive — There are logical risk-based or behavioral-based explanations for the asset class and why it should continue to exist.

Larry Swedrow talks about factors here, but it can easily be applied to asset classes. The factors versus asset class discussion is a post in itself.

So how do you make an asset class?

There are at least two ways to define an asset class:

In absolute terms
In relative terms

Both are used in the investing world. Here’s how we do it using small-cap as an example.

Defining an asset class in absolute terms: Take all the stocks under a $2 billion market cap and put them in an index. These are now a small-cap blend asset class.

Defining an asset class in relative terms: Take all the stocks and measure their market. Now take the bottom 10% and put them in an index. These are now a small-cap blend asset class.

Both are used but the relative is more prevalent.

For growth and value, the relative is almost always used. Growth and value are defined in relation to each other. They are merged at the hip as Warren Buffet says.

That’s the end of this very short primer on asset classes. A longer and more detailed post is upcoming.

If you want to know waay more about asset classes I can recommend 3 books:

Rick Ferri’s book All About Asset Allocation

Roger Gibson’s Asset Allocation: Balancing Financial Risk, Fifth Edition: Balancing Financial Risk

Larry Swedroe’s Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today

Performance of asset classes

There are a lot of asset classes if you really start looking for them. The important thing to have in mind is that diversifying across many asset class is a good idea and often yields higher returns.

For example, U.S stocks seem to zig when foreign stocks zag so it is a good idea to have both in your portfolio.

Asset class returns 1989-2017 – Sources

Below is a table of returns along with standard deviation, drawdown, and market correlation. It is sorted by highest returning asset class to lowest.

Asset class	Returns	STD	Drawdown	Market correlation
Emerging Markets – Value	12.41%	38.77%	53.94%	0.48
Mid-Cap Value – MCV	12.38%	18.06%	39.41%	0.81
Emerging Markets – Small	12.38%	38.60%	54.53%	0.47
Mid-Cap Blend – MCB	12.05%	17.89%	41.82%	0.90
Micro-Cap	11.81%	23.83%	42.75%	0.70
Small-Cap Value – SCV	11.43%	18.42%	36.86%	0.74
Large-Cap Growth – LCG	10.80%	20.50%	48.30%	0.96
Small-Cap Blend – SCB	10.72%	19.01%	36.07%	0.89
Small-Cap Growth – SCG	10.60%	19.46%	40.00%	0.90
Emerging Markets – EM	10.51%	32.97%	52.81%	0.57
Mid-Cap Growth – MCG	10.47%	24.16%	55.29%	0.90
Total US Market – TSM	10.42%	17.58%	37.07%	1.00
Real Estate – REIT	10.38%	18.16%	47.41%	0.48
Large-Cap Blend – LCB	10.37%	17.51%	37.71%	0.99
Large-Cap Value – LCV	10.07%	16.36%	35.97%	0.95
International Europe	8.08%	19.53%	44.73%	0.86
Long-Term Treasury – LTT	7.90%	11.44%	13.03%	-0.21
Total World Market	7.31%	17.59%	41.88%	0.90
High Yield Corporate Bonds	7.21%	10.99%	21.29%	0.70
Inter. Term Corporate Bond	7.18%	6.85%	6.99%	0.42
Inter. Term Treasury – ITT	6.19%	6.27%	4.33%	-0.20
TIPS	6.15%	6.75%	8.92%	0.06
Total Bond Market – TBM	6.08%	4.82%	2.66%	0.12
Long-Term Tax-Exempt Munis	6.06%	6.05%	5.76%	0.27
International Bond Fund	5.83%	4.47%	4.85%	0.18
International Small	5.78%	24.85%	50.37%	0.61
International Value	5.53%	19.74%	43.92%	0.74
Inter Tem Tax Exempt Munis	5.39%	4.20%	2.12%	0.21
Short-Term Investment Grade	5.18%	4.25%	4.74%	0.44
Total International	5.04%	19.94%	44.10%	0.75
Short-Term Bonds – STB	4.95%	3.84%	0.86%	0.06
International Developed – EAFE	4.88%	19.02%	43.67%	0.77
Precious Metals Fund	4.76%	35.46%	72.37%	0.23
Short-Term Treasury – STT	4.62%	3.99%	0.58%	-0.06
Gold	3.73%	14.35%	36.65%	-0.19
Short-term Tax Exempt Munis	3.08%	2.07%	0.00%	0.01
Tbills/Treasury Money Mkt	3.00%	2.55%	0.00%	0.06
International Pacific	1.93%	22.32%	50.39%	0.55
Commodities	1.32%	25.45%	72.86%	0.17

Sources

You can find the best-in-class ETF for each asset class in the article What Is The Best ETF And Mutual Fund?

As you can see value, small-cap and emerging markets have performed very well. The ones that have performed the worst are commodities, cash (t-bills), Pacific stocks (due to the Nikkei asset bubble), gold and precious metals. Gold is just barely keeping up with inflation. Gold has never been a very good investment nor a good speculation. This is because it does not produce anything like companies.

Emerging markets may have had the highest return but they also have the highest risk in the form of standard deviation and largest drawdowns.

A special mention to the all-time worst performing asset class: Commodities. It has the distinct displeasure of having the worst returns and the most severe drawdown since 1987. It also takes the 2nd place as the riskiest asset as measured by standard deviation.

Benefits of having multiple asset classes

When you visit the portfolios on portfolioeinstein.com you see that the best performing portfolios are the ones with more than 1 asset class.

This is because when one asset class zigs the other zags. This helps to stabilize your portfolio. It also helps your returns. This is due to the rebalancing effect. When you rebalance you buy more of the asset class that has gone down in value and sell more of the asset class that has gone up in price. It is a buy low and sell high in action and automated. If you have more asset classes there are more opportunities for this. This is evident from the Morningstar Target date index which performed particularly well. See What Is The Best Target Date Fund?

Before you go all in in the best performing asset class you should be aware of a few things:

This is historical data and future performance may not look like the past
An asset class can underperform for very long periods of time. For example, growth has outperformed value for almost 10 years now but historically value beats growth.
The risk of holding one asset class is best shown during the 2008 financial crisis when REITs (real estate) were decimated (along with everything else). But it did take longer for REIT to recover.

The best course of action is to pick a portfolio with a light to heavy overweight of the best performing asset classes. You can find the all the portfolios here.

On the portfolio allocation page, you can see the holdings of the portfolios. You can see which asset classes are needed to construct the portfolio along with their ticker symbols for the corresponding ETF. You can also find our best-in-class ETFs here.

Summary, the takeaway, and your next steps

This has been a very short introduction to asset classes. The takeaway is that you need more than one asset class in your portfolio so that you can lower your risk and increase your returns. Don’t worry about the returns of the asset classes, however, worry about the portfolio you want to go with.

You should select a portfolio that has a high probability of reaching your financial goals while being aware of the risks.

We’re planning a follow up where we go into details about which asset classes will do best under certain conditions.

5 Reasons Why A Lazy Portfolio Is Right For You

October 19, 2018 Leave a Comment

Are you looking for a well-rounded simple portfolio that has good returns? The lazy portfolios can help you. Here are 5 extremely good reasons why you should use a lazy portfolio.

If you’re new to investing and want a true, tried and tested portfolio, look no further! These lazy portfolios promise to give you a mostly hands-off approach to investing. They offer a lot more than easy, however. Dive in to know the 5 extremely good reasons why you should use a lazy portfolio.

5 Reasons Why A Lazy Portfolio Is Right For You

These are the lazy portfolios with returns and risk

A lazy portfolio is just a portfolio that gives you a hands-off approach to investing for long periods of time. At most they require a yearly rebalance and nothing else.

Portfolio Name	Number of asset classes	1 year return 2018	YTD (July 2019)	10 year return	Drawdown	Risk Level	Market Correlation	Dollar Value
S&P 500 (Benchmark)	1	-4.52%	20.62%	12.97%	-37.71%	5 - very high risk	0.99	$167,045.76
David Swensen's Portfolio	6	-5.77%	14.63%	8.86%	-26.20%	3 - medium risk	0.89	$117,264.69
Bill Schultheis Coffeehouse Portfolio	7	-5.29%	12.64%	8.48%	-20.21%	2 - low risk	0.9	$108,918.59
Ted Aronson Family Taxable Portfolio	11	-7.66%	12.83%	9.14%	-26.53%	3 - medium risk	0.89	$111,316.36
Allan Roth Second Grader High Risk Portfolio	3	-7.50%	17.29%	10.23%	-34.95%	5 - very high risk	0.97	$103,558.43
Scott Burns Margaritaville	3	-7.04%	12.80%	7.95%	-28.09%	4 - high risk	0.92	$81,473.03
William Bernstein No Brainer Portfolio	4	-6.76%	12.86%	8.68%	-27.63%	4 - high risk	0.95	$91,983.79
William Bernstein Cowards Portfolio	9	-4.88%	10.90%	7.38%	-19.93%	2 - low risk	0.93	$97,354.23
Paul Merriman FundAdvice Ultimate Buy and Hold	13	-7.18%	10.47%	7.37%	-21.68%	3 - medium risk	0.83	$99,272.22

The end dollar value assumes a $10,000 lump sum investment in 1989.

Lazy portfolio 1 – 2 fund portfolio (Balanced Portfolio 70/30)

80.00% US Total Stock Market (VTI)
30.00% Total US Bond Market (BND)

The balanced portfolios consisting of two asset classes, stocks and bonds are the simplest portfolios to implement. What they lack in flair and sexiness they make up for in simple effectiveness. They can be modeled to almost any risk level. John Bogle, the supreme hero of the investing world, recommends that you hold a total stock market fund and a total bond fund. The percentage of bonds should equal your age, so a 50-year-old should hold 50% VTI and 50% BND.

Lazy portfolio 2 – David Swensen’s Portfolio

30.00% US Total Stock Market (VTI)
20.00% REITs (VNQ)
5.00% Emerging Markets (VWO)
15.00% International All-World ex-US (VEU)
15.00% Intermediate-Term Treasuries (VGIT)
15.00% TIPS (VTIP)

David Swensen of the Yale Endowment fund sets forth the portfolio in his book Unconventional Success: A Fundamental Approach to Personal Investment. David Swensen is truly one of the good guys in investing advocating fiduciary principles, low-cost index investing and being humble about one’s knowledge.

Lazy portfolio 3 – William Bernstein’s Cowards Portfolio

10.00% US Large Cap Value (VTV)
15.00% US Large Cap (VV)
10.00% US Small Cap Value (VIOV)
5.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
5.00% Emerging Markets (VWO)
5.00% Pacific Stocks (VPL)
5.00% European Stocks (VGK)
40.00% Short Term Treasuries (VGSH)

Lazy portfolio 4 – William Bernstein’s No Brainer Portfolio

25.00% US Large Cap (VV)
25.00% US Small Cap (VIOO)
25.00% International All-World ex-US (VEU)
25.00% Short Term Treasuries (VGSH)

William Bernstein, a former doctor, investment consultant and an all around good guy in the investing world has presented a host of portfolios through his career. His book, The Four Pillars of Investing: Lessons for Building a Winning Portfolio is required reading on investing. His investing philosophy is broad diversification, common sense and with a realistic expectation of future returns. Other books that are highly recommended are Rational Expectations: Asset Allocation for Investing Adults and The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk.

Lazy portfolio 5 – Bill Schultheis’ “Coffeehouse” Portfolio

10.00% US Large Cap Value (VTV)
10.00% US Large Cap (VV)
10.00% US Small Cap Value (VIOV)
10.00% US Small Cap (VIOO)
10.00% REITs (VNQ)
10.00% International All-World ex-US (VEU)
40.00% Total US Bond Market (BND)

The very famous Coffeehouse portfolio is categorized as a Lazy Portfolio due to its ease in its implementation and maintenance. It is featured in the book. Bill Schultheis have a beautiful website. Check out his book by the same title The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life.

Lazy portfolio 6 – Frank Armstrong Ideal Index Portfolio

9.25% US Large Cap Value (VTV)
6.25% US Large Cap (VV)
9.25% US Small Cap Value (VIOV)
6.25% US Small Cap Growth (IJT)
8.00% REITs (VNQ)
31.00% International All-World ex-US (VEU)
30.00% Short Term Treasuries (VGSH)

Frank Armstrong is the author of The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio. In his book, he presents a the Ideal Index Portfolio. Frank Armstrong’s portfolio is tilted towards small-cap and value stocks.

Lazy portfolio 7 – Scott Burns Margaritaville

33.33% US Total Stock Market (VTI)
33.33% International All-World ex-US (VEU)
33.33% TIPS (VTIP)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the “Couch Potato Portfolio” investment strategy. In addition to the now-famous couch potato portfolio, he suggests 9 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class.

We highlighted the Couch Potato portfolio in the article The Couch Potato Portfolio; Two Fund Supremacy?

The Couch Potato portfolio is the “little brother” of Margaritaville.

Now for the reasons why you should invest in a lazy portfolio!

# 1 reason why you should use a lazy portfolio – it’s easy

Investing is not hard. Not anymore. And certainly not with ready to portfolios like we offer here on portfolioeinstein.com.

Using a lazy portfolio makes it even easier. They have few asset classes and you can quickly get an overview of the portfolio.

There is some merit in making your portfolio complex. Complexity comes at a cost however and may not be desirable.

The lazy portfolios do not contain any special asset classes so in that regard they are also easy to understand. The laziest of them all has just 2 assets classes! Stocks and bonds – the 2 fund solution. Now that’s easy!

# 2 reason why you should use a lazy portfolio – they offer good returns vs. risk

As you can see from the table above all the lazy portfolios offer a respectable return. To be sure you can get a higher return. See here for which portfolios have done better in the past.

But the higher returns also come with a cost in the form of a higher risk. You would have suffered a 37% drawdown in 2009 holding the S&P500 but you would only have suffered 20-28% with a lazy portfolio.

Take another look at the 2 funds lazy portfolio. It is the most simple and still has the highest performance! Now that’s lazy for you!

# 3 reason why you should use a lazy portfolio – they’re made by known professionals

All of the portfolios above are tied to some of the most respectable people in the investing industry.

