Model Retirement/Investment Portfolios: A Comparison
In my rough guide to investing, I suggested some all-in-one mutual funds for beginners. But what if you want to go a step further and design your own portfolio? Or you have a 401k with only limited choices?
Of course, the best answer is always to read some good books. But another idea I’ve been meaning to do for a while is to collect the model portfolios from lots of different reputable books and sources and compare them to each other. You won’t see any individual stock picks here, all the sources will be based (at least loosely) upon modern portfolio theory and thus focus on optimizing the risk/reward ratio using proper asset allocation.
I think it should go without saying that since these are model portfolios, they are imperfect by design and at most should serve as rough guidelines for your own investing. Everyone has a different time horizons and situations. Use them as one part of your own research.
One way to tailor these portfolios to your own use is to adjust the stock/bond ratio according to how aggressive you wish to be. Accordingly, I have tried to separate the stock and bond components.
Completed Model Portfolios
- Couch Potato Portfolio
- Boglehead’s Guide To Investing
- All About Asset Allocation
- The Intelligent Asset Allocator
- A Random Walk Down Wall Street
- FundAdvice.com by Merriman
- Unconventional Success by Swensen
- Columnist Ben Stein
Future Model Portfolios (in progress)
Here are the remaining sources that I have in mind so far. Please feel free to suggest others.
- The Four Pillars of Investing by Bernstein (Review)
- Common Sense on Mutual Funds by Bogle (Review)
- The Informed Investor by Armstrong (Review)
- Index Funds: The 12-Step Program for Active Investors by Hebner (Review)
- Coffeehouse Portfolio by Schultheis
This index of posts has been added to my Rough Guide To Investing.
By Jonathan Ping | Investing, Retirement | 1/19/07, 4:08am
January 19th, 2007 at 8:20 am
I also like “The Bogleheads’ Guide to Investing” !
January 19th, 2007 at 8:46 am
One topic that I want to suggest is, when setting up a 401k, what percentage should go where? I finally had the opportunity to go into a 401k, which I immediately jumped on. But then the form asked what percentange did I want going into bonds, volatile mutual funds, non-volitile mutual funds, etc. I did research online and I believe I made the right choices, but perhaps I put more money in one place than I should have. In all honesty, I haven’t been really keep track of what my returns have been, which would probably be the best indicator of if I need to restructure things. What is a good percentage I should expect from a 401k portfolio? 5%? 8%?
January 19th, 2007 at 11:57 am
Awesome idea! Can’t wait to see what you come up with.
Don’t forget the Boglehead’s recommended Vanguard 4 Fund Solution:
VTSMX Total Stock Market Index Fund
VGTSX Total International Stock Index
VBMFX Total Bond Market Index
Cash (Money Market Fund of choice)
Not sure what %’s they recommend….
January 19th, 2007 at 1:11 pm
Ah yes, the Bogleheadsn Guide to Investing. How could I forget, I even bought that book!
January 19th, 2007 at 2:26 pm
I have read Bernstein’s The Intelligent Asset Allocator and found it’s quite good. But the are quite some similarities between this book and the Four Pillars. So it may not be necessary.
January 20th, 2007 at 7:21 pm
[...] (This is the first in my series of Model Portfolio Comparisons.) [...]
January 20th, 2007 at 7:27 pm
[...] (This is the second in my series of Model Portfolio Comparisons.) [...]
January 21st, 2007 at 8:03 pm
Yes, I might use IAA instead of Four Pillars even, as I seem to have lost my copy of Four Pillars…
January 22nd, 2007 at 8:49 am
[...] Jonathan at MyMoneyBlog starts a series of portfolio analysis based on some widely used models. And sometimes, you can afford to be lazy and still beat the market, according to JLP. [...]
January 22nd, 2007 at 3:09 pm
[...] What do all these asset classes in the model portfolio comparisons mean, anyways? Total Market? Large-Cap? Value? One big hurdle is that there are no set definitions for any of these classes, and each individual mutual fund can and will use it’s own interpretation. But let’s try anyways, starting with equities. [...]
January 22nd, 2007 at 8:38 pm
[...] (This is the third in my series of Model Portfolio Comparisons.) [...]
January 25th, 2007 at 12:13 am
[...] (This is the fourth in my series of Model Portfolio Comparisons.) [...]
