Decided To Move Towards Dr. Bernstein's If You Can Portfolio
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Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
At the point that you added 1/3rd EDV this no longer is Dr. Bernstein's portfolio. He advocated short term treasuries or T bills for a reason...invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I mean, that's overall well within Boglehead parameters. 66.6/33.3, with 50/50 US and international. A bit higher on international than most probably, and EDV carries additional interest rate risk and is more volatile, but you're still not old.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
It's a big change but I think in the right direction. I would question using EDV though - yes, it can be a great diversifier in a typical stock crash, but what if we have inflation, rising rates and poor stock performance? Have you considered, say, a combination of VGLT and VTIP? That would give you a combination of deflation/inflation protection and reduce the impact of rising rates by lowering overall duration.
For context: BND has a duration of around 5 years IIRC, while EDV is around 5 times that (~25 years). It is very rate sensitive.
For context: BND has a duration of around 5 years IIRC, while EDV is around 5 times that (~25 years). It is very rate sensitive.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Are you planning to retire in 25 years? That's the duration of EDV.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I like the negative Correlation of EDV with 66% Equity portfolio.UpperNwGuy wrote: ↑Fri Jun 18, 2021 4:38 pm Are you planning to retire in 25 years? That's the duration of EDV.
In a crash scenario EDV could reduce my volatility.
Personally plan to use this allocation even in retirement, no changes forever.
Re-balance once year like he suggested and call it a day.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
EDV? Prepare to be obliterated once rates start to rise. I would definitely stick to short/intermediate term for the bonds.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Do you know the interest rates in Greece?
0.99%
We are at 2.5% and why is that?
There is more risk of deflation than inflation.
0.99%
We are at 2.5% and why is that?
There is more risk of deflation than inflation.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Coincidentally, Bernstein has regularly said the opposite.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
There is an argument to be made that "one way an investor can minimize their interest rate risk is to match the average duration of their bond holdings with their investment horizon. In plain English, long-term investors reduce their interest rate risk by owning long-term bonds..." For more information, see link
According to the link, someone who is 46, like the OP, can use EDV.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Do you live in Greece? Why would you bring up Greece? That has nothing to do with our reality.invest2bfree wrote: ↑Fri Jun 18, 2021 5:15 pm Do you know the interest rates in Greece?
0.99%
We are at 2.5% and why is that?
There is more risk of deflation than inflation.
No one that I know of believes we are more likely to experience deflation.
Good luck.
Cheers
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I can assure you that your plan is NOT a Bill Bernstein portfolio. He would run from EDV faster than you could shake a stick at him. That ETF has a duration of 24 years!invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
You astutely point out that you do not have it in you to withstand the volatility of a 100% stock portfolio. However, you will be sorely disappointed when you see the volatility of EDV in a rising rate environment.
Using EDV is not a little tweak.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
OP - do you have a specific question?
If you are just looking for general thoughts on your portfolio, my take is that it’s a fine portfolio. I think the only adjustment I would make would be to swap EDV for a long term treasury fund (non-stripped) like VGLT instead. Reason is that EDV has more volatility than an emerging markets equity fund. You may be comfortable with it now, but hard to tell what your comfort level will be in 10 or 15 years. Just a thought. I do agree that the portfolio is more diversified with EDV though.
If you are just looking for general thoughts on your portfolio, my take is that it’s a fine portfolio. I think the only adjustment I would make would be to swap EDV for a long term treasury fund (non-stripped) like VGLT instead. Reason is that EDV has more volatility than an emerging markets equity fund. You may be comfortable with it now, but hard to tell what your comfort level will be in 10 or 15 years. Just a thought. I do agree that the portfolio is more diversified with EDV though.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Thanks would zroz better than edv?absolute zero wrote: ↑Fri Jun 18, 2021 5:56 pm OP - do you have a specific question?
If you are just looking for general thoughts on your portfolio, my take is that it’s a fine portfolio. I think the only adjustment I would make would be to swap EDV for a long term treasury fund (non-stripped) like VGLT instead. Reason is that EDV has more volatility than an emerging markets equity fund. You may be comfortable with it now, but hard to tell what your comfort level will be in 10 or 15 years. Just a thought. I do agree that the portfolio is more diversified with EDV though.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
To what objective would you want it to be "better" at?invest2bfree wrote: ↑Sat Jun 19, 2021 8:49 amThanks would zroz better than edv?absolute zero wrote: ↑Fri Jun 18, 2021 5:56 pm OP - do you have a specific question?
If you are just looking for general thoughts on your portfolio, my take is that it’s a fine portfolio. I think the only adjustment I would make would be to swap EDV for a long term treasury fund (non-stripped) like VGLT instead. Reason is that EDV has more volatility than an emerging markets equity fund. You may be comfortable with it now, but hard to tell what your comfort level will be in 10 or 15 years. Just a thought. I do agree that the portfolio is more diversified with EDV though.
ZROZ has a higher expense ratio, and is more volatile (higher standard deviation) because it has a higher duration.
They're both more volatile then a broad stock portfolio, but they have been less "correlated" with stocks, and the dramatic fall in interest rates has gave them decent returns in the past. Those aren't options I would pick for the safe/bond portion of my portfolio, and I would not expect there returns to be anything like the past.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I'm a big fan of Dr. Bernstein, but not this particular idea. I think he wanted to make it as stone simple and possible, and just say 1/3 each. That is very bond heavy - particularly for a young investor - and particularly when bonds are yielding nothing and have significant interest rate risk. IMO, your modification of the Bond holding is going exactly the wrong direction - I'd go shorter, not longer.
To me, a better, nearly equally simple portfolio would be:
50% Total Stock Market
25% Total International Stock
25% Bond (and I'd go Short Term Index, vs TBM, but take your pick . . )
To me, a better, nearly equally simple portfolio would be:
50% Total Stock Market
25% Total International Stock
25% Bond (and I'd go Short Term Index, vs TBM, but take your pick . . )
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
You can still use VT.
2/3 VT and 1/3 bond
As long as you actually rebalance both ways and don't freak out when your bond fund loses value, overall volatility of the portfolio will probably be about the same with EDV as BND. Shocking.
2/3 VT and 1/3 bond
As long as you actually rebalance both ways and don't freak out when your bond fund loses value, overall volatility of the portfolio will probably be about the same with EDV as BND. Shocking.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
what coming volatility? Do you know the future? That being said, stocks are usually (to be expected) volatile. That's the nature of the beast. No guts, no glory. Nevermind the supposed coming volatility, how did you handle the past volatility when the stock market fell 33% between mid Feb-Mid March 2020? That tells you what you need to know.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm I am 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
you design your portfolio to the maximum pain point you can tolerate. Using 50% declines (worst since the Great Depression) what's your maximum loss you can tolerate:
that tells you your willingness to take risk.
Your need and ability are also factors in the amounts of risk you choose:
https://www.cbsnews.com/news/asset-allo ... -you-take/
https://www.cbsnews.com/news/asset-allo ... tolerance/
https://www.cbsnews.com/news/asset-allo ... -you-need/
https://www.cbsnews.com/news/asset-allo ... ing-goals/
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I used VGLT instead of EDV for a similar purpose. In my backtesting, the long-term treasuries tended to be similar or better than extended duration in complementing equity. Also long-term treasuries were much less scary and impacted the portfolio much less during periods of rising interest rates. Now I am couple of years from retirement, I have started adding VTIP for short-term TIPS. I would also recommend you go ahead and start maxing your annual i-bonds limit.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
US is already 57% VT.
One more reason for my change is I dont want any country including my home country over 50% of my portfolio.
EDV's capital gains distributions gives me pause.
Did not take that into account.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I agree. Not to complicate things, but maybe take a look at Rick Ferri’s “Core 4” portfolio suggestions. Rick is a Boglehead.Outer Marker wrote: ↑Sat Jun 19, 2021 12:15 pm I'm a big fan of Dr. Bernstein, but not this particular idea. I think he wanted to make it as stone simple and possible, and just say 1/3 each. That is very bond heavy - particularly for a young investor - and particularly when bonds are yielding nothing and have significant interest rate risk.
https://core-4.com/
“My opinions are just that - opinions.”
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Stick with your 100% stocks. You'll be happy to have done so in 20+ years.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I do not think it is necessary to add a separate sector bet on REITS. They are already part of TSM, are highly correlated to it, and have under-performed it. Stick with three funds.Gaston wrote: ↑Sat Jun 19, 2021 9:07 pmI agree. Not to complicate things, but maybe take a look at Rick Ferri’s “Core 4” portfolio suggestions. Rick is a Boglehead.Outer Marker wrote: ↑Sat Jun 19, 2021 12:15 pm I'm a big fan of Dr. Bernstein, but not this particular idea. I think he wanted to make it as stone simple and possible, and just say 1/3 each. That is very bond heavy - particularly for a young investor - and particularly when bonds are yielding nothing and have significant interest rate risk.
https://core-4.com/
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I agree REITS or any other form of investments are good for active investors who are speculating on sectors.
For a truly passive investor 3 fund is the best.