David Swensen is chief investment officer at the Yale endowment fund and offered his portfolio in David Swensen – Unconventional Success: A Fundamental Approach to Personal Investment.

The two fund portfolio is offered by supreme investing hero John Bogle in his many books. One of them is a must-read – The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns.

William Bernstein of the two lazy portfolios Cowards portfolio and the No-brainer is also one of the good guys in investing. His book William Bernstein: The Four Pillars of Investing: Lessons for Building a Winning Portfolio is required reading for any investor.

Bill Schultheis is a well know author and investment advisor. His portfolio comes from his fabulous book The Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On with Your Life and his website.

Frank Armstrong’s Ideal Index portfolio is offered by Frank Armstrong in his book The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio.

# 4 reason why you should use a lazy portfolio – they are proven and tested

All of the lazy portfolios have stood the test of time. They have survived the out-of-sample test. Meaning that they have proved viable after their initial construction, thereby excusing them of backtest bias or data snooping.

These lazy portfolios are portfolios that will serve you well for many years to come

# 5 reason why you should use a lazy portfolio – it keeps you from doing stupid things

We are investors.

But we are human. We are subject to a host of biases when it comes to investing and money.

Some of them include:

Recency bias. We tend to attribute more importance to recent events (like recent stock returns). But recent data may not and certainly is not in investing representative of the long-term performance of investing.
Overconfidence bias. We simply think that we are better than we are.
Information bias. Information bias is a cognitive bias to seek information when it does not affect action. People can often make better predictions or choices with less information: more information is not always better.

There are many more biases and most of them are detailed fantastically by Jason Zweig in his fabulous book Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich.

We are all affected by biases and they help us navigate the world. They are one of the reasons why so many active managers repeatedly, continuously and consistently fail to beat the market.

James Montier has also written 2 great books on behavioral investing, one is The Little Book of Behavioral Investing: How not to be your own worst enemy and the other and more in-depth is Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance.

If you are concerned with managing your own personality or even know that you are prone to making dumb things with your money, know that you are not alone! The lazy portfolios can help you with this, however. Allocate money to one of the portfolios and stick with it and you will dodge all those nasty biases!

If you want to go to the source of the discovery and documentation of the human bias I recommend Nobel laureate Daniel Kahneman’s undisputed authority on bias’s Thinking, Fast and Slow and if you are eager for more why not also read another Nobel laureate who helped shape the field of behavioral finance, Richard Thaler’s Misbehaving: The Making of Behavioral Economics.

Alternatives to lazy portfolios

So you’re intrigued but not convinced of the benefits of the lazy portfolio?

There are many alternatives to a lazy portfolio.

Remember, a lazy portfolio is really just a portfolio with a hands-off approach. As such most portfolios on portfolioeinstein are lazy portfolios. The hardest part (which isn’t so hard) is buying the ETFs or mutual funds.

Go here to see all the portfolios on portfolioeinstein.com and here to see the allocations.

If you need help with rebalancing we got you covered with this cheat-sheet so you can rebalance every year and get it just right!

Other than that we recommend looking at the many one-fund solutions that will get you a well-diversified portfolio in one fund. Target-date funds are an example of this. The article What Is The Best Target Date Fund? will help you here. iShares also has one-fund ETFs: AOR, AOM, AOA, AOK.

Should you have a lazy portfolio?

By now you can answer this question. Only you can answer it, however.

Here are some questions to make your choice easier:

Do you want an easy investment portfolio?
Do you want an easy to maintain an investment portfolio?
Do you want a great overview?
Do you want less risk but also less return?

Summary and next steps

Listen, I know investing can be hard. It can be hard to grasp all the details and technical terms. That’s why I made portfolioeinstein.com and why I wrote this article.

Lazy portfolios offer an easy solution to the complicated question of investing. Lazy portfolios offer good returns with low risk. They are made by reputable well knows members of the investing community.

If you’re just starting out or has become disillusioned by the financial industry then go with a lazy portfolio.

Don’t miss our next great tip on how you can get more money from your portfolio.

Who Are The 3 Good Guys In Investing?

October 12, 2018 Leave a Comment

We know who the best investors are. Who the most famous are. But who are the good guys in investing? Who are the ones that have helped millions of people achieve their hopes and dreams through investing? In this article, we highlight three people who have gone above and beyond in helping everyone invest better.

Who Are The 3 Good Guys In Investing?

The Good Guys of investing

The world of investing is littered with stories of famous investors, bankrupt investors, unlikely investors, and unique investors.

For most of us, those stories should remain stories. We cannot replicate the success of these famous investors.

The good guys in investing are those individuals that have gone above and beyond in helping everyone invest better. They have helped everyone understand investing and made it easy to implement an investing strategy.

To be sure, many that have done just that and even proclaim they are doing just that! But be wary. For the truly good guys are far between. If you should only listen to a few people about investing, listen to these three people.

Why the best investors can’t help you

The best investors are just that. The best investors. The best investors can’t help you achieve your financial goals. They are busy being the best. The best investors include:

Benjamin Graham
Warren Buffett
David Tepper
Sir John Templeton
Jesse Livemore
Peter Lynch
George Soros
Bill Ackman
Stanley Druckenmiller
Jim Chanos

These investors have all achieved phenomenal returns above the market average.

But they can’t help you.

First, because they are really not out to help you, but help themselves make money. That’s their primary goal.

Second, their methods are so unique and different that they cannot easily be replicated. To be a great investor you need to do something very different than everyone else is doing. If they didn’t they would not achieve a markedly different result.

Why the most famous investors can’t help you

These are the media darlings that you always hear about. These include:

Jim Cramer
Carl Icahn
Ray Dalio
Robert Kiyosaki
Kenneth Fisher
Jim Rogers

These investors are present in the media. Either by their own accord or because the media loves them. Their returns are mediocre at best and they are best when they are loud and self-promoting.

They can’t help you either.

First, because their incentives are completely at odds with yours. They are more often than not promoting themselves or their own brand.

Second, they are simply not good investors for you. They don’t have a process nor a strategy that they can pass on.

Why the star managers can’t help you

If you look at Morningstar.com you find plenty of funds that have beaten the market over the past 5 years and even 10 years. This is often explained due to the manager’s herculean effort in achieving superior returns year after year.

One of the more famous examples of a star manager is Peter Lynch who managed the Fidelity Magellan Fund (1977-1990) and achieved stellar returns. The returns were achieved early in the fund’s existence however and as the fund grew over time the performance lagged.

Star managers usually demand a much higher compensation. This will and does invariably remove out any edge the manager can exert upon the fund.

In addition, the star managers seem to fade over time, making them shooting star managers. There are a few reasons for this:

They take a massive amount of risk early in order to produce outsized returns. In effect, they gamble with their client’s money. If their bets pay off they are hailed and paid as star managers. If they fail the fund closes and they start a new one.
They are extremely lucky for a long time. This is the coin flipping effect in action described some many times elsewhere: Take 1000 managers and have them flip a coin.
- After 1 year you have 500 managers that flipped heads
- After 2 years you have 250 managers have flipped heads
- after 3 years 125 managers have flipped heads
- after 4 years 62 managers have flipped heads
- after 5 years 32 managers have flipped heads
- after 6 years 15 managers have flipped heads
- after 7 years 7 managers have flipped heads
- after 8 years 3 managers have flipped heads
- after 9 years you might just have 1 manager left that is hailed as a star manager because he has flipped heads for 9 years in a row. Truly he is worthy of star manager status.

John Ueland

Why the best educated investors can’t help you

There is some evidence that managers with an MBA perform slightly better than those without an MBA. More often than not, however, education gets in the way because of overconfidence bias. Doctors are some of the worst investors!

In 1999 Long-Term Capital Management (LTCM), a hedge fund blew up due to poor investing strategies. The fund’s board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences. LTCM was bailed out in the year 2000 with a $3.6 billion injection overseen by the federal reserve.

Warren Buffett is quoted saying:

Success in investing doesn’t correlate with I.Q. once you’re above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

How the good guys in investing can help you

The good guys in investing stand out because they don’t have a personal agenda, aside from their dedication to making the world invest better. They are not trying to sell you anything. They are not trying to impress you. Here are some other traits of the good guys in investing:

They have made unusual sacrifices in order to help you. Either monetary or time wise.
They promote a set of replicable principles of investing
They promote a replicable process of investing
They have made significant contributions to the shrine of investing wisdom.
They have plenty of evidence to back up their investing strategies.
They eat their own cooking.
Their process has proven to work consistently over time.

Good guy in investing number 1 – John C. Bogle of Vanguard

Legend and supreme hero. No one even comes close to John Bogle when it comes to good guys in investing.

John Bogle is the founder of Vanguard and launched the first commercial index fund in 1976. The structure of the company of Vanguard is also unique as the shareholders themselves own Vanguard. It’s the first and only (still!) true mutual mutual fund. Let’s just go through that again because that is immensely mind-bending and important.

The company is owned by its funds. The company’s different funds are then owned by the shareholders. Thus, the shareholders are the true owners of Vanguard. The company has no outside investors other than its shareholders.

The biggest fund companies are owned by, well its owners! Not their shareholders. For example:

Fidelity is private and owned by the Johnson family.
Charles Schwab Company is a publicly traded company.
iShares is owned by BlackRock which is a publicly traded company.
PIMCO is owned by Allianz which is a publicly traded company.
Franklin Templeton Investments is a publicly traded company.
Dimensional Fund Advisors is a privately owned company.
Nuveen is owned by TIAA which is a non-profit organization.
JP. Morgan Chase & Co is a publicly traded company.
T. Rowe Price is a publicly traded company.
Capital Research and Management Company is privately owned.

These companies have one mission above all else: To serve their owners.

So what so special about what John Bogle did?

He aligned the interests of the owners with the investors

It is as simple as that. Vanguard is structured so that the owners are the investors.

This is most clear in that Vanguard continuously lowers its prices on its products – because that’s what the owners want! As John Bogle says, the cost is extremely important in investing. You don’t get what you pay for – you get what you don’t pay for.

A study by Morningstar.com established that the single most effective way to determine a fund’s future performance is to look at its cost. The lower the annual cost, the better the performance.

Other fund companies like Fidelity, DFA only lower their prices when absolutely forced to and do so kicking and screaming.

That’s a far-cry from Vanguard’s mission: to stand up for investors everywhere.

Because of Vanguard, because of John Bogle, millions of people enjoy lower cost funds and will have far more money when they retire than if they had invested through other fund families.

How much more? Let’s do the hypothetical numbers.

Vanguard has $5.1 trillion in global assets under management, as of January 31, 2018.

Vanguard funds average expense ratio is 0.19% compared to the industry average of 1.08%.

Vanguard fees for 2018: $5.1 trillion x 0.19% = $9,690,000,000.00

If Vanguard wasn’t around the fees would have been: $5.1 trillion x 1.08% (industry average) = $55,080,000,000.00

Difference: $45,390,000,000.00

That’s $45,3 BILLION dollars that Vanguard in 2018 ALONE has saved investors!

John Bogle’s own net worth is estimated at $80 million dollars.

Are you ready to give John Bogle a medal?

But wait there’s more.

John Bogle has written several books – all of them extremely recommended. All of them filled to the brim with investing wisdom, with evidence of how you should invest, with warnings of the many “helpers” in the financial industry.

John Bogle takes the fiduciary responsibility very seriously and has no respect for other fund companies and investors who do not take an interest in severing their shareholders.

John Bogle’s investment process:

Select low-cost funds
Consider carefully the added costs of advice
Do not overrate past fund performance
Use past performance to determine consistency and risk
Beware of stars (as in, star mutual fund managers)
Beware of asset size
Don’t own too many funds
Buy your fund portfolio – and hold it

The economic impact of John Bogle and Vanguard is extremely underappreciated. I don’t think anyone in history has set up a system that has generated so much wealth to average people as Vanguard. Well maybe except for Adam Smith.

You can find John Bogle’s portfolio here and the returns and risk here.

Good guy in investing number 2 – William Bernstein

A former doctor Willam Bernstein has written several books and guides on investing on investing. His book The Four Pillars of Investing: Lessons for Building a Winning Portfolio and his newest Rational Expectations: Asset Allocation for Investing Adults are a must-read for any investor of any age. He is the originator of the No-brainer portfolio, The Cowards Portfolio, and others.

William Bernstein process for investing is to diversify into many asset classes.
Have rational expectations for the stock market
Be skeptical of the finance industry

You can find William Bernstein’s portfolios here and their returns and risk here.

Good guy in investing number 3 – Richard Ferri

Richard Ferri is a former Navy fighter pilot and founder of portfoliosolutions.com.

If you have spent any time on portfolioeinstein.com, you know I’m a huge fan of Rick Ferri and his writing which I consider some of the best material on investing you can get your hands on. He has written some great books including:

In addition to that, he promotes diversification in investing and simplifying your investment.

He was/is active on the Bogleheads forum and is very generous with his time there commenting on posts and answering questions.

You can find Rick Ferri’s portfolios here and their returns and risk here. An in-depth article on his portfolios is here.

Good guys in investing runners-up

These are the runners-up. They have all done plenty to serve the investing community and all have a good process for investing.

David F. Swensen. author of David Swensen – Unconventional Success: A Fundamental Approach to Personal Investment.
Paul Merriman author of Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor.
Charles Ellis, author of Winning the Loser’s Game, Seventh Edition: Timeless Strategies for Successful Investing.
Taylor Larimore, author of The Bogleheads’ Guide to the Three-Fund Portfolio: How a Simple Portfolio of Three Total Market Index Funds Outperforms Most Investors with Less Risk.
JL Collins, author of The Simple Path to Wealth: Your roadmap to financial independence and a rich, free life.
Larry Swedroe, author of many books, among the best are Wise Investing Made Simple: Larry Swedroe’s Tales to Enrich Your Future.

Summary and your next steps

Navigating the world of investing is tough. Whom to believe? What to invest in? If you start with the good guys in investing you’re off to a very good beginning – and end!

You simply cannot go wrong if you read any of their books or listen to them talk. They are honorable, look out for the individual investor and have a process for getting you up and running.

Hey, I want to bring you more articles like this, I want to show you more good guys in investing but you need to sign up for my newsletter so I can reach you.

Meet Susan: The Most Important Question In Investing

September 21, 2018 Leave a Comment

If you answer the most important question in investing when you start investing it means the difference between being the sucker or beating everyone else (well almost). Make sure you answer this question before you do anything else!

Meet Susan: The Most Important Question In Investing

Maria had just started retirement last year. For the past 40 years, she had been a registered nurse. Now with her retirement income, she was looking forward to doing part-time teaching, which she loved to do. She also looked forward to traveling which she loved even more. Based on her own retirement savings, however, she would be doing a lot more teaching and a lot less traveling.

Maria was a sucker.

She had invested in individual stocks and active mutual funds. Her returns for the 40-year period was 6% giving her $619,047 at the start of retirement.

She could have had $1,351,529 with a 9% return if she had answered the most important question in investing.

Don’t be like Maria.

Don’t be a sucker.

By the end of this article, you will have the necessary knowledge and confidence to answer the most important question in investing.

How the most important question can change your life

When you answer the most important question, you pick a choice between two doors. One of these doors (the correct one) will lead you to:

Spend more time doing what you do best and what you love!
Remove anxiety and worry about your investments.
Remove the possibility of doing dumb things with your money.
Increase your investment returns.
Increase the likelihood of beating everyone else by 99%.
Bonus: Be in the same company as Nobel laureates and the smartest people in investing.

This is why this question is so important to get right.

Why is there a most important question anyway?

Since mathematicians entered the field of finance and investing maybe starting with Louis Bachelier in 1900 and Harry Markowitz in 1952 there has been a greater and greater emphasis on information value.

Enter EMH. The Efficient Market Hypothesis.

The Efficient Market Hypothesis proposed by Eugene Fama in 1965, established that all known information is already incorporated into stock prices. It does not matter what you know, someone already knows that bit of information and the stock price has already adjusted to reflect this information.

This means that all stock prices are priced fairly. The current prices are the best bet of what a share of stock is worth. The conclusion of Eugene Fama’s work is that you cannot hope to outsmart the market and receive outsized returns.

Since Fama’s work, an ever-increasing work has been done to track the performance of investment managers, individual investors, pension funds, sovereign wealth funds, and endowments. The data is clear and Fama is spot on. It is very hard indeed to beat the market. Justin Fox ‘ fantastic book The Myth of the Rational Market is a fantastic summary of how the modern market came to his finally leads us to the most important question in investing.

The most important question in investing

Ok, I have held out long enough so here it comes, the most important question.

Can you beat the market?

Hold on! Before you answer let me set up a framework for you so you can answer with conviction.

First, we’ll swing by your competition, the market. Let’s meet Susan.

This is Susan. This is how Susan beats you – Door #1

You are not alone when investing. When you are trading a share of stock, you are buying or selling a share from someone else. A trade like that happens most often because you have a different opinion of the stock. Maybe you think the stock is undervalued, maybe it has great products etc. The point is you are always trading against someone else in the market.

So what does your competition look like?

Susan the money manager and your competition from Investing Demystified.

Lars Kroijer is former hedge fund manager and author of Investing Demystified: How to Invest Without Speculation and Sleepless Nights. Here he is painting a picture of Susan. Don’t do a TLDR; read the whole thing.

Imagine Susan, the portfolio manager of a technology-focused fund working for a highly rated mutual fund/unit trust (let’s call it Ability) who like us is looking at Microsoft.

Susan and Ability have easy access to all the research that is written about Microsoft including the 80-page, in-depth reports from research analysts from all the major banks, including Morgan Stanley and Goldman Sachs, that have followed Microsoft and all its competitors since Bill Gates started the business. The analysts know all Microsoft’s business lines, down to the programmers who write the code to the marketing groups that come up with the great ads. They may have worked at Microsoft or its competitors, and perhaps went to Harvard or Stanford with senior members of the management team. On top of that, the analysts speak frequently with their banks’ trading groups who are among the market leaders in trading Microsoft shares and can see market moves faster and more accurately than almost any trader.

All research analysts will talk to Susan regularly and at great length because of the commissions Ability’s trading generates. Microsoft is a big position for Ability and Susan reads all the reports thoroughly – it’s important to know what the market thinks. Susan enjoys the technical product development aspects of Microsoft and she feels that she talks the same language as techies, partly because she knew some of them from when she studied computer science at MIT. But Susan’s somewhat ‘nerdy’ demeanour is balanced out by her ‘gut feel’ colleagues, who see bigger picture trends in the technology sector and specifically how Microsoft is perceived in the market and its ability to respond to a changing business environment.

Susan and her colleagues frequently go to IT conferences and have meetings with senior people from Microsoft and peer companies, and are on a first-name basis with most of them. Microsoft also arranged for Ability personnel to visit its senior management at offices around the world, both in sales and development, and Susan also talks to some of Microsoft’s leading clients.

Like the research analysts from the banks, Ability has an army of expert PhDs who study sales trends and spot new potential challenges (they were among the first to spot Facebook and Google). Further, Ability has economists who study the US and global financial system in detail as the world economy affects Microsoft’s performance. Ability also has mathematicians with trading pattern recognition technology to help with the analysis.

Susan loves reading books about technology and every finance/investing book she can get her hands on, including all the Buffett and value investor books. Susan and her team know everything there is to know about the stocks she follows (including a few things she probably shouldn’t know, but she keeps that close to her chest), some of which are much smaller and less well researched than Microsoft.

She is one of the best-rated fund managers in a couple of the comparison sites, but doesn’t pay too much attention to that. After doing her job for over 20 years she knows how quickly things can change and instead focuses on remaining at the top of her game.

Now picture Susan and multiply her by 10.000 and you get a picture of what you are up against.

Now, remember, this is not just your competition. Everyone is facing everyone else in this die-hard environment, making it extremely difficult for anyone to be better than anyone else. Everyone faces their own Susan. Here is Charles Ellis summing it up:

“Active managers aren’t failing to beat the market because they are not informed, skillful, expert, and diligent. Quite the opposite; they can’t outperform the expert consensus of the other active managers after fees and costs with any consistency over time because so many competitors are so skillful, informed, hardworking, and so well armed with information and technology.”
– Charles Ellis “Portfolio Operations,” Financial Analysts Journal, September–October 1971, 36–46

Ok, you think, so Susan looks scary but I’m pretty smart, I read a lot, I got many LinkedIn contacts etc. Take a look at the lists below. How do you stack up to Susan?

These are the disadvantages that are killing your investment returns

The average investor is at a huge disadvantage when investing compared to the professionals. Here are a few:

Informational disadvantage. Limited access to investment journals, analyst reports, curated news, macroeconomic perspectives etc.
Technological disadvantages. Limited access to soft- and hardware, trading programs etc.
Experience. Limited experience in analyzing companies, industries, trading practices, price history etc.
Connectivity. Limited access to key individuals in companies and the investing community. Seeking Alpha and other forums do not make up for this.
Time disadvantage. Unless you’re a professional you got a full-time job doing other stuff, leaving your evenings and weekends to do what the professionals do 8+ hours each day, every day.

But wait there’s more.

If you didn’t feel like the above applied to you, Congratulations! You are either a professional or delusional. If you are a professional, look at the list below.

Are you as smart as Susan and her competition?

Just as you have many disadvantages when you are facing Susan, Susan, in turn, faces her own disadvantages when going up against her competition. These are:

Everyone is looking at the same data (everyone has access to the same financial reporting, price history, company info, industry info, analysts’ reports, journals etc.).
Everyone has access to the same connections (CFOs, CEOs, analysts, investment experts etc.)
Everyone graduated Summa Cum Laude from an Ivy League school.
Everyone has the newest but the same technology.
Everyone has the best software from the same top vendors.
Everyone is paid huge sums of money to excel.
Everyone is on top of their game, spending all their professional time trying to excel.
Everyone is extremely clever at coming up with new ideas and new perspectives.
Everyone is extremely disciplined.
Everyone has a CFA designation.
Everyone has earned an MBA.
Everyone is constantly upgrading themselves with new knowledge and processes.

These may not look like disadvantages. And indeed they are not when taken out of context. But in investing when everyone looks like the list above it is not an advantage. It simply the price of playing. It is the baseline. But the baseline has a cost. Here’s Charles Ellis again:

“Game theorists describe as zero sum those situations in which neither side will gain a significant advantage unless the other side suffers an equally significant failure. And if, over the long haul, the players are as evenly matched in skills, information, experience, and resources as professional investors today certainly appear to be, little systematic advantage will be gained and maintained by any of the players and their average annual experience will be to lag behind the market by the cost to play.”
– Charles Ellis, “Portfolio Operations,” Financial Analysts Journal, September–October 1971, 36–46

This is how you beat the market – finding your edge

In order to beat the market, you need to have an edge. You need to have something that makes you different than the other market participants. You need an edge to do something different. Two paths will lead you to do something different and ultimately beating the market:

Knowing something that no one else does. (Read Michael Lewis’ The Big Short: Inside the Doomsday Machine for examples of this)
Interpreting existing knowledge different from anyone else. (Buffet has become famous in his earlier days for investing in troubled companies).

When you ask yourself, “do I have an edge”? you need to look at the two above statements and determine where you set yourself apart. It is not enough to be smart, to be well read or any of the other traits that are simply required in order to play the game.

Other market participants are not missing anything. They are not overlooking a key piece of data, they are not overvaluing a company, and they have not failed to extrapolate important data.

Your competition does not make mistakes.

Your competition has thought of everything.

Just like you.

What is your answer to the most important question? Door #2

So what is your answer to the most important question?

Can you beat the market?

Unless you’re David Tepper or one of 8 other money managers you should answer No.

That’s the smart thing to answer.

That’s the only thing to answer.

When you enter door number 2, you reach passive index land. No surprise there.

For all actively managed funds, this number is more forgiving over 15 years. Here 16.26% of all funds, to outperform their indexes. This means holding a passive index fund would have beaten ALL active money managers 83.74% of the time.
Source: https://us.spindices.com/spiva/#/reports

Study after study and book after book details, present and proves that you cannot beat the market. You cannot even hope to beat the market. Indeed, it is a mathematical impossibility for everyone to beat the market.

Sure, you can beat the market in one year or even two years. Hell, I have beaten the market several times! (I’ve underperformed more times).

The point is you need to do it over 20-30-40 years. And if you are in your 20’s and just starting out, you got 60-70 years in front of you. That’s a very long time. A very long time in which you need to sustain your edge over some of the smartest and most driven people in the world.

What about play money and why play money is a horrible idea

It can be hard to face the facts about passive index investing. And even harder when you are a professional with an MBA and a CFA title. Add to this that you have spent 10 years analyzing stocks, going through the FED minutes, predicting the next recession, suffered through endless earnings calls etc. It’s hard because all that work is probably for nothing without any value. It’s hard because we’re used to being rewarded for the effort. That’s how it works right? The more effort you put in the better the result. That’s how it should work. In investing however the inverse is true. The less we do the better we do. Fidelity’s study here.

Don’t do something, just stand there!
– John Bogle – The Little Book of Common Sense Investing

Many books including some very famous ones advocate and placate to soften the blow of the facts of our investing inadequacies by suggesting you keep some fun money on hand. Sometimes called play money.

Normally this is set at 5% of your portfolio value.

With this play money, you are advised to do whatever you want in the stock market including investing in cryptocurrencies, biotech etc.

This is horrible advice and you should not do it.

Even at 5% the facts, don’t change. At 5% the numbers don’t change.

You’re still going to underperform the market.
You’re still going to get slaughtered by the professionals.
If you’re a professional you are still going to underperform by the cost of your services. That is if you even have an edge and can keep up with the market.

Think of it this way: You don’t spend 5% of your time training to play tennis professionally or spend 5% of your time learning to levitate. You don’t spend 5% of your time doing your job.

This is because it is stupid to do so. Your failure rate is 100%.

So don’t use 5% of your capital in order to appease your gambling tendencies, your vanity or your impulse for excitement.

Time is Your Friend, Impulse is Your Enemy.
– John Bogle

Hero up, be humble and use your willpower to engage 100% of your portfolio to passive index strategies. There are tons right here on portfolioeinstein.com. If you’re just getting started to see How to invest money: 5 simple steps that work for anyone on how to get started.

You are awesome at other stuff. Go do that other awesome stuff – and now that you are not looking at meaningless stock data all day, you have more time to be awesome and improve your awesomeness.

Summary and your next steps

After answering the most important question in investing you should be well on your way to door #2. Into passive indexing land. You’ve seen that it is almost impossible to beat the market, even if you’re a professional.

Go to how-to-invest-money-5-simple-steps-that-work-for-anyone to in order to progress to your next step in your investing journey.

If this article got you interested in learning more about beating everyone else at investing I recommend these books to continue your education:

Be sure to sign up for our newsletter. We got something awesome cooking that will help you in a big way to invest even better!

238 Investment Portfolios Tested: This Is #1

September 14, 2018 Leave a Comment

Do you know that you can earn $100,000’s of additional of dollars just by implementing the right investment portfolio? It isn’t more expensive and it isn’t more complicated. AND you are going to beat out 99% of everyone else in the investment community – even the hedge funds! We have tested 238 Investment portfolios – this is #1!

238 Investment Portfolios Tested: This Is #1

Which funds should I buy – the question that trips up investors (you and me!)

The right portfolio mix is what trips up investors. Which funds should I buy? Should I invest in tech stocks, what about dividend stocks?

The right asset allocation is the best determinant of the success of your portfolio. This is why you should focus most of your energy on getting your asset allocation right so that it jives with your situation.

Luckily there have been tons of research done on the topic and tons of portfolios have been constructed to serve every need – your’s too!

There’s no need to make your own portfolio. The portfolio you can get from the professionals is just that: Professional!

Don’t pick the allocation yourself and don’t pick the funds yourself.

DO pick a portfolio constructed by investing professional.

But how do you pick the right portfolio? One way and definitely not the best way is to look for solid performing portfolios.

In this post, we’ll cover some of these best performing portfolios.

