Gyroscopic Investing

I'm just starting out. I plan to put $25,000 in GTU, VGSH, VGLT and VT. I'm a Vanguard fan and I also believe I need "world" exposure. But maybe for this approach I don't.
Any thoughts on this quarter or the other quarters?
Thank you.

PS I'm 66 and plan to retire at age 67 & 1/2. Not sure yet if this approach will become 20 or 50 or 80% of my liquid assets.

fred9 wrote: I'm just starting out. I plan to put $25,000 in GTU, VGSH, VGLT and VT. I'm a Vanguard fan and I also believe I need "world" exposure.

Fred, with VT, well over 50% of your equity exposure will be outside of the US. That is more than I personally want, and I have opted for a blend of 80% in VTI, and 20% VEU for the equity component. You will have greater currency risk with VT; I would not tell you not to do it, just be aware going in.

VGLT, unfortunately, does not have the duration of TLT (or buying your own 30 year bonds through Vanguard), and will not provide you as much deflation protection, or as much volatility with interest rate changes. I recommend that you read the bond FAQ at http://crawlingroad.com/blog/2009/02/09 ... ation-faq/
Good luck.

edit:modified link

6 Iron,
thanks for your input! I will read the bond FAQ and maybe back off on the foreign.

(7 iron is my favorite club.)

My opinion is that VT is an excellent component for a Boglehead style portfolio, but doesn't add much except expenses to a Permanent Portfolio.

A pure Boglehead portfolio is built out of Total Stock Market, Total International Stock, and Total Bond.  The international stocks are absolutely necessary to have exposure to a currency other than the US Dollar.  A lot of brainpower has been spent on deciding how to split up the stock part between domestic and international stocks.  I think letting the market decide, as VT does, is more elegant and in keeping with Boglehead principles.  Also, using a single index fund for both domestic and international stocks may be more tax efficient since the fund automatically "rebalances" itself internally without distributing capital gains.  So VT has a lot going for it as the one and only stock fund in a Boglehead portfolio.

A Permanent Portfolio, however, already has very strong currency insurance from the gold allocation.  Adding international stocks seems redundant to me.  Adding international stocks to the mix increases expenses and complexity, neither of which is a good thing.

KevinW wrote:
A Permanent Portfolio, however, already has very strong currency insurance from the gold allocation.  Adding international stocks seems redundant to me.  Adding international stocks to the mix increases expenses and complexity, neither of which is a good thing.

None other than Harry Browne would agree with you, Kevin. I like the added diversity of a dash of international stocks in my permanent portfolio, but it would be very reasonable to consider placing it in the variable portfolio as well.

I would go 85% domestic with VTI and 15% in an international index like VGTSX.

The point about currency risk with international stocks is the key.  Over on the bogleheads PP thread people have occasionally lost sight of this point, and I think recent world events may have reminded them that foreign stocks are actually a hybrid equity/currency play.

As discussed here and elsewhere, I think there are a number of ways to implement the Stock portion, and good arguments can made to justify wildly different divisions (in nation, size, and value) among that asset class.  My opinion is that the presence of Gold in 25% weight mitigates the need for much, if not all, of the currency question; but contrary arguments here have all been reasonably founded.  Also note that the diversification benefit gained when using asset classes that are themselves primarily Large Cap in weight are likely to be small.  Yet, in Harry's design of the PP, no weighting or impact is small; all have powerful effect, even as we can argue which class holds the greatest dominance.

So, for me, the question becomes what allocation is best suited to help stay the course and avoid the capitulation point (switching strategies or going to cash)?

Roy

My own allocation is pretty close to what Tex mentions as well. About 80% in Vanguard Total Stock Market Index and about 20% in Vanguard FTSE ex-US international index.

I'm not big on loading up on international stocks for the currency risks already stated.

craigr wrote: My own allocation is pretty close to what Tex mentions as well. About 80% in Vanguard Total Stock Market Index and about 20% in Vanguard FTSE ex-US international index.

I'm not big on loading up on international stocks for the currency risks already stated.

Craig or MT, given that PRPFX holds 10% swiss franc exposure, have either of you ever thought about a Swiss equity index like EWL?  I agree it is not necessary but wonder what the thought process was during the fund creation............

MCSquared wrote:

craigr wrote: My own allocation is pretty close to what Tex mentions as well. About 80% in Vanguard Total Stock Market Index and about 20% in Vanguard FTSE ex-US international index.

I'm not big on loading up on international stocks for the currency risks already stated.

Craig or MT, given that PRPFX holds 10% swiss franc exposure, have either of you ever thought about a Swiss equity index like EWL?   I agree it is not necessary but wonder what the thought process was during the fund creation............

Never considered it. I'm not sure owning Swiss Francs is relevant any more as Switzerland dropped the gold link to the franc several years back.

craigr wrote:

MCSquared wrote:

craigr wrote: My own allocation is pretty close to what Tex mentions as well. About 80% in Vanguard Total Stock Market Index and about 20% in Vanguard FTSE ex-US international index.

I'm not big on loading up on international stocks for the currency risks already stated.

Craig or MT, given that PRPFX holds 10% swiss franc exposure, have either of you ever thought about a Swiss equity index like EWL?   I agree it is not necessary but wonder what the thought process was during the fund creation............

Never considered it. I'm not sure owning Swiss Francs is relevant any more as Switzerland dropped the gold link to the franc several years back.

Understood.  The fund still claims that the franc will benefit greatly from high inflation.

MCSquared wrote: Understood.  The fund still claims that the franc will benefit greatly from high inflation.

They are presumably talking about inflation outside Switzerland. 

The big Swiss banks have made a lot of loans into Eastern Europe. It is not impossible to think that if those banks get into trouble that the Swiss central bank will print up some Francs to bail them out.

I went ahead with VTWSX which is the MF version of VT. Why? No good reason.  In some ways Global offers more stability, in others, more volatility.  Really, it's a coin toss, but in classic HB fashion I won't try to predict the future. I'll just make a play on both outcomes.  Maybe Global will be the new Total Stock Market.


P.S.  I own some PRPFX so my true domestic to int. equity holdings are more like 65/35 respectively.