For a truly passive investor 3 fund is the best.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Someone with a 30+ year time horizon until retirement should be 100% global equities in my view. Usually this means someone in their 20 to 30s who may have a relatively low amount of initial savings who shouldn't be bothered by large drawdowns (this may require behavior changes or understanding). If they are too bothered, then maybe something like LifeStrategy Growth and gives some bond cushion or Target Date fund. An all in one fund.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
But Paul Merriman has done some good backtesting indicating how even a small amount of bond allocation from the outset of a long investing horizon slows down returns over decades. The difference can be staggering.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Personally easier said than done.DB2 wrote: ↑Sun Jun 20, 2021 12:14 pmSomeone with a 30+ year time horizon until retirement should be 100% global equities in my view. Usually this means someone in their 20 to 30s who may have a relatively low amount of initial savings who shouldn't be bothered by large drawdowns (this may require behavior changes or understanding). If they are too bothered, then maybe something like LifeStrategy Growth and gives some bond cushion or Target Date fund. An all in one fund.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
But Paul Merriman has done some good backtesting indicating how even a small amount of bond allocation from the outset of a long investing horizon slows down returns over decades. The difference can be staggering.
When you have decent nest egg you can sit tight.
As an young investor your entire savings is in the market then 2000-2003 or 2007-2009 hits then you easily give up.
I have seen many investors go to treasuries in 2009 bottom.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
I didn't touch my 401K through the 2008-9 crash (37 at the time). I didn't have much money in it (much to me anyway). However, I couldn't emotionally tolerate that drawdown with a much larger nestegg today and do I have bond allocation. I agree though, it depends on the person.invest2bfree wrote: ↑Sun Jun 20, 2021 12:24 pmPersonally easier said than done.DB2 wrote: ↑Sun Jun 20, 2021 12:14 pmSomeone with a 30+ year time horizon until retirement should be 100% global equities in my view. Usually this means someone in their 20 to 30s who may have a relatively low amount of initial savings who shouldn't be bothered by large drawdowns (this may require behavior changes or understanding). If they are too bothered, then maybe something like LifeStrategy Growth and gives some bond cushion or Target Date fund. An all in one fund.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm Hello,
I have decided to move away from 100% VT portfolio to balanced three fund portfolio recommended by Dr. Bernstein for millennials.
https://www.amazon.com/gp/product/B00JC ... taft_p1_i8
His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
I decided to tweak it a little bit, instead of total bond use EDV for my bonds.
Basically 1/3 VTI, 1/3rd VXUS and 1/3rd EDV.
For my 401k
1/3rd FZILX, 1/3rd FZROX and 1/3rd FNBGX.
Iam 46 years old and feel that I wont be able to handle the coming volatility with a 100% stocks portfolio.
But Paul Merriman has done some good backtesting indicating how even a small amount of bond allocation from the outset of a long investing horizon slows down returns over decades. The difference can be staggering.
When you have decent nest egg you can sit tight.
As an young investor your entire savings is in the market then 2000-2003 or 2007-2009 hits then you easily give up.
I have seen many investors go to treasuries in 2009 bottom.
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
This is my early retirement portfolio. Age 44. No more TIPS, no more REITs, just a simple three-fund. Feels just about perfect to me.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
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Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
BND contains lot corporate bonds which behave like equity.zuma wrote: ↑Sun Jun 20, 2021 12:36 pmThis is my early retirement portfolio. Age 44. No more TIPS, no more REITs, just a simple three-fund. Feels just about perfect to me.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
Compare BND vs TLT in March 2020 then you would know why TLT is preferred.
We were lucky to snap back in 2020.
TLT went from 83 in 2007 in 120 in 2009, when stock market lost 50%.
Negative Correlation with the stock market is a powerful tool.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth
Re: Decided To Move Towards Dr. Bernstein's If You Can Portfolio
Also a fine portfolio.invest2bfree wrote: ↑Sun Jun 20, 2021 12:51 pmBND contains lot corporate bonds which behave like equity.zuma wrote: ↑Sun Jun 20, 2021 12:36 pmThis is my early retirement portfolio. Age 44. No more TIPS, no more REITs, just a simple three-fund. Feels just about perfect to me.invest2bfree wrote: ↑Fri Jun 18, 2021 4:25 pm His recommendation is 1/3rd US Stock, 1/3 rd XUS and 1/3rd Total Bond.
Compare BND vs TLT in March 2020 then you would know why TLT is preferred.
We were lucky to snap back in 2020.
TLT went from 83 in 2007 in 120 in 2009, when stock market lost 50%.
Negative Correlation with the stock market is a powerful tool.