What do you mean by “the best investment portfolio”?

The best investment portfolio is a moving target. Taking cues from Einstein and the Theory of Relativity we know that the speed of light is just about the only constant in the universe.

We’ll make things simple and present the best investment portfolio by its cumulative returns. This means we will be ignoring a swathe of factors, among these:

Risk-adjusted returns (e.g. Sharpe ratio)
Risk of the portfolio (e.g. standard deviation, ulcer index, Sortino ratio)
The investor’s tolerance for risk
The timeframe of the investment (what is best for a 20-year portfolio is not best for a 1-year portfolio)
The starting year of the investment (the starting year plays a big part when measuring performance)
Rolling returns (looking at rolling returns gives yet another perspective of best investment portfolio)
Drawdowns (a portfolio can have huge drawdowns and still have the best returns)
Diversification analysis (have the portfolio earned its returns by concentration and if so, is it replicable?)
Income requirements (does the portfolio need to sustain a constant stream of income?)
Expense ratios (how expensive is the portfolio to implement and maintain?)

Investment returns are very important when viewed over a long time frame. In the short term, however, the most important factor in reaching your financial goals is your ability to save money.

Our methodology

The basis for our measurement is the portfolios that are tracked by portfolioeinstein.com. As per 13/09/2018, we are tracking 235 portfolios. All the portfolios are buy-and-hold and assume a lump sum investing in 1989 along with yearly rebalances.

The years tracked are from 1989 to 2017.

We are only looking at the compound annual growth rate of the investments (CAGR). This is the standard way of measuring returns of investments on portfolios. CAGR takes interest-on-interest into account.

For example, $1 earning 10 percent interest this year would be worth $1.10 by the end of the year. ($1 times 1.1) Next year the $1.10 grows to $1.21. ($1.1 times 1.1). In ten years that $1 grows to $2.5. This is the compounding effect in action.

All the portfolios are using the same data. Here are the sources for the data.

How did the US stock market do?

The benchmark in investing is normally the US stock market, either the S&P500 or the Wilshire 5000.

We use the total stock market index. It has a marginally higher return than the S&P 500 due to the inclusion of small, mid-cap stocks and value stocks. All of which has historically done slightly better than large-cap growth stocks which comprise the S&P 500.

The US total stock market is the benchmark because it is extremely easy to gain exposure to through mutual funds (e.g. VTSMX) or through ETFs (VTI, ITOT, SCHB) (see our best-in-class recommendations for ETFs and mutual funds).

There are several authors that recommend holding the total stock market portfolio as the only fund making up the entire portfolio. Among these are JL Collins of The Simple Path to Wealth: Your road map to financial independence and a rich, free life and John Bogle, Supreme hero of the investing world in his book The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns.

Here are the stats for the US Total Stock Market 1989-2017.

Name	Return	Risk	Drawdown
Total US Stock Market	10.42%	17.58%	-37.07%

That is a great return and is the reason why active managers and individual investors cannot hope to beat the market. In the most recent SPIVA study, only 8% of active managers beat the market over 15 years. This number decreases when the timeframe increases to the point where outperformance becomes an impossibility. See Why Does All Active Management Suck for details and check out Rick Ferri’s book The Power of Passive Investing: More Wealth with Less Work which has tons more data and evidence backing up why active management is a loser’s game.

If we go further back to 1871. The longest back we have data the return for the total stock market is 8.71%. The return for our measurement is thus higher than the average on record.

The best investment portfolio, the #1 investment portfolio

So here is the #1 investing portfolio:

Name	Return	Risk	Drawdown
Paul Merriman’s Target Date Portfolio (25-year-old)	11.67%	18.14%	-37.29%

Paul Merriman’s Target Date Portfolio (25-year-old)

Paul Merriman’s portfolio is characterized by tilting heavily into small-cap value stocks. Historically the best performing asset class. It is the most aggressive and concentrated of all his target date funds. Together with Chris Pedersen, Paul Merriman has constructed what he calls the ultimate target-date fund. These are characterized by tilting heavily into small-cap value, historically the best performing asset class. This is what the allocation looks like:

70.00% US Small Cap Value (VIOV)
5.00% Emerging Markets (VWO)
20.00% International Small Cap Value (DLS)
5.00% Emerging Markets Small Cap (EWX)

You can find the allocation for this portfolio here. I also strongly recommend you read his article and listen to his podcast on this particular portfolio.

Paul Merriman, educator, entrepreneur and all-around good in investing have a host of portfolios. They all express massive diversification and a slight to an extreme bias towards value and small cap, especially small-cap value which historically has been the best performing asset, class. Paul Merriman’s podcast is highly recommended, as are the many articles on his site. His personal finance book Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor easily wins as the best-titled book on personal finance. His book Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind is fantastic and stuffed with sage advice, statics, and evidence-based best-investing practices.

The second best investment portfolio

At second place we find the next tier of Paul Merriman’s target date funds.

Portfolio Name	Return	Risk	Drawdown
Paul Merriman’s Target Date Portfolio (35-year-old)	11.43%	17.90%	-37.13%

It is more diversified than the one above but still has a lot of concentration of small cap value.

See the allocation here.

The rest of the best investment portfolios (#3-8)

Portfolio Name	Return	Risk	Drawdown
Scott Adams Dilbert’s Portfolio	11.17%	22.68%	-44.93%
Index Fund Advisors, Portfolio 100	10.90%	17.91%	-39.64%
Paul Merriman 2-Fund-Value-Portfolio	10.87%	16.65%	-36.32%
Paul Merriman 4-Fund-Portfolio	10.81%	16.79%	-35.35%
Paul Merriman’s Target Date Portfolio (45-year-old)	10.77%	16.23%	-34.03%
Dan Solin SuperSmart Portfolio, High Risk	10.68%	16.94%	-39.56%

Scott Adams, the author of the comic strip, Dilbert, proposed a portfolio consisting of 50% emerging markets and 50% total stock market. This is the result. The portfolio is gonna have massive drawdowns but also massive upswings. You are going to feel like a failure a lot of the time if you hold this portfolio. Something Scott Adams is quite accustomed to failing according to his fantastic little book How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life that teaches that failure is really the preamble to success. This goes for investing as well.

At the #4 spot, we find Index Fund Advisors. IFA’s portfolios are all highly diversified and with a large tilt towards small-cap and value. Mark Hebner heads up IFA and is on a mission to educate about index investing, his book Index Funds: The 12-Step Recovery Program for Active Investors is very recommended.

At spot number 5-6 we find 2 portfolios by Paul Merriman again. The #5 spot is a portfolio consisting of 50% small value and 50% large value. The #6 is an attempt to build The Ultimate Portfolio by using only value funds.

At spot #7 we find yet another(!) Paul Merriman portfolio. (No I’m not getting paid by Paul).

Finally, at spot number 8 we find one of Dan Solin’s many portfolios. I consider Dan Solin one of the good guys in investing. Promoting evidence-based, sound principles in investing. He has a history with Index Fund Advisors which probably influenced his investing methodology. Or maybe he was just attracted by IFA’s reliance on academic work done by Fama/French. His SuperSmart portfolios have a tilt towards small-cap and value. All of IFA’s portfolios have this as well, as does DFA’s David Booth’s. They all rely on the work by Eugene Fama and Kenneth French. Dan Solin is the author of some great books on investing most notably The Smartest Portfolio You’ll Ever Own: A Do-It-Yourself Breakthrough Strategy and The Smartest Investment Book You’ll Ever Read: The Proven Way to Beat the “Pros” and Take Control of Your Financial Future.

Why these portfolios?

As can be seen in the above portfolios containing a tilt towards value and small-cap has outperformed the broader market so any portfolio that has a strong tilt towards value and small-cap will have outperformed the broader market.

How much money would the best investment portfolio have given me?

There is 0.99% difference (less than 1%) between the number 8 and the best portfolio. Can that really make that much of a difference?

Yes, it can! That 1% difference can make a HUGE difference over long periods of time. So how much money would the 8 portfolios have given us over these over 29 years?

#	Portfolio Name	Final Amount
#1	Paul Merriman’s Target Date Portfolio (25 year old)	$ 245,490.26
#2	Paul Merriman’s Target Date Portfolio (35 year old)	$ 230,855.90
#3	Scott Burns Dilbert’s Portfolio	$ 215,721.79
#4	Index Fund Advisors, Portfolio 100	$ 200,832.99
#5	Paul Merriman 2-Fund-Value-Portfolio	$ 199,466.89
#6	Paul Merriman 4-Fund-Portfolio	$ 196,310.86
#7	Paul Merriman’s Target Date Portfolio (45 year old)	$ 194,370.70
#8	Dan Solin SuperSmart Portfolio, High Risk	$ 189,917.12

The difference of $55,573.14 underscores the power of compounding but also of choosing the right portfolio. The end amount is a 29% increase in the number of dollars from the lowest to the highest!

In comparison, the worst performing portfolio on portfolioeinstein.com is David Booth (DFA) Fixed Income Portfolio with a CAGR of 4.48%. This is not bad at all considering its extremely low risk. David Booth (DFA) Fixed Income Portfolio’s final amount would have been $35,622.63.

How do I build these portfolios?

So you saw the numbers and now you want to implement the portfolio.

But hold on a minute!

Remember when I said there were a lot of factors that I did not take into account when presenting the best portfolios? I’m talking about these guys:

Risk-adjusted returns (e.g. Sharpe ratio, )
Risk of the portfolio (e.g. standard deviation, ulcer index, Sortino ratio)
The investor’s tolerance for risk
The timeframe of the investment (what is best for a 20-year portfolio is not best for a 1-year portfolio)
The starting year of the investment (the starting year plays a big part when measuring performance)
Rolling returns (looking at rolling returns gives another perspective of best investment portfolio)
Drawdowns (a portfolio can have huge drawdowns and still have the best returns)
Diversification analysis (have the portfolio earned its returns by concentration and if so, is it replicable?)
Income requirements (does the portfolio need to sustain a constant stream of income?)
Expense ratios (how expensive is the portfolio to implement and maintain?)
Tracking error.

Because we are all unique just like everyone else, your situation might call for a different portfolio than what is considered the best performing investment portfolio.

Now, this is important. The Dilbert portfolio, #3, is extremely volatile and may not be up when you want it to be up. It might have a large drawdown just when you need the money. Same goes for #1 and #2 but emerging markets is a very volatile asset class.

Also note, past performance is not indicative of future returns. What we have recorded in history will NOT come to pass in the future. History may rhyme and it may look a lot like the past. But it will not be the past.

Let me repeat that: The returns you see on the portfolios and everywhere else in the financial media are NOT the returns you will actually experience. But it is our best guess!

Do your due diligence or wait a few weeks for our forthcoming best risk-adjust-article.

If you want to see the allocations for the above portfolios go here.

Summary and your next steps

Whether you are saving for retirement or building a nest egg the returns on your investment play a huge role. But so does saving money regularly. Money can only compound on other money.

There is a large difference in returns and dollar amount between the best investment portfolio and number eight. The difference is almost 30%.

All investing decisions should be made in comparison to a benchmark, for example, the total US stock market.

Still confused or more confused?

Hang tight and sign up for my newsletter. I’ll make you smarter week-by-week

Asset Allocation of 332 Investment Portfolios

September 7, 2018 Leave a Comment

This is the asset allocation of the portfolios found on portfolioeinstein.com.

We are currently tracking asset allocation and performance of ~~208~~ ~~235~~ 332 investment portfolios!

Asset Allocation of 332 Investment Portfolios

This is the asset allocation of the portfolios found on portfolioeinstein.com.

We are currently tracking asset allocation and performance of ~~208~~ ~~235~~ 332 investment portfolios!

You can find the best-in-class ETFs here.

The rebalance tool is here.

You can find the returns and risk metrics here.

You can find the best target date retirement fund in the article What Is The Best ETF And Mutual Fund?

To get an overview of the many target date fund providers we track you should read the article Target Date Fund Portfolios

If you are looking for lazy portfolios you should read 5 Reasons Why A Lazy Portfolio Is Right For You and Lazy Portfolios to get an overview.

7Twelve Portfolio by Craig Israelsen

You can find them in the article Craig Israelsen: 7Twelve Portfolio: Too Much Diversification?

Allan Roth Second Grader Portfolios

You can find them in the article Allan Roth Second Grader Portfolio: Beating The Hell Outa Wall Street?

Alpha Architect Robust Portfolio

7.50% US Large Cap Value (VTV)
7.50% US Small Cap Value (VIOV)
10.00% REITs (VNQ)
7.50% International Large Cap Value (EFV)
20.00% Intermediate-Term Treasuries (VGIT)
10.00% Commodities (DBC / GSG)
30.00% Momentum Factor (MTUM)
7.50% International Small Cap Value (DLS)

Wes Gray and Jack Vogel over at AlphaArchitect constructed this portfolio. Alpha Architect normally employs mainly a tactical approach for portfolio construction. Alpha Architect has enjoyed a great deal of success because of their stock selection methodology, which they have documented several places. Among these are

They are all three extremely well researched and all evidence-based approaches to go beyond the buy and hold methodology. Their books are a nerd’s heaven.

Balanced Portfolios

You can find them in the article The Balanced Portfolio: Portfolio Grand Daddy

Ben Stein’s Perfect Portfolio

20.00% US Total Stock Market (VTI)
20.00% US Large Cap (VV)
4.00% REITs (VNQ)
20.00% International Developed Blend (VEA)
12.00% Emerging Markets (VWO)
20.00% Cash (money market fund) (BIL)
4.00% Energy (XLE)

Ben Stein is a personal finance columnist and actor. He has written several books on personal finance and investing, the 2 that stand out are The Little Book of Bulletproof Investing: Do’s and Don’ts to Protect Your Financial Life and Yes, You Can Still Retire Comfortably!
The above portfolio is from here.

Bill Schultheis’ “Coffeehouse” Portfolio

You can find them in the article Bill Schultheis: Coffeehouse Portfolio: Relax And Get On With Your Life Portfolio?

