90% PP + 10% Bogle portfolio

[frugal]

Hello,

does it make sense to have 2 portfolios:

90% HBPP
+
10% David Swenson Lazy Portofolio


- a small percentage of the total
- risk of foreign currencies
...

What is your opinion?


Regards and enjoy 2015!

[goodasgold]

For many years I was an orthodox Boglehead, and I will be eternally grateful to the BH philosophy for helping me to retire early, but I was won over to the HBPP philosophy when Taylor Larrimore excerpted portions of the PP book on the Boglehead list in late 2012. Reading the book confirmed my overall adherence to the PP way.

I believe both perspectives work well, but I can't help thinking that all of that PP gold, locked inside of a safety deposit box which is locked inside of a bank vault, is the ultimate Sleep Well At Night (SWAN) portfolio. I don't care how many years the price of gold stagnates or even drops sharply, it is nice having the yellow stuff as the ultimate fallback when times really get rough, as I believe will happen when folks finally figure out that the Western nations are racing toward bankruptcy. When it will happen, I don't have a clue, but one day the light bulb will go on, even for the diehard Krugmanites.

As a practical measure, I haven't abandoned my Boglehead holdings completely. I keep about 2/3 of my savings in the PP and 1/3 in my old Boglehead format. The BH segment includes assets that the 100% PPer would scorn, such as some international stock funds, intermediate bond funds, and TIPS funds. The BH component is divided into the standard "age in bonds" mixture for equities vs. bonds.

[EdwardjK]

In my opinion, it does not matter how you allocate your assets as long as (1) You make the decision to save some portion of your income as early in life as possible, (2) You allocate your investments across assets that have historically grown in value, and, (3) You UNDERSTAND the basis for that allocation.

You can invest 100% of your assets in equities IF you UNDERSTAND and ACCEPT the volatility.  However, education and experience will eventually tell you that doing so is not the best approach as you get older.

I think the HBPP is a good investment strategy to protect what you saved over your lifetime.  It's a good "sleep well" strategy that reduces the volatility and generates a reasonable rate of return pretty much every year (2013 was not so hot).

What I especially like about the HBPP is that the underlying allocation never changes.  Browne developed the current 25%, four asset model over 30 years ago and it has withstood the basis of time and experience.  Many/most other investment strategies will likely have been "tweaked" many times over that same time period.

Were these tweeks really an effort to build a solid and reliable investment strategy?  Or were they just an effort of overcome the strategies current deficiencies?

[buddtholomew]

I'll be honest, I'm not sure what the 10% adds other than complexity. Swenson's portfolio has six funds in it, which means each will represent approx. 2% of your total. Not much of tilt there.

There is minimal (if any) benefit to holding 10% of your portfolio in a conventional BH allocation unless the account is isolated from your other investments. If looking at all investments as a whole, either overweight one of the four HBPP assets or invest the entire 10% in some other equity/fixed income class - e.g. REITS, SCV, INT, EM, Corporate Bonds, CD's, etc.

[Ad Orientem]

I think if you want to have something outside the PP, why not invest with the hope of beating the long term PP returns? If you can handle the near and intermediate term volatility, I would just go with 80-90% HBPP and the rest in VOO or VT as a long term buy and hold. Just set the dividends for auto reinvest and close your eyes to that part of your investment for the next ten or twenty years. There are no guarantees in life or investing, but history would suggest that if you have a 10-20 year investment horizon a 100% stock portfolio (indexed) will probably outperform the HBPP.

[frugal]

Using a EU-HB-PP an international Bogle Portfolio makes some sense.

Or increase the EU-stock asset from 25% to ##%? By the studies what % you recommend?


Thank you all! Happy 2015

[Mouro]

Frugal, put those 10% (or whatever percentage, since the VP is completely independent of the PP) in a global ETF that tracks the MSCI World (or the MSCI World ACWI if you like EM).

You can look at justetf.com for the best ETFs that track those indexes.

Set it and forget it. Nice and easy. 

[frugal]

It is one idea but I would prefer to have a VP more diversified.

Any advice for other ETFs to be included ?


Kindest regards.

[ILoveMoney]

I have seen these books on asset allocation recommended on the Bogleheads site more than once.

Haven't read these myself but they may provide you with a starting point.

All About Asset Allocation, Second Edition by Richard Ferri
The Investor's Manifesto by William Bernstein
The Intelligent Asset Allocator by William Bernstein