January 29th, 2007 at 6:54 am
Jonathan,
You really need to add Jeremy Siegel’s “Stocks for the Long Run”. His work is the academic foundation for why people should stick their retirement funds into a stock mutual fund for 20+ years. If anyone out there needs definitive statistical analysis that the stock market has been the best investment over any 20 year period in the NYSE’s history, this is it.
February 1st, 2007 at 3:09 am
Thanks mapgirl, I’ve added Siegel to my reading list as well.
February 1st, 2007 at 10:58 am
Nice article. I really like your blog
I just have 2 questions
1) All articles/books talk about Asset allocation where you assign some % to small cap stocks, some % to REIT, some % to bonds & so on. Even though that should be your goal, it doesn’t work that way. Normally people don’t invest a lump sump amount of say 10K. So people buy 1 investment at a time & after say a couple of years they just find out what their actual asset allocation is; which turns out to be a little different from what they had planned
2) So much talk everywhere is about retirement & earning money after retiring. Doesn’t any one want money right now?
February 2nd, 2007 at 6:57 pm
[...] (This is the sixth in my series of Model Portfolio Comparisons.) [...]
February 3rd, 2007 at 3:41 am
[...] All of these suggested portfolios were developed by smart people who did their homework. But none of them are the same! This is because every single one also made compromises based on their interpretation of current research, simplicity, availability of suitable investments, costs, and also to some measure their overall predictions of the future. We have to do the same thing on our end. [...]
February 7th, 2007 at 1:31 am
[...] I am still ironing out a slightly tweaked asset allocation, one that has a more balanced domestic/international distribution and something I hopefully won’t mess with again for a long time. I’m reviewing the model portfolio comparisons and the books they came from, including Ferri’s new book All About Index Funds. [...]
February 16th, 2007 at 10:06 am
[...] Last month, Jonathan at MyMoneyBlog ran a series on model portfolios which covered some (so far six) popular portfolios based on various investment philosophies. When these model portfolios were originally developed (some are more than thirty years old), the main investment vehicles were mutual funds, where were apparently the only choices at that time. However, the recent development in the exchange traded funds (ETFs) world presents an opportunity to rethink the ways to build portfolio based on those classic asset allocations. In fact, as ETFs rapidly gaining ground on mutual funds, largely due to their obvious benefits such as low cost and flexible pricing when compared with their mutual fund counterparts, there are already portfolios contain nothing but ETFs. [...]
March 12th, 2007 at 11:53 am
[...] Core Ideas (80-95% of total portfolio) 100% Target Retirement Fund, or 33% Total US Stock Market Index, 33% Total International Index, 33% Total Bond Index, or Something based on one of these model asset allocation portfolios. [...]
August 9th, 2007 at 3:48 pm
I just started my first real job after graduating and have no clue what this whole 401k thing is about. I know i def want to utilize it, but i am not sure how. Any tips? I’m 23…making a little under 40,000
September 26th, 2007 at 12:00 pm
I hope that I am posting in the correct thread for this question.
Has anyone had any success in finding reasonably priced software for an individual investor to use in constructing the lowest risk/highest-return portfolio to meet his or her investment goals and risk tolerance?
There seem to be tons of Professional Tools out there.
There do not seem to by many geared toward the individual that allows you to:
1. Set up the holdings in your model portfolio
2. Allow you to set you initial allocation by percentage, number of shares dollar amount
3. Calculate the Standard Deviation for your model for 3/5/10 years
4 Place your portfolio on an “Efficient Frontier” graph
5. This allows you to modify your holdings, or asset allocations to arrive at the best risk/return allocation to meet your needs.
The best I have found in several weeks of searching is ?Steel Mutual Funds – Pro Plus? that can be found at:
http://www.mutualfundexpert.com/
The cost is at the far end of my intended budget at:
? Mutual Funds – Pro Plus Everything in Professional, plus: 701 data columns, calendar year and monthly data & graphs for 44 years with Monthly data, Bull-Bear market performance, 1, 3, 5, 10-year Risk-adjusted Performance statistics
$62 for a monthly subscription (full updates from Morningstar.com each month), $122 per quarter for one(1) data update per quarter or $129 to buy the product one time, with a one time data download. They offer a free trial.