Bridgewater All Seasons Portfolio

18.00% US Large Cap (VV)
3.00% US Small Cap (VIOO)
6.00% International Developed Blend (VEA)
3.00% Emerging Markets (VWO)
40.00% Long Term Treasuries (TLT)
15.00% Intermediate-Term Treasuries (VGIT)
7.50% Commodities (DBC / GSG)
7.50% Gold (IAU)

This is also called a risk-parity portfolio. Bridgewater is the largest hedge fund manager in the world (2018) and offers this portfolio to guard against all possible economic scenarios. The above portfolio is featured in Meb Faber’s fantastic book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.

Burton Malkiel Portfolios

You can find them in the article Burton Malkiel Portfolio: No Random Returns Here

David Booth (DFA) Portfolios

You can find them in the article David Booth Portfolios: Home Runs For Days

David Swensen’s Portfolio

You can find it in the article David Booth Portfolios: Home Runs For Days

Dimensional 2030 Target Date Retirement Income Fund

17.50% US Total Stock Market (VTI)
17.50% US Large Cap (VV)
10.50% International Developed Blend (VEA)
5.20% Emerging Markets (VWO)
5.20% International All-World ex-US (VEU)
6.10% Short-Term Investment Grade (VCSH)
31.90% TIPS (VTIP)
6.10% 2 Year Global Fixed Income (BNDX)

Although late to the target-date retirement party DFA has launched a slew of target-date retirement funds. The funds from DFA are uncustomary lacking weighting towards value and small-cap. They also employ a good amount of TIPS. Don’t let that scare you. DFA employs Eugene Fama and Kenneth French on their investing committee. They pioneered the model for describing asset class premia. The impact on investing by Fama cannot be understated and is eloquently detailed in the Myth of the Rational Market by Justin Fox.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Dimensional 2040 Target Date Retirement Income Fund

26.00% US Total Stock Market (VTI)
26.00% US Large Cap (VV)
15.50% International Developed Blend (VEA)
7.60% Emerging Markets (VWO)
7.70% International All-World ex-US (VEU)
8.60% Short-Term Investment Grade (VCSH)
8.60% 2 Year Global Fixed Income (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Dimensional 2050 Target Date Retirement Income Fund

29.80% US Total Stock Market (VTI)
29.80% US Large Cap (VV)
17.80% International Developed Blend (VEA)
8.70% Emerging Markets (VWO)
8.90% International All-World ex-US (VEU)
2.50% Short-Term Investment Grade (VCSH)
2.50% 2 Year Global Fixed Income (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Dimensional 2060 Target Date Retirement Income Fund

29.80% US Total Stock Market (VTI)
29.80% US Large Cap (VV)
17.80% International Developed Blend (VEA)
8.70% Emerging Markets (VWO)
8.90% International All-World ex-US (VEU)
2.50% Short-Term Investment Grade (VCSH)
2.50% 2 Year Global Fixed Income (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Dimensional Retirement Income Fund

6.40% US Total Stock Market (VTI)
6.40% US Large Cap (VV)
3.80% International Developed Blend (VEA)
1.90% Emerging Markets (VWO)
1.90% International All-World ex-US (VEU)
47.60% TIPS (VTIP)
32.00% 1 Year Fixed Income (BSV)

Fidelity Freedom Index 2030 (55 years old)

51.46% US Total Stock Market (VTI)
22.11% International All-World ex-US (VEU)
24.03% Total US Bond Market (BND)
0.05% Cash (money market fund) (BIL)
1.29% Commodities (DBC / GSG)
1.06% TIPS (VTIP)

Fidelity Investments Inc. offers a slew of target-date retirement funds. Fidelity is a privately owned company being the 4^th largest in assets under management. It is featured in the book Fidelity’s World: The Secret Life and Public Power of the Mutual Fund Giant.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Fidelity Freedom Index 2040 (45 years old)

62.11% US Total Stock Market (VTI)
26.58% International All-World ex-US (VEU)
9.97% Total US Bond Market (BND)
0.02% Cash (money market fund) (BIL)
1.32% Commodities (DBC / GSG)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Fidelity Freedom Index 2050 (35 years old)

62.11% US Total Stock Market (VTI)
26.58% International All-World ex-US (VEU)
9.97% Total US Bond Market (BND)
0.02% Cash (money market fund) (BIL)
1.32% Commodities (DBC / GSG)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Fidelity Freedom Index 2060 (25 years old and younger)

62.11% US Total Stock Market (VTI)
26.58% International All-World ex-US (VEU)
9.97% Total US Bond Market (BND)
0.02% Cash (money market fund) (BIL)
1.32% Commodities (DBC / GSG)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Frank Armstrong Ideal Index Portfolio

9.25% US Large Cap Value (VTV)
6.25% US Large Cap (VV)
9.25% US Small Cap Value (VIOV)
6.25% US Small Cap Growth (IJT)
8.00% REITs (VNQ)
31.00% International All-World ex-US (VEU)
30.00% Short Term Treasuries (VGSH)

Frank Armstrong is the author of The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio. In his book he presents a the Ideal Index Portfolio. Frank Armstrong’s portfolio is tilted towards small-cap and value stocks.

Gibson Five Asset Classes

20.00% US Total Stock Market (VTI)
20.00% REITs (VNQ)
20.00% International All-World ex-US (VEU)
14.00% Total US Bond Market (BND)
20.00% Commodities (DBC / GSG)
6.00% Non-US Bonds (BNDX)

Roger Gibson, supreme commander of asset classes, offer two portfolios in his excellent book Asset Allocation: Balancing Financial Risk, Fifth Edition: Balancing Financial Risk. It is the go-to book for all things related to asset allocation. Richard Ferri’s All About Asset Allocation is a close second though less detailed.

Gibson Four Asset Classes

25.00% US Large Cap Value (VTV)
25.00% REITs (VNQ)
25.00% International Developed Blend (VEA)
25.00% Commodities (DBC / GSG)

Harry Markowitz’s “Father of Modern Portfolio Theory” Portfolio

50.00% US Total Stock Market (VTI)
50.00% Total US Bond Market (BND)

Father of Modern Portfolio Theory (MPT) is not as you would expect a puzzle of calculations of mean-variance. Instead, Markowitz has stated he splits his portfolio evenly in bonds and stocks. There is a great piece on Harry Markowitz in Justin Fox’ book The Myth of the Rational Market.

Index Fund Advisors Portfolios

You can find them in the article Index Fund Advisors: Market Beating Portfolios.

iShares Lifepath Fund

22.09% US Large Cap (VV)
4.15% US Small Cap (VIOO)
0.51% REITs (VNQ)
13.67% International All-World ex-US (VEU)
50.82% Total US Bond Market (BND)
8.76% TIPS (VTIP)

The iShares target-date funds are no-fuzz straight up simple funds that give you broad exposure with a glide path towards retirement. You can see them here.
iShares is the boutique of ETFs owned by Blackrock Inc. Blackrock is the world largest asset manager in the world (6.3 trillion dollars in 2017).
You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

iShares LifePath Index 2030 Fund (55-year-old)

36.98% US Large Cap (VV)
2.32% US Small Cap (VIOO)
7.77% REITs (VNQ)
1.56% International Developed Blend (VEA)
21.20% International All-World ex-US (VEU)
26.03% Total US Bond Market (BND)
4.14% TIPS (VTIP)

iShares LifePath Index 2040 Fund (45-year-old)

46.60% US Large Cap (VV)
1.08% US Small Cap (VIOO)
13.03% REITs (VNQ)
2.19% International Developed Blend (VEA)
26.32% International All-World ex-US (VEU)
9.40% Total US Bond Market (BND)
1.38% TIPS (VTIP)

iShares LifePath Index 2050 Fund (35-year-old)

50.02% US Large Cap (VV)
0.76% US Small Cap (VIOO)
16.24% REITs (VNQ)
1.13% International Developed Blend (VEA)
30.76% International All-World ex-US (VEU)
1.09% Total US Bond Market (BND)

iShares LifePath Index 2060 Fund (25-year-old)

49.69% US Large Cap (VV)
0.97% US Small Cap (VIOO)
16.17% REITs (VNQ)
32.15% International All-World ex-US (VEU)
1.02% Total US Bond Market (BND)

BlackRock Model Portfolio 10% Stocks

15.00% US Total Stock Market (VTI)
59.00% Total US Bond Market (BND)
26.00% Non-US Bonds (BNDX)

The BlackRock model portfolio tool is available to advisors building portfolios for their clients. The model portfolios are simple 3-4 fund portfolios so they are easy to implement and maintain. You can try out the tool here. The model portfolios normally use iShares ETFs as building blocks. Using Vanguard ETFs you save slightly on the fees.

BlackRock Model Portfolio 15% Stocks

15.00% US Total Stock Market (VTI)
5.00% International All-World ex-US (VEU)
55.00% Total US Bond Market (BND)
25.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 20% Stocks

26.00% US Total Stock Market (VTI)
10.00% International All-World ex-US (VEU)
41.00% Total US Bond Market (BND)
23.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 36% Stocks

28.00% US Total Stock Market (VTI)
12.00% International All-World ex-US (VEU)
38.00% Total US Bond Market (BND)
22.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 40% Stocks

31.00% US Total Stock Market (VTI)
20.00% International All-World ex-US (VEU)
31.00% Total US Bond Market (BND)
18.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 51% Stocks

33.00% US Total Stock Market (VTI)
22.00% International All-World ex-US (VEU)
33.00% Total US Bond Market (BND)
12.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 55% Stocks

31.00% US Total Stock Market (VTI)
20.00% International All-World ex-US (VEU)
31.00% Total US Bond Market (BND)
18.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 65% Stocks

40.00% US Total Stock Market (VTI)
25.00% International All-World ex-US (VEU)
25.00% Total US Bond Market (BND)
10.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 70% Stocks

41.00% US Total Stock Market (VTI)
29.00% International All-World ex-US (VEU)
22.00% Total US Bond Market (BND)
8.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 80% Stocks

44.00% US Total Stock Market (VTI)
36.00% International All-World ex-US (VEU)
15.00% Total US Bond Market (BND)
5.00% Non-US Bonds (BNDX)

BlackRock Model Portfolio 85% Stocks

48.00% US Total Stock Market (VTI)
37.00% International All-World ex-US (VEU)
15.00% Total US Bond Market (BND)

BlackRock Model Portfolio 91% Stocks

50.00% US Total Stock Market (VTI)
41.00% International All-World ex-US (VEU)
9.00% Total US Bond Market (BND)

BlackRock Model Portfolio 100% Stocks

57.00% US Total Stock Market (VTI)
43.00% International All-World ex-US (VEU)

JL Collins, Simple Path to Wealth, Wealth Building Portfolio

100.00% US Total Stock Market (VTI)

JL Collins is a personal finance writer and author of the wonderful book The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life. It is highly recommended – also as an audiobook! His basic portfolio consists of one fund, while his preservation portfolio adds a bond fund to the mix. His how-to-invest series on his blog is worth your time.

JL Collins, Simple Path to Wealth, Wealth Preservation Portfolio

75.00% US Total Stock Market (VTI)
25.00% Total US Bond Market (BND)

The Larry Swedroe Portfolios

These have all gotten a new home over at Larry Swedroe Portfolio: Nemesis of Low Returns

Meb Faber’s Global Asset Allocation Portfolio (GAA)

18.00% US Large Cap (VV)
4.50% REITs (VNQ)
13.50% International Developed Blend (VEA)
4.50% Emerging Markets (VWO)
13.50% Long Term Treasuries (TLT)
19.80% Corporate Bonds (LQD)
5.00% Commodities (DBC / GSG)
5.00% Gold (IAU)
1.80% TIPS (VTIP)
14.40% Non-US Bonds (BNDX)

Meb Faber, Quant and productivity-meister galore regularly backtests portfolios. In his fantastic book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies, he has collected a host of different portfolios playing on the same theme – well-diversified portfolios.

Meb Faber’s Global Tactical Asset Allocation (GTAA) Conservative

3.75% US Large Cap Value (VTV)
3.75% US Small Cap Value (VIOV)
15.00% REITs (VNQ)
7.50% International Developed Blend (VEA)
7.50% Emerging Markets (VWO)
10.00% Long Term Treasuries (TLT)
10.00% Intermediate-Term Treasuries (VGIT)
10.00% Corporate Bonds (LQD)
15.00% Commodities (DBC / GSG)
10.00% Non-US Bonds (BNDX)
7.50% Momentum Factor (MTUM)

In his very popular paper A Quantitative Approach to Tactical Asset Allocation Meb Faber, quant and co-founder of Cambria, suggests multiple buy-and-hold portfolios in addition to his now trademark trend following strategy. Meb is known for favoring value and momentum strategies. I recommend all of Meb Faber’s books as he doesn’t waste your time. Some of the best ones include Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies and The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

Meb Faber’s Global Tactical Asset Allocation (GTAA) Moderate

5.00% US Large Cap Value (VTV)
5.00% US Small Cap Value (VIOV)
20.00% REITs (VNQ)
10.00% International Developed Blend (VEA)
10.00% Emerging Markets (VWO)
5.00% Long Term Treasuries (TLT)
5.00% Intermediate-Term Treasuries (VGIT)
5.00% Corporate Bonds (LQD)
20.00% Commodities (DBC / GSG)
5.00% Non-US Bonds (BNDX)
10.00% Momentum Factor (MTUM)

Meb Faber’s Ivy 10 Portfolio

You can find them in the article Meb Faber: Ivy 10 Portfolio: Expand And Conquer Yale And Harvard

Meb Faber’s Ivy 5 Portfolio

You can find them in the article Meb Faber’s Ivy 10 Portfolio: Expand And Conquer Yale And Harvard

Meb Faber IVY 20 portfolio

5.00% US Large Cap (VV)
5.00% US Mid Cap (IJH)
5.00% US Small Cap (VIOO)
5.00% US Micro Cap (IWC)
5.00% REITs (Real Estate) (VNQ)
5.00% Int. Developed Blend (VEA)
5.00% Emerging Markets (VWO)
5.00% Intl Sm Cap Blend (VSS)
5.00% Total US Bond Market (BND)
5.00% Timber (TREE)
5.00% Infrastructure
20.00% Commodities (DBC / GSG)
5.00% TIPS (VTIP)
5.00% Non-US Bonds (BNDX)
5.00% Emerging Markets Small Cap (EWX)
5.00% Emerging Market Bonds (VWOB)
5.00% International REITs (Real Estate) (VNQI)

Co-written with Eric Anderson, Meb Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets lays out a strategy that attempts to mirror the investment portfolios of the Ivy Leagues Endowment fund like Yale, Harvard, and Princeton. Especially Yale’s performance has been envious. Yale’s Endowment is led by David Swensen who also has a recommend portfolio on this site.

