[This is work in progress.]
The current portfolio has 70% equity and 30% fixed income. According to Vanguard, the characteristics of such a portfolio are:
Detailed Target Allocation
My equity allocation takes up 70% of the entire portfolio. It is divided into roughly 50% US and 50% international equities, with a small “alternative” asset class of 6% in Precious Metals and Mining equity (PME).
The fixed income allocation is 30% of the entire portfolio. For various reasons, the fixed income portion, as shown below, is not my desired allocation. (I expect my desired allocation to be a combination of US Total Bond Market, US TIPS and MMF/Cash equivalents.) The numbers for the fixed income portion shown just indicates the approximate holdings at the time of writing.
- US LargeCap / Total Market : 17%
- US SmallCap : 10%
- US REIT : 5%
- International EAFE LargeCap : 17%
- International Emerging Markets : 10%
- International EAFE SmallCap : 5%
- Precious Metals and Mining Equity : 6%
FIXED INCOME 30%
- Non-USD Fixed Income Assets : 10%
- Multi-Sector Bond : 10%
- US Total Bond Market : 5%
- Money Market and Cash Equivalents : 5%
Funds and ETF Vehicles
The funds I used to implement the portfolio are given in the table below. Note that some of the funds listed under the “Secondary / Substitutes” column are there because they are the “least expensive” fund in my 401(k), because of legacy reasons (not reallocated because of capital gains) or they are simply ETF substitutes held outside of Vanguard.
|Secondary / Substitutes|
|US LC / Total||VTSAX||MIEZX|
|US SC||VTMSX||BRSIX, MGRFX|
|Int’l EAFE LC||VTMGX||VEA, VEURX, VPACX, VDMIX|
|Int’l EAFE SC||VINEX||GWX, SCZ|
|US Total Bond||AGG|
|MMF & Cash Equ||FSPXX||VCTXX, VMMXX, Savings Bonds, Stable Value Fund|
Evolution of My Portfolio Asset Allocation
I always find it fascinating to review how my portfolio allocation has evolved over the years (see figure below).
I backed off from the “dark side” (individual stock trading and all that) sometime in the summer of 2001 after I discovered the original Morningstar Diehards forum. My initial portfolio was heavily influenced by Larry Swedroe’s “What Wall Street Doesn’t Want You To Know …” and Bill Bernstein’s “The Intelligent Asset Allocator”. The allocation at that time was a 100% equity portfolio, with equal weights in US LargeCap, US SmallCap and International EAFE LargeCap.
In the middle of 2002, as I gained more knowledge, I convinced myself the usefulness of a fixed income allocation (especially useful for rebalancing purposes) as well as the diversifying effects of REITs. These two were to become the fourth and fifth asset classes in my portfolio.
By the end of 2002, the sixth asset class PME was added. This was originally invested in American Century’s BGEIX until I shifted the allocation to Vanguard’s VGPMX a year or so later. The price of gold at that time was hovering around US$300.
Right around the summer of 2003, Vanguard “bought” over Schroder’s EAFE SmallCap fund. This fund, now known as Vanguard International Explorer fund (VINEX), was to become the vehicle for my seventh and final asset class.
From 2003 to the present day, I had also dribbled with various other investment vehicles, like collaterized commodity futures fund (PCRIX) in 2004, energy sector from 2004 to 2006 (ICENX), international real estate (FIREX, EGLRX) in 2006, and healthcare sector from 2005 to 3/2008 (ICHCX, IHF, IHI, PBE).
I now find that these “dribbles” are all just minor distractions along the way. These have now all been discarded and consolidated under the heading “Obsolete” in the figure. Oh, I am sure more distractions will come along in future and I just hope that I can stay focused in my investments.
[to be added]
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I post a portfolio update once a month. These are posted under the category “Portfolio Updates“.
In January of every year, I will post a summary of the portfolio: