AdOrientum brought up in another thread the idea of having an 80/20 PP/VP split and simply choosing a single stock index fund for the VP to buy and hold with long-term growth in mind. I've been tossing around the same idea, but have never pulled the trigger because I can't identify a fund that makes sense to me as a useful complement to the PP. The PP philosophy has ruined me in that regard.
So here's my question: if you were required to pick one index fund, mutual fund, or other investment to allocate 20% of your funds to (in addition to your PP) what would it be and why?
Just a few of my own ideas for discussion : VT for international exposure, VWINX for low-expense but actively-managed income, or perhaps a rental home.
For me it would be VT. Owning a slice of the world's capital assets is very appealing to me. I think global equities are one of the most resilient long term asset classes out there. Even the PP could potentially lose everything in a currency/bond collapse because you would be rebalancing into a black hole (selling gold and stocks every week to buy more bonds). Having a totally separate portfolio (no rebalancing between them!) would atleast allow that portion of your assets to be worth something.
everything comes from somewhere and everything goes somewhere
AdamA wrote:
This isn't really a fund, but I've always been a fan of the "Dogs of the Dow" strategy. Simple and mechanical, and seems to work.
That counts! Various dividend strategies are appealing to me, too, especially since they work well with a buy & hold mentality and don't require much maintenance. I'll have to learn more about Dogs of the Dow.
I do have a preference to low-ER funds over managing lots of individual stocks myself. Any recommendations to look at?
VT, no re-balancing, global indexed exposure. However, since I already use this as my "Stock" fund for my PP...
My VP single investment choice would be owning timberland. Reasoning:
1) An attempt to have my wife call me a "timber baron"
2) I have a family history in farming, but I live a corporate life right now, so this is about as maintenance free as I can get and still maintain the family legacy
3) Timber compounds on the stump and has some of the best tax treatment possible
4) I get to sell when I want to, there is no annual cycle
5) There is a strong timber industry in my state of GA and neighboring states
6) Something to fuss over, as I never want to retire, I just want to do something new.
“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.� ~Talmud
AdamA wrote:
This isn't really a fund, but I've always been a fan of the "Dogs of the Dow" strategy. Simple and mechanical, and seems to work.
HDOGX - Hennessy Total Return Fund. A quasi-Dogs Of The Dow mutual fund with the lowest expense ratio (0.08%...yeah, eight one-hundredths of one percent) I've ever seen on an ostensibly actively managed fund. This fund's unique strategy (and the reason for its low expense ratio)? It follows a pure quantitative formula (no human managers making "gut feeling" guesses about stocks allowed) of 7.5% of its assets of in each of the 10 "Dogs of the Dow" stocks and the other 25% in Treasury securities of less than one year's maturity; rebalance and repeat every year. Ok, so it's not a pure Dogs of the Dow strategy but it's not too far off.
Also, there is an ETF (SDOG) that invests in a "Dogs of the S&P 500" strategy where rather than picking the highest yielding stocks overall it picks the five highest yielding common stocks (no preferreds or REITs from each of the ten GICS sectors that make up the index (this way you aren't overweighted in financials, regulated utilities, or other tradtional high-yield areas) and rebalances every quarter.
AdamA wrote:
This isn't really a fund, but I've always been a fan of the "Dogs of the Dow" strategy. Simple and mechanical, and seems to work.
That counts! Various dividend strategies are appealing to me, too, especially since they work well with a buy & hold mentality and don't require much maintenance. I'll have to learn more about Dogs of the Dow.
I do have a preference to low-ER funds over managing lots of individual stocks myself. Any recommendations to look at?
If you believe their data, it outperforms the S&P by a percentage point or two (depending on how you implement it). After taxes and trading fees, though, it might be a tie, and not really worth the effort. That's of course if you use a taxable account.
"All men's miseries derive from not being able to sit in a quiet room alone."
Considering the idea of complementing the PP, and if the PP theoretically suffer more with an escalation of the interest rate, I would use a fund, if there is one, composed of short-term bonds (interest rate risk) and REITs (PP diversifier).
Last edited by escafandro on Sat May 11, 2013 1:12 am, edited 1 time in total.
VT and leave it alone until you are within five years of retirement. No rebalancing. Just let it run. Maybe add a little here and there if you feel comfortable with your PP's size, but otherwise just reinvest the dividends and ignore it.
Trumpism is not a philosophy or a movement. It's a cult.
I guess a global fund like VT, but if I was feeling dangerous I might go with a dividend aristocrats fund.
I'd personally stay away from rental properties -- no liquidity and too many maintenance expenses. I know people who've owned rental properties only to eventually sell them and swear to never do it again.
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.
- H. L. Mencken
I just use the TSM and TISM funds, since the expense ratio is lower than TW, as my VP. Eventually, I'd like to get into real estate (not an REIT, but actual land/buildings).
Has anyone had any sucess implementing the AAII Model Shadow Stock Portfolio ? They claim a 16.9% return for the last 20 yrs. vs a S&P 500 of 8.5%. as of 2/29/13. It may be difficult to find the right stocks and the buy and sell times , but it looks feasible. Comments would be appreciated. Thx.
I'm a lifetime member of AAII, but I have not tried implementing their Shadow Stock Portfolio. I don't believe their returns factor in taxes or transaction costs.
Over the past 10 years the Shadow Stock Portfolio has ranged between 10-48 transactions per year, with an average of about 22 transactions. Since 2004 it has held 129 different stocks. There would also be a lag between when AAII recommends buying/selling a stock and when you actually execute the trade, which could affect your performance in comparison to theirs.
So I guess depending on your tax situation and the size of your portfolio, you might have done fairly well for yourself.
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.
- H. L. Mencken
greenv wrote:
Has anyone had any sucess implementing the AAII Model Shadow Stock Portfolio ? They claim a 16.9% return for the last 20 yrs. vs a S&P 500 of 8.5%. as of 2/29/13. It may be difficult to find the right stocks and the buy and sell times , but it looks feasible. Comments would be appreciated. Thx.
16.9%? Is that all...LOL. Zacks Research claims that if you had bought their #1 ranked stocks (and only the #1 ranked ones) when they recommended them and then sold when they fell to #2 ranking or below you would have made a compounded anual return of 26% per year from 1986-2012.