Meb Faber’s Risk Parity Portfolio

7.50% US Total Stock Market (VTI)
5.00% REITs (VNQ)
7.50% International All-World ex-US (VEU)
35.00% Intermediate-Term Treasuries (VGIT)
35.00% Corporate Bonds (LQD)
5.00% Commodities (DBC / GSG)
5.00% Gold (IAU)

Meb Faber’s risk parity portfolio from his blog where he compares it to Ray Dalio’s All Weather Portfolio (also on this site). All of Meb Faber’s books are worth a read and especially Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies and The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

Merrill Lynch Edge Select Portfolio, Conservative

8.00% US Large Cap Value (VTV)
5.00% US Large Cap Growth (VUG)
1.00% US Small Cap Value (VIOV)
1.00% US Small Cap Growth (IJT)
1.00% Emerging Markets (VWO)
5.00% International All-World ex-US (VEU)
17.00% Intermediate-Term Treasuries (VGIT)
24.00% Cash (money market fund) (BIL)
10.00% Corporate Bonds (LQD)
4.00% High Yield Corporate Bonds (HYG / JNK)
12.00% Non-US Bonds (BNDX)
12.00% Mortgages (VMBS)

Merrill Lynch offers these portfolios through their Select Edge Portfolios. Their portfolios are some of the more complex ones with many asset classes. They are also the only ones including mortgages in their portfolios as a distinct asset class. In addition, their most aggressive portfolio holds 16% in bonds/cash which is unusual for that level of risk.

Merrill Lynch Edge Select Portfolio, Moderately Conservative

9.00% US Large Cap Value (VTV)
14.00% US Large Cap Growth (VUG)
1.00% US Small Cap Value (VIOV)
1.00% US Small Cap Growth (IJT)
3.00% Emerging Markets (VWO)
9.00% International All-World ex-US (VEU)
17.00% Intermediate-Term Treasuries (VGIT)
2.00% Cash (money market fund) (BIL)
15.00% Corporate Bonds (LQD)
5.00% High Yield Corporate Bonds (HYG / JNK)
9.00% Non-US Bonds (BNDX)
15.00% Mortgages (VMBS)

Merrill Lynch Edge Select Portfolio, Moderate

12.00% US Large Cap Value (VTV)
19.00% US Large Cap Growth (VUG)
2.00% US Small Cap Value (VIOV)
2.00% US Small Cap Growth (IJT)
5.00% Emerging Markets (VWO)
13.00% International All-World ex-US (VEU)
14.00% Intermediate-Term Treasuries (VGIT)
2.00% Cash (money market fund) (BIL)
14.00% Corporate Bonds (LQD)
4.00% High Yield Corporate Bonds (HYG / JNK)
2.00% Non-US Bonds (BNDX)
11.00% Mortgages (VMBS)

Merrill Lynch Edge Select Portfolio, Moderately Aggressive

16.00% US Large Cap Value (VTV)
25.00% US Large Cap Growth (VUG)
2.00% US Small Cap Value (VIOV)
2.00% US Small Cap Growth (IJT)
7.00% Emerging Markets (VWO)
17.00% International All-World ex-US (VEU)
9.00% Intermediate-Term Treasuries (VGIT)
2.00% Cash (money market fund) (BIL)
9.00% Corporate Bonds (LQD)
3.00% High Yield Corporate Bonds (HYG / JNK)
1.00% Non-US Bonds (BNDX)
7.00% Mortgages (VMBS)

Merrill Lynch Edge Select Portfolio, Aggressive

19.00% US Large Cap Value (VTV)
29.00% US Large Cap Growth (VUG)
3.00% US Small Cap Value (VIOV)
3.00% US Small Cap Growth (IJT)
9.00% Emerging Markets (VWO)
21.00% International All-World ex-US (VEU)
5.00% Intermediate-Term Treasuries (VGIT)
2.00% Cash (money market fund) (BIL)
4.00% Corporate Bonds (LQD)
1.00% High Yield Corporate Bonds (HYG / JNK)
1.00% Non-US Bonds (BNDX)
3.00% Mortgages (VMBS)

Morningstar Portfolios, including portfolios made by Christine Benz

You can find all the Morningstar portfolios over at Morningstar Portfolios: A Laser Beam On Your Returns

Muhammad El-Erian’s Portfolio

18.00% US Total Stock Market (VTI)
13.00% REITs (VNQ)
18.00% International Developed Blend (VEA)
15.00% Emerging Markets (VWO)
6.00% Long Term Treasuries (TLT)
11.00% Total US Bond Market (BND)
13.00% Commodities (DBC / GSG)
6.00% TIPS (VTIP)

Mohamed El-Erian is former CEO of the PIMCO. PIMCO has 1.7 Trillion dollars under management. In El-Erian’s book When Markets Collide: Investment Strategies for the Age of Global Economic Change, he presents a shock absorbent long-term portfolio. He is often attributed with coming up the expression “new normal” in the post-financial crisis.

Paul Merriman’s Portfolios

You can find them in the article Paul Merriman Portfolios: Unbiased Outperformance

Paul Merriman’s Ultimate Portfolio

You can find them in the article Paul Merriman Portfolios: Unbiased Outperformance and Paul Merriman’s Ultimate Portfolio: 10 X 10 = Winner?

This is the portfolio that Paul Merriman features on MarketWatch. It shows the power of diversification that brings home very good returns while keeping risk in check.

Rick Ferri Portfolios

You can find them in the article Rick Ferri Portfolio, Can It Bring You Enough Returns?

Rob Arnott’s Portfolio

10.00% US Large Cap (VV)
10.00% REITs (VNQ)
10.00% International All-World ex-US (VEU)
10.00% Long Term Treasuries (TLT)
20.00% Corporate Bonds (LQD)
10.00% Commodities (DBC / GSG)
10.00% TIPS (VTIP)
20.00% Non-US Bonds (BNDX)

Robert Arnott of Research Affiliates has proposed this portfolio in an article. Rob Arnott is a strong advocate for smart beta strategies his book The Fundamental Index: A Better Way to Invest explains how to get better returns from a factor-based index than a market cap weighted index can provide.

Robo advisor Betterment 100

34.60% US Total Stock Market (VTI)
9.20% US Large Cap Value (VTV)
7.50% US Mid Cap Value (JKI)
6.40% US Small Cap Value (VIOV)
27.30% International Developed Blend (VEA)
15.00% Emerging Markets (VWO)

Betterment is probably the most well-known fin-tech company. It started the robo-advisor phenomenon. They have 13 Billion assets under management as per 2017. Their portfolios are well diversified and are some of the few that have emerging market bonds as an asset class. If you want to gain a greater insight into the robo-advisory phenomenon I recommend picking up FinTech Innovation: From Robo-Advisors to Goal-Based Investing and Gamification.

Robo Advisor Betterment 90

30.90% US Total Stock Market (VTI)
8.20% US Large Cap Value (VTV)
6.70% US Mid Cap Value (JKI)
5.70% US Small Cap Value (VIOV)
24.60% Int. Developed Blend (VEA)
14.00% Emerging Markets (VWO)
3.50% Total US Bond Market (BND)
0.60% Cash (money market fund) (BIL)
1.20% TIPS (VTIP)
2.90% Non-US Bonds (BNDX)
1.70% Emerging Market Bonds (VWOB)

Robo advisor Betterment 80

27.00% US Total Stock Market (VTI)
7.20% US Large Cap Value (VTV)
5.90% US Mid Cap Value (JKI)
5.00% US Small Cap Value (VIOV)
22.10% International Developed Blend (VEA)
12.80% Emerging Markets (VWO)
6.80% Total US Bond Market (BND)
2.40% TIPS (VTIP)
7.20% Non-US Bonds (BNDX)
3.60% Emerging Market Bonds (EMB / VWOB)

Betterment is probably the most well-known fin-tech company. It started the robo advisor phenomenon. They have 13 Billion assets under management as per 2017. Their portfolios are well diversified and are some of the few that have emerging market bonds as an asset class. If you want to gain a greater insight into the robo advisor phenomenon I recommend picking up FinTech Innovation: From Robo-Advisors to Goal-Based Investing and Gamification.

Robo Advisor Betterment 70

23.40% US Total Stock Market (VTI)
6.30% US Large Cap Value (VTV)
5.10% US Mid Cap Value (JKI)
4.30% US Small Cap Value (VIOV)
19.30% Int. Developed Blend (VEA)
11.60% Emerging Markets (VWO)
9.80% Total US Bond Market (BND)
3.80% TIPS (VTIP)
10.90% Non-US Bonds (BNDX)
5.50% Emerging Market Bonds (VWOB)

Robo advisor Betterment 60

19.80% US Total Stock Market (VTI)
5.30% US Large Cap Value (VTV)
4.30% US Mid Cap Value (JKI)
3.60% US Small Cap Value (VIOV)
16.70% International Developed Blend (VEA)
10.30% Emerging Markets (VWO)
12.30% Total US Bond Market (BND)
5.00% TIPS (VTIP)
14.70% Non-US Bonds (BNDX)
8.00% Emerging Market Bonds (EMB / VWOB)

Robo Advisor Betterment 50

16.20% US Total Stock Market (VTI)
4.40% US Large Cap Value (VTV)
3.60% US Mid Cap Value (JKI)
3.00% US Small Cap Value (VIOV)
13.70% Int. Developed Blend (VEA)
9.00% Emerging Markets (VWO)
14.70% Total US Bond Market (BND)
6.30% TIPS (VTIP)
18.40% Non-US Bonds (BNDX)
10.70% Emerging Market Bonds (VWOB)

Robo advisor Betterment 40

12.90% US Total Stock Market (VTI)
3.40% US Large Cap Value (VTV)
2.80% US Mid Cap Value (JKI)
2.40% US Small Cap Value (VIOV)
11.10% International Developed Blend (VEA)
7.40% Emerging Markets (VWO)
7.00% Short Term Treasuries (VGSH)
15.10% Total US Bond Market (BND)
6.60% TIPS (VTIP)
19.50% Non-US Bonds (BNDX)
11.80% Emerging Market Bonds (EMB / VWOB)

Robo Advisor Betterment 30

9.50% US Total Stock Market (VTI)
2.60% US Large Cap Value (VTV)
2.10% US Mid Cap Value (JKI)
1.80% US Small Cap Value (VIOV)
8.30% Int. Developed Blend (VEA)
5.60% Emerging Markets (VWO)
24.20% Short Term Treasury (VGSH)
11.40% Total US Bond Market (BND)
6.10% Short-Term Bonds
6.10% Short-Term Investment Grade (VCSH)
5.00% TIPS (VTIP)
14.60% Non-US Bonds (BNDX)
8.80% Emerging Market Bonds (VWOB)

Robo Advisor Betterment 20

6.30% US Total Stock Market (VTI)
1.70% US Large Cap Value (VTV)
1.40% US Mid Cap Value (JKI)
1.20% US Small Cap Value (VIOV)
5.60% Int. Developed Blend (VEA)
3.70% Emerging Markets (VWO)
42.80% Short Term Treasury (VGSH)
7.60% Total US Bond Market (BND)
10.70% Short-Term Bonds
10.70% Short-Term Investment Grade (VCSH)
3.30% TIPS (VTIP)
9.80% Non-US Bonds (BNDX)
5.90% Emerging Market Bonds (VWOB)

Robo Advisor Betterment 10

3.20% US Total Stock Market (VTI)
0.90% US Large Cap Value (VTV)
0.50% US Mid Cap Value (JKI)
0.60% US Small Cap Value (VIOV)
2.80% Int. Developed Blend (VEA)
1.90% Emerging Markets (VWO)
61.40% Short Term Treasury (VGSH)
3.80% Total US Bond Market (BND)
15.40% Short-Term Bonds
15.40% Short-Term Investment Grade (VCSH)
1.70% TIPS (VTIP)
4.90% Non-US Bonds (BNDX)
2.90% Emerging Market Bonds (VWOB)

Robo Advisor Betterment 0 = 100% Bonds

80.00% Short Term Treasury (VGSH)
20.00% Short-Term Bonds
20.00% Short-Term Investment Grade (VCSH)

Robo advisor Wealthfront 100

20.00% US Total Stock Market (VTI)
5.00% US Large Cap Value (VTV)
16.00% REITs (VNQ)
18.00% International Developed Blend (VEA)
31.00% Emerging Markets (VWO)
5.00% Corporate Bonds (LQD)
5.00% Emerging Market Bonds (EMB / VWOB)

The robo advisor firm came late to the robo advisor party but have enjoyed an immense amount of success. One of the giant of the investment world, Burton Malkiel, author of A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing, is the Chief Investment Officer at Wealthfront. Charles Ellis, another investing giant, and author of Winning the Loser’s Game, Seventh Edition: Timeless Strategies for Successful Investing is on the advisory board. If you want to gain a greater insight into the robo-advisory phenomenon I recommend picking up FinTech Innovation: From Robo-Advisors to Goal-Based Investing and Gamification.