If anyone has had any success, please feel free to contact me at:
Dk1047@mail.com
May 13th, 2008 at 7:41 pm
This has been great info. Can’t wait to see the other portfolios.
June 20th, 2008 at 2:02 pm
The guru of asset allocation, Roger Gibson (“Asset Allocation,” 4th ed.), suggests seven major asset categories: short-term debt, U.S. bonds, non-U.S. bonds, U.S. stocks, non U.S stocks, real estate securities, and commodity-linked securities. These would be weighted in a porfolio using some form of mean-variance software to get an optimun mix, given an investor’s risk tolerance.
This is the gold standard, guys.
August 2nd, 2008 at 5:12 pm
If you compare stocks to real assets – even gold – for the last decade, you will see stocks are actually going backwards in comparison and you have lost ground even if you made a lot of money in the market….
You can invest in Real Estate using your retirement funds if you go offshore and invest where they do not have recourse loans. Check out Entrust or Equity Trust….
If you compare the USD to the world economy – you will see the USD is dropping like a rock. Why not get your money in multiple accounts in different currencies with say First Caribbean and hedge on the dropping USD with currencies going up….
There are 40 million people who visit Las Vegas each year for vacation, but 120 million visit Dubai. There are other places outside the US doing better, go seek them out…
It is time for US investors to invest in the world economy before they (we) are all broke. Russians lived their sheltered lives behind an actual wall, until the wall came down and they figured they were broke….
I am not saying that the US economy is broke, but it is suffering compared to many other countries. I just throw out some new food for thought is all. Hope everyone has a nice day….
May 13th, 2009 at 9:22 am
[...] for a great review of some recommended asset allocations, check out My Money Blogs series on Retirement Portfolios. It’s absolutely fantastic. Share and [...]
July 26th, 2009 at 5:05 am
All recomendations of Portfolios I guess are pretty good.. All are based upon their Past Performance, but also based upon older methods of the market and Not including The New ETF’s, Leverging and dozens of other New ways of Investing and the fact that none since the past 10 yrs..
The past 10 yrs has allowed Millions More into the market and to Make changes so easily thanks to the Internet and the PC and this has Got to effect the Future with alot more Volatility..
And notice None came up with a ALL Bond Portfolio… Wonder How Come? But I have seen others and Done some of my own and they have done just about as well to even better.. And even IF Owning All Bonds produces 2-3% Less APY? So what.. If you can save enough $ to compensate for that and it will give You What you Need and want?
Go for it!
To Much emphisis is hyping owning too much in Equities.. Of course these authors Have too… Why? It supports their Own careers and their Industry.. Does Wall Street make more selling Bonds or Stocks?
I would advocate To go ahead and try those Rec’d. Ports If “YOU WANT TO MAKE AS MUCH AS YOU CAN” and take at least a 50% Higher Risk.. With Bonds the odds are about 6-5 you will achieive your goals using making only 6-7%, Add the Equities and those Odds Get alot worse.. like 50/50 on any given yr, that you have to start taking $ out of your Portfolio..
Just have to use the Yrs of 00-02′ as an example..Not 08′..
AT THE FIRST SIGN OF A BEAR? GET INTO NOTHING BUT TREASURIES? Why not? Just ck the Bear Yrs and see for yourself..
and for just One Fund to start with? VBMFX, then VFIIX, Then use VUSTX for Bears.. If have to own Equities? VWINX at the most.
Most won’t like that, since it forces one to have to Save More and Have Less to spend…But, that’s just too Bad now isn’t it?
And Only use Extra $ you might have, AFTER fully funding your Retirement Port.. to own much anything else..
Was the best advice I got from the Hundreds of Limo Clients I served working in this Business..
And when I was Financially able to retire 10 yrs earlier than Planned? The $ was There, durning 2002…and Making $, not loosing it..
If you want to “Make as Much as You Can” ( MMAYC) then go ahead with all these other suggestions and IDEA’s.. Since they are based upon the Past performance and that’s only about 75% of pciture, that other 25% can really take a big Bite out of your $ at anytime..
July 28th, 2009 at 9:47 pm
[...] fund providers: FundAdvice.com – Suggested Portfolios 8 separate portfolios linked from this page: Model Retirement/Investment Portfolios: A Comparison ? My Money Blog Good friend got M.S. in Finance @ U of Illinois and this was a professor of his: Focus 580 on [...]