Robo advisor Wealthfront 80

22.00% US Total Stock Market (VTI)
15.00% US Large Cap Value (VTV)
15.00% REITs (VNQ)
19.00% International Developed Blend (VEA)
16.00% Emerging Markets (VWO)
6.00% Corporate Bonds (LQD)
7.00% Emerging Market Bonds (EMB / VWOB)

Robo advisor Wealthfront 60

19.00% US Total Stock Market (VTI)
15.00% US Large Cap Value (VTV)
11.00% REITs (VNQ)
16.00% International Developed Blend (VEA)
12.00% Emerging Markets (VWO)
19.00% Corporate Bonds (LQD)
8.00% Emerging Market Bonds (EMB / VWOB)

Robo advisor Wealthfront 40

18.00% US Total Stock Market (VTI)
15.00% US Large Cap Value (VTV)
6.00% REITs (VNQ)
12.00% International Developed Blend (VEA)
8.00% Emerging Markets (VWO)
31.00% Corporate Bonds (LQD)
10.00% Emerging Market Bonds (EMB / VWOB)

S&P 500

100.00% US Large Cap (VOO)

This is the most common benchmark. This is what active managers are trying to beat when they are trying to beat the “market”. It consists of the 500 largest companies in the U.S. based on market capitalization. It was the first index to be passively indexed and tracked by a fund. This was done by the Vanguard Index Trust, later renamed to Vanguard 500 Index Fund. John Bogle founder of Vanguard describes this it in his book Common Sense on Mutual Funds.

Schwab Managed Portfolio, Aggressive Growth

33.00% US Large Cap (VV)
13.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
31.00% International Developed Blend (VEA)
9.00% Emerging Markets (VWO)
5.00% Cash (money market fund) (BIL)
4.00% Commodities (DBC / GSG)

Charles Schwab founded his business in 1971 and is now one of the largest banks with a brokerage and an ETF business. Schwab brokerage offer to manage your portfolios according to your risk level using a number of portfolios. Schwab also offers one-fund target-date retirement funds. The Charles Schwab story is interesting in itself and is vividly described in Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry.

Schwab Managed Portfolio, Balanced With Growth

22.00% US Large Cap (VV)
7.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
20.00% International Developed Blend (VEA)
5.00% Emerging Markets (VWO)
26.00% Total US Bond Market (BND)
5.00% Cash (money market fund) (BIL)
6.00% Commodities (DBC / GSG)
1.00% High Yield Corporate Bonds (HYG / JNK)
2.00% TIPS (VTIP)
1.00% Non-US Bonds (BNDX)

Schwab Managed Portfolio, Growth

29.00% US Large Cap (VV)
9.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
26.00% International Developed Blend (VEA)
7.00% Emerging Markets (VWO)
12.00% Total US Bond Market (BND)
5.00% Cash (money market fund) (BIL)
6.00% Commodities (DBC / GSG)
1.00% TIPS (VTIP)

Schwab Managed Portfolio, Balanced

15.00% US Large Cap (VV)
5.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
13.00% International Developed Blend (VEA)
4.00% Emerging Markets (VWO)
33.00% Total US Bond Market (BND)
15.00% Cash (money market fund) (BIL)
5.00% Commodities (DBC / GSG)
1.00% High Yield Corporate Bonds (HYG / JNK)
2.00% TIPS (VTIP)
2.00% Non-US Bonds (BNDX)

Schwab Managed Portfolio, Income with Growth

9.00% US Large Cap (VV)
2.00% US Small Cap (VIOO)
5.00% REITs (VNQ)
8.00% International Developed Blend (VEA)
37.00% Total US Bond Market (BND)
20.00% Cash (money market fund) (BIL)
1.00% Commodities (DBC / GSG)
4.00% High Yield Corporate Bonds (HYG / JNK)
10.00% TIPS (VTIP)
4.00% Non-US Bonds (BNDX)

Schwab Managed Portfolio, Conservative Income

5.00% REITs (VNQ)
40.00% Total US Bond Market (BND)
25.00% Cash (money market fund) (BIL)
7.00% High Yield Corporate Bonds (HYG / JNK)
18.00% TIPS (VTIP)
5.00% Non-US Bonds (BNDX)

Schwab Target Date Fund 2020 (25 years old)

50.32% US Large Cap (VV)
6.84% US Small Cap (VIOO)
4.82% REITs (VNQ)
7.63% Emerging Markets (VWO)
26.13% International All-World ex-US (VEU)
0.18% Short Term Treasuries (VGSH)
4.08% Total US Bond Market (BND)

This is part of Charles Schwab’s target date funds. The can be bought as one-fund solutions.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Schwab Target Date Fund 2030 (35 years old)

48.43% US Large Cap (VV)
6.24% US Small Cap (VIOO)
4.57% REITs (VNQ)
6.90% Emerging Markets (VWO)
25.02% International All-World ex-US (VEU)
0.30% Short Term Treasuries (VGSH)
7.73% Total US Bond Market (BND)
0.81% Cash (money market fund) (BIL)

This is part of Charles Schwab’s target date funds. The can be bought as one-fund solutions.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Schwab Target Date Fund 2030 (55 years old)

39.28% US Large Cap (VV)
3.65% US Small Cap (VIOO)
3.44% REITs (VNQ)
3.49% Emerging Markets (VWO)
18.65% International All-World ex-US (VEU)
1.92% Short Term Treasuries (VGSH)
26.46% Total US Bond Market (BND)
3.11% Cash (money market fund) (BIL)

This is part of Charles Schwab’s target date funds. The can be bought as one-fund solutions.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Schwab Target Date Fund 2040 (45 years old)

45.46% US Large Cap (VV)
5.15% US Small Cap (VIOO)
4.20% REITs (VNQ)
5.64% Emerging Markets (VWO)
22.95% International All-World ex-US (VEU)
0.74% Short Term Treasuries (VGSH)
14.62% Total US Bond Market (BND)
1.24% Cash (money market fund) (BIL)

This is part of Charles Schwab’s target date funds. The can be bought as one-fund solutions.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Scott Adams Dilbert’s Portfolio

50.00% US Total Stock Market (VTI)
50.00% Emerging Markets (VWO)

Scott Adams, author of the comic strip Dilbert suggested this simple portfolio. As of 2017, it is the 3^rd best performing portfolio on portfolioeinstein.com. It is also the one with the highest standard deviation. Scott Adams’ portfolio is as interesting as his own life has been. He has written a wonderful little book, How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life that teaches that failure is really the preamble to success. This goes for investing as well.

Scott Burns Couch Potato

You can find them in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Margaritaville

33.33% US Total Stock Market (VTI)
33.33% International All-World ex-US (VEU)
33.33% TIPS (VTIP)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Four Square

25.00% US Total Stock Market (VTI)
25.00% International All-World ex-US (VEU)
25.00% TIPS (VTIP)
25.00% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Five Fold

20.00% US Total Stock Market (VTI)
20.00% REITs (VNQ)
20.00% International All-World ex-US (VEU)
20.00% TIPS (VTIP)
20.00% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Six Ways from Sunday

16.70% US Total Stock Market (VTI)
16.66% REITs (VNQ)
16.66% International All-World ex-US (VEU)
16.66% Energy (XLE)
16.66% TIPS (VTIP)
16.66% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Seven Value Portfolio

14.50% US Total Stock Market (VTI)
14.25% US Large Cap Value (VTV)
14.25% REITs (VNQ)
14.25% International All-World ex-US (VEU)
14.25% Energy (XLE)
14.25% TIPS (VTIP)
14.25% Non-US Bonds (BNDX)

Scott Burns Seven Value 2 Portfolio

12.50% US Total Stock Market (VTI)
12.50% US Large Cap Value (VTV)
12.50% US Small Cap Value (VIOV)
12.50% REITs (VNQ)
12.50% International All-World ex-US (VEU)
12.50% Energy (XLE)
12.50% TIPS (VTIP)
12.50% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns Nine Emerging Portfolio

11.12% US Total Stock Market (VTI)
11.11% US Large Cap Value (VTV)
11.11% US Small Cap Value (VIOV)
11.11% REITs (VNQ)
11.11% Emerging Markets (VWO)
11.11% International All-World ex-US (VEU)
11.11% Energy (XLE)
11.11% TIPS (VTIP)
11.11% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

Scott Burns 10 Speed Portfolio

10.00% US Total Stock Market (VTI)
10.00% US Large Cap Value (VTV)
10.00% US Small Cap Value (VIOV)
10.00% REITs (VNQ)
10.00% Emerging Markets (VWO)
10.00% International All-World ex-US (VEU)
10.00% International Large Cap Value (EFV)
10.00% Energy (XLE)
10.00% TIPS (VTIP)
10.00% Non-US Bonds (BNDX)

Scott Burns, author of Spend ‘Til the End: The Revolutionary Guide to Raising Your Living Standard is a newspaper columnist and author who has covered personal finance and investments for over 30 years. He is known for creating the Couch Potato Portfolio investment strategy. In addition to the now-famous Couch Potato Portfolio, he suggests 8 other portfolios on his AssetBuilder asset manager site. The 9 portfolios have a hierarchical nature to them each adding another asset class. We have them profiles in the article The Couch Potato Portfolio: Two Fund Supremacy?

T. Rowe Price ActivePlus Portfolio, Model 10

7.00% US Large Cap (VV)
3.00% International Developed Blend (VEA)
10.00% Short Term Treasuries (VGSH)
60.00% Total US Bond Market (BND)
20.00% TIPS (VTIP)

T. Rowe Price is a US-based asset management company with 900 Billion dollars under management (2017). They offer a host of services. Managed portfolios being one of them. The portfolios presented here are the asset allocations which the model portfolios are benchmarked against. The managed portfolios would most likely be using their own actively managed funds to achieve similar portfolios.

T. Rowe Price ActivePlus Portfolio, Model 20

14.00% US Large Cap (VV)
6.00% International Developed Blend (VEA)
60.00% Total US Bond Market (BND)
20.00% TIPS (VTIP)

T. Rowe Price ActivePlus Portfolio, Model 30

21.00% US Total Stock Market (VTI)
9.00% International Developed Blend (VEA)
50.00% Total US Bond Market (BND)
20.00% TIPS (VTIP)

T. Rowe Price Rowe Price is a US-based asset management company with 900 Billion dollars under management (2017). They offer a host of services. Managed portfolios being one of them. The portfolios presented here are the asset allocations which the model portfolios are benchmarked against. The managed portfolios would most likely be using their own actively managed funds to achieve similar portfolios.

T. Rowe Price ActivePlus Portfolio, Model 40

28.00% US Total Stock Market (VTI)
12.00% International Developed Blend (VEA)
43.00% Total US Bond Market (BND)
17.00% TIPS (VTIP)

T. Rowe Price ActivePlus Portfolio, Model 50

35.00% US Total Stock Market (VTI)
15.00% International All-World ex-US (VEU)
38.00% Total US Bond Market (BND)
12.00% TIPS (VTIP)

T. Rowe Price ActivePlus Portfolio, Model 60

42.00% US Total Stock Market (VTI)
18.00% International All-World ex-US (VEU)
33.00% Total US Bond Market (BND)
7.00% TIPS (VTIP)

T. Rowe Price ActivePlus Portfolio, Model 70

49.00% US Total Stock Market (VTI)
21.00% International All-World ex-US (VEU)
27.00% Total US Bond Market (BND)
3.00% TIPS (VTIP)

T. Rowe Price ActivePlus Portfolio, Model 80

56.00% US Total Stock Market (VTI)
24.00% International All-World ex-US (VEU)
20.00% Total US Bond Market (BND)

T. Rowe Price ActivePlus Portfolio, Model 90

63.00% US Total Stock Market (VTI)
27.00% International All-World ex-US (VEU)
10.00% Total US Bond Market (BND)

T. Rowe Price ActivePlus Portfolio, Model 100

70.00% US Total Stock Market (VTI)
30.00% International All-World ex-US (VEU)

TD Ameritrade Core Portfolio Aggressive

53.00% US Total Stock Market (VTI)
32.00% International All-World ex-US (VEU)
12.00% Total US Bond Market (BND)
1.00% Cash (money market fund) (BIL)
2.00% Non-US Bonds (BNDX)

TD Ameritrade is a US brokerage that also offers to manage your portfolios. These are the asset allocations of those portfolios.

TD Ameritrade Core Portfolio Growth

43.00% US Total Stock Market (VTI)
27.00% International All-World ex-US (VEU)
26.00% Total US Bond Market (BND)
1.00% Cash (money market fund) (BIL)
3.00% Non-US Bonds (BNDX)

TD Ameritrade is a US brokerage that also offers to manage your portfolios. These are the asset allocations of those portfolios.

TD Ameritrade Core Portfolio Moderate Growth

31.00% US Total Stock Market (VTI)
19.00% International All-World ex-US (VEU)
44.00% Total US Bond Market (BND)
1.00% Cash (money market fund) (BIL)
5.00% Non-US Bonds (BNDX)

TD Ameritrade is a US brokerage that also offers to manage your portfolios. These are the asset allocations of those portfolios.

TD Ameritrade Core Portfolio Moderate

25.00% US Total Stock Market (VTI)
15.00% International All-World ex-US (VEU)
53.00% Total US Bond Market (BND)
1.00% Cash (money market fund) (BIL)
6.00% Non-US Bonds (BNDX)

TD Ameritrade is a US brokerage that also offers to manage your portfolios. These are the asset allocations of those portfolios.

TD Ameritrade Core Portfolio Conservative

16.00% US Total Stock Market (VTI)
9.00% International All-World ex-US (VEU)
66.00% Total US Bond Market (BND)
1.00% Cash (money market fund) (BIL)
8.00% Non-US Bonds (BNDX)

TD Ameritrade is a US brokerage that also offers to manage your portfolios. These are the asset allocations of those portfolios.

Ted Aronson Family Taxable Portfolio

5.00% US Total Stock Market (VTI)
15.00% US Large Cap (VV)
5.00% US Small Cap Value (VIOV)
10.00% US Small Cap (VIOO)
5.00% US Small Cap Growth (IJT)
10.00% Emerging Markets (VWO)
15.00% Pacific Stocks (VPL)
5.00% European Stocks (VGK)
10.00% Long Term Treasuries (TLT)
5.00% High Yield Corporate Bonds (HYG / JNK)
15.00% TIPS (VTIP)

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.

The Andrew Tobias Portfolio

33.33% US Total Stock Market (VTI)
33.33% International All-World ex-US (VEU)
33.33% TIPS (VTIP)

Andrew Tobias of the best-selling book The Only Investment Guide You’ll Ever Need recommends this 3-fund portfolio in his book. It is very similar to the Bogleheads 3-fund portfolio detailed in the post Three Fund Portfolio: Did Awesomeness Find Trinity?

The Global Market Portfolio, (“GMP”) CREDIT SUISSE

20.00% US Large Cap (VV)
5.00% REITs (VNQ)
5.00% Emerging Markets (VWO)
15.00% International All-World ex-US (VEU)
15.00% Long Term Treasuries (TLT)
22.00% Corporate Bonds (LQD)
2.00% TIPS (VTIP)
16.00% Non-US Bonds (BNDX)

This is how the all the global market are divided according to Credit Suisse courtesy of Mab Faber in his book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.

The Global Market Portfolio, Financial Engines 2007

13.00% US Large Cap Value (VTV)
13.10% US Large Cap Growth (VUG)
3.70% US Mid Cap Value (JKI)
3.70% US Mid Cap Growth (IJK)
1.80% US Small Cap Value (VIOV)
1.80% US Small Cap Growth (IJT)
2.40% Emerging Markets (VWO)
8.10% Pacific Stocks (VPL)
15.80% European Stocks (VGK)
1.10% Long Term Treasuries (TLT)
5.30% Intermediate-Term Treasuries (VGIT)
6.20% Total US Bond Market (BND)
2.60% Cash (money market fund) (BIL)
3.40% Corporate Bonds (LQD)
18.00% Non-US Bonds (BNDX)

Based on data working within Financial Engines Christopher Jones, Chief Investment Officer at the firm presented this portfolio in his book The Intelligent Portfolio: Practical Wisdom on Personal Investing from Financial Engines. Financial Engines is the investment advisory firm you have never heard about. They are however the largest independent advisory firm in the US. It was taken private in 2018 and merged with Edelman financial services.

The Jack Bogle Portfolio

60.00% US Total Stock Market (VTI)
40.00% Total US Bond Market (BND)

John Bogle, supreme commander and hero of the investing world, advocates holding bonds your age in proportion to your age. Your age = the percentage of bonds you should hold. The rest should be investing in a broadly diversified index fund. John Bogle’s book Common Sense on Mutual Funds is an absolute classic that you need to read.

The Marc Faber Portfolio

13.00% US Large Cap (VV)
25.00% REITs (VNQ)
8.00% International Developed Blend (VEA)
4.00% Emerging Markets (VWO)
25.00% Total US Bond Market (BND)
25.00% Gold (IAU)

Faber is the legendary permabear and author of the Gloom Boom & Doom Report.

The Permanent Portfolio by Harry Browne

You can find them in the article The Permanent Portfolio: Do Well No Matter What Happens.

The Talmud Portfolio

34.00% US Total Stock Market (VTI)
33.00% REITs (VNQ)
33.00% Total US Bond Market (BND)

“Let every man divide his money into three parts, and invest a third in land, a third in business and a third let him keep by him in reserve.” So it is written in the Talmud, a record of debates among rabbis about Jewish law dating as early as 1200 B.C. And so it is written on Page 1 of Asset Allocation: Balancing Financial Risk, Fifth Edition: Balancing Financial Risk by Roger Gibson, supreme commander of asset allocation.

Tim Maurer Simple Money Portfolio

7.50% US Large Cap Value (VTV)
7.50% US Large Cap (VV)
7.50% US Small Cap Value (VIOV)
7.50% US Small Cap (VIOO)
15.00% International Large Cap Value (EFV)
15.00% International Small Cap Blend (VSS)
40.00% Intermediate-Term Treasuries (VGIT)

In his fantastic little book Simple Money: A No-Nonsense Guide to Personal Finance, Tim Maurer of Buckingham Wealth Management (same firm as Larry Swedroe) present this portfolio. His book is very well worth a read. What is it with these guys at Buckingham? Do they all write good books?

Time.Inc Money Portfolio 1, Simple and Cheap

30.00% US Total Stock Market (VTI)
10.00% REITs (VNQ)
20.00% International All-World ex-US (VEU)
30.00% Total US Bond Market (BND)
10.00% Non-US Bonds (BNDX)

This portfolio along with the one below appeared on Timeinc.com money blog. It’s basically a 60/40 portfolio.

Time.Inc Money Portfolio 2, Tilt Toward Value

25.00% US Total Stock Market (VTI)
5.00% US Large Cap Value (VTV)
5.00% US Small Cap Value (VIOV)
10.00% REITs (VNQ)
15.00% International All-World ex-US (VEU)
30.00% Total US Bond Market (BND)
10.00% Non-US Bonds (BNDX)

This portfolio along with the one below appeared on Timeinc.com money blog. It’s basically a 60/40 portfolio with a tilt toward value.

Tony Robbins / Ray Dalio Portfolio

You can find them in the article Tony Robbins and Ray Dalio Portfolio: Master Your Portfolio

Total US Stock Market

100.00% US Total Stock Market (VTI)

Not so much a portfolio as a single stock fund. The total stock market is often a benchmark for fund managers tracking the Wilshire 5000. The difference between the S&P 500 and the total stock market is minuscule but noticeable due to the inclusion of value and small cap stocks in the total stock market which increases returns marginally. The is the portfolio of JL Collins of The Simple Path to Wealth: Your road map to financial independence and a rich, free life recommends as well as the one that John Bogle, supreme commander, and hero of the investing world recommend in Common Sense on Mutual Funds.

TrevH from Bogleheads Portfolio

25.00% US Large Cap (VV)
25.00% US Small Cap Value (VIOV)
25.00% International Large Cap Value (EFV)
25.00% International Small Cap Blend (VSS)

The common theme of slicing and dicing made TrevH of the Boglehead forum come up with a simpler portfolio of Paul Merriman’s Ultimate portfolio. The Boglehead forum is dedicated to spreading the investing philosophy of Vanguard’s founder John Bogle, supreme commander, and hero of the investing world. The Bogleheads have published the awesome book The Bogleheads’ Guide to Investing which is a fantastic primer on investing. If you’re thinking about retirement you should definitely pick up their book on retirement The Bogleheads’ Guide to Retirement Planning authored by Taylor Larimore and Rick Ferri among others.

Vanguard LifeStrategy Conservative Growth (40/60)

24.00% US Total Stock Market (VTI)
16.10% International All-World ex-US (VEU)
42.00% Total US Bond Market (BND)
17.90% Non-US Bonds (BNDX)

This one-stop shop fund from Vanguard gives you full divarication in one fund. It is not a target-date fund as the asset allocation does not have a glide path. Vanguard has 5.1 Trillion dollars under management. The founder John Bogle is the supreme commander and hero of the investing world. If you only read two books on investing the second one would be Bogle’s Common Sense on Mutual Funds.

Vanguard LifeStrategy Growth Fund (80/20)

48.10% US Total Stock Market (VTI)
31.90% International All-World ex-US (VEU)
14.00% Total US Bond Market (BND)
6.00% Non-US Bonds (BNDX)

Vanguard LifeStrategy Income Fund (20/80)

12.00% US Total Stock Market (VTI)
8.00% International All-World ex-US (VEU)
56.00% Total US Bond Market (BND)
24.00% Non-US Bonds (BNDX)

Vanguard LifeStrategy Moderate Growth (60/40)

36.10% US Total Stock Market (VTI)
24.10% International All-World ex-US (VEU)
27.90% Total US Bond Market (BND)
11.90% Non-US Bonds (BNDX)

Vanguard Target Retirement 2030 (55 years old)

42.20% US Total Stock Market (VTI)
28.00% International All-World ex-US (VEU)
20.90% Total US Bond Market (BND)
8.90% Non-US Bonds (BNDX)

This is Vanguard’s stab at target-date retirement funds. They are simple and well diversified. Vanguard has 5.1 Trillion dollars under management. The founder, John Bogle, is the supreme commander and hero of the investing world. If you only read two books on investing the second one would be Bogle’s Common Sense on Mutual Funds.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Vanguard Target Retirement 2040 (45 years old)

51.20% US Total Stock Market (VTI)
33.90% International All-World ex-US (VEU)
10.50% Total US Bond Market (BND)
4.40% Non-US Bonds (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Vanguard Target Retirement 2050 (35 years old)

54.00% US Total Stock Market (VTI)
35.90% International All-World ex-US (VEU)
7.10% Total US Bond Market (BND)
3.00% Non-US Bonds (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Vanguard Target Retirement 2060 (25 years old)

53.90% US Total Stock Market (VTI)
36.10% International All-World ex-US (VEU)
7.10% Total US Bond Market (BND)
2.90% Non-US Bonds (BNDX)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Warren Buffett’s Portfolio

90.00% US Large Cap (VV)
10.00% Short Term Treasuries (VGSH)

In the 2013 letter to shareholders, Warren Buffett recommended that a trust is set up for his wife. This trust would invest 90% in a large-cap low-cost index fund (he recommended Vanguard) and 10% in short-term government bonds. He has since on a number of occasions reiterated this with the addition that average investors would be best served by low-cost index funds. You can read the entire letter here or get the deluxe version The Essays of Warren Buffett: Lessons for Corporate America.

William Bernstein’s Portfolios

You can find asset allocation for all of William Bernstein’s portfolios over at William Bernstein Portfolios: The Portfolio Giant

Dan Solin Portfolios

These fantastic and varied portfolios have a new home over at Daniel Solin Portfolios: Smart Investing, Simple

TIAA-CREF Lifecycle 2030

48.70% US Total Stock Market (VTI)
14.90% Int. Developed Blend (VEA)
5.40% Emerging Markets (VWO)
1.30% Short Term Treasury (VGSH)
28.40% Total US Bond Market (BND)
1.30% TIPS (VTIP)

TIAA, formerly TIAA-CREF (Teachers Insurance and Annuity Association-College Retirement Equities Fund), is a Fortune 100 financial services organization that is the leading provider of financial services in the academic, research, medical, cultural and governmental fields. TIAA has $1 trillion in combined assets under management with holdings in more than 50 countries (as of 31 December 2017). These target date funds are all constructed using index funds. They also have other complex target date funds that have underlying active funds.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

TIAA-CREF Lifecycle 2040

59.90% US Total Stock Market (VTI)
18.50% Int. Developed Blend (VEA)
6.70% Emerging Markets (VWO)
14.90% Total US Bond Market (BND)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

TIAA-CREF Lifecycle 2050

64.70% US Total Stock Market (VTI)
19.90% Int. Developed Blend (VEA)
7.20% Emerging Markets (VWO)
8.20% Total US Bond Market (BND)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

TIAA-CREF Lifecycle 2060

66.30% US Total Stock Market (VTI)
20.40% Int. Developed Blend (VEA)
7.50% Emerging Markets (VWO)
5.80% Total US Bond Market (BND)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

TIAA-CREF Lifecycle Index Retirement Income

28.20% US Total Stock Market (VTI)
8.70% Int. Developed Blend (VEA)
3.20% Emerging Markets (VWO)
10.00% Short Term Treasury (VGSH)
39.90% Total US Bond Market (BND)
10.00% TIPS (VTIP)

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Goldman Sachs Target Date 2055 Portfolio

41.90% US Large Cap (VV)
6.10% US Small Cap (VIOO)
3.80% REITs (Real Estate) (VNQ)
21.10% Int. Developed Blend (VEA)
9.20% Emerging Markets (VWO)
3.30% Intl Sm Cap Blend (VSS)
3.80% Cash (money market fund) (BIL)
4.50% Corporate Bonds (LQD)
3.20% High Yield Corporate Bonds (HYG)
3.10% Long-Term Corporate Bonds (VCLT)

This is Goldman Sachs’ stab at the high growth area of target date funds. Goldman Sachs’ funds use some complex instruments which cannot be replicated and it is doubtful that they provide more return (the data is in – they don’t) See more in this post.

Goldman Sachs Target Date 2045 Portfolio

39.60% US Large Cap (VV)
5.70% US Small Cap (VIOO)
3.50% REITs (Real Estate) (VNQ)
19.90% Int. Developed Blend (VEA)
8.60% Emerging Markets (VWO)
3.00% Intl Sm Cap Blend (VSS)
2.24% Cash (money market fund) (BIL)
8.20% Corporate Bonds (LQD)
2.70% High Yield Corporate Bonds (HYG)
1.46% TIPS (VTIP)
2.00% Non-US Bonds (BNDX)
3.10% Long-Term Corporate Bonds (VCLT)

Goldman Sachs Target Date 2035 Portfolio

31.50% US Large Cap (VV)
2.40% US Small Cap (VIOO)
2.80% REITs (Real Estate) (VNQ)
15.80% Int. Developed Blend (VEA)
6.90% Emerging Markets (VWO)
2.10% Intl Sm Cap Blend (VSS)
4.59% Cash (money market fund) (BIL)
20.90% Corporate Bonds (LQD)
1.01% High Yield Corporate Bonds (HYG)
3.60% TIPS (VTIP)
5.60% Non-US Bonds (BNDX)
2.80% Long-Term Corporate Bonds (VCLT)

Goldman Sachs Target Date 2025 Portfolio

22.47% US Large Cap (VV)
1.53% US Small Cap (VIOO)
1.97% REITs (Real Estate) (VNQ)
11.32% Int. Developed Blend (VEA)
5.00% Emerging Markets (VWO)
1.69% Intl Sm Cap Blend (VSS)
1.62% Total US Bond Market (BND)
5.84% Cash (money market fund) (BIL)
29.03% Corporate Bonds (LQD)
1.18% High Yield Corporate Bonds (HYG)
3.91% TIPS (VTIP)
12.26% Non-US Bonds (BNDX)
2.18% Long-Term Corporate Bonds (VCLT)

3 Fund Portfolio

You can find all of these in the article Three Fund Portfolio: Did Awesomeness Find Trinity?

FPL Capital Management Portfolio 10

2.00% US Large Cap Value (VTV)
2.00% US Large Cap (VV)
2.00% US Small Cap Value (VIOV)
0.50% REITs (Real Estate) (VNQ)
1.00% International Lg Cap Value (EFV)
90.00% Total US Bond Market (BND)
0.50% Intl Sm Cap Value (DLS)
1.00% Emerging Markets Value (FNDE)
1.00% International REITs (Real Estate) (VNQI)