Thoughts on this portfolio?
By - jonahwimmer
I would argue there’s no sense having a bond ETF when you’re young and retirement is decades off. Bonds are a wealth preservation tool, not a wealth building tool.
It depends on risk tolerance. 10% bonds will not ruin him. It is pretty moderate method of investment.
There's periods where bonds beat stocks too. A purchase in long term bonds in 2000 would still be worth more than an equivalent purchase in the S&P because they performed that much better from '00-'10.
If one really goes with the "can't time the market" philosophy, I don't see how bonds can be left out, even if just a 10% hedge.
2000 was lost decade for US Stock Market.
I have exposure to bonds in 2055 Target Date Retirement Fund for Roth Account.
Also depends on whether there are other objectives for the portfolio , with shorter horizons, other than retirement. Very infrequently does anyone give context for these posts but it seems necessary to determine if the risk is dialed in correctly. I am only 33 but hold some fixed income in our brokerage since we want to make a large purchase in less than 5 years (home). I figure most people have more than just one financial objective in their portfolio
Agreed. I suppose one way to be a little more aggressive is to eliminate that bond allocation.
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In all seriousness it's a reasonable enough portfolio. You're holding the global market to more or less global market weights. The bond allocation will drag but on the other side it will reduce your volatility. Everyone says go pure equity until the market underperforms for 10+ years. Disclosure I'm pure equity in what I control but I have no issue with the volatility and a gov't pension to fall back on. I don't need my money for 20+ years, I consider my investments payments to the future. I'm relatively indifferent to the path my money takes between now and then.
Being aggressive and being stupid tend to go hand in hand for many retail investors.
Being aggressive in a reasonable way tends to mean one of two things. 1 - concentrate your risk in a particular market sector/company. 2 - expose your portfolio to leverage. Both have their advantages and drawbacks.
Risk concentration is good when it works but most people can't agree on where you should concentrate your risk (small cap value, mid cap growth, tech disrupters, large cap growth, etc...).
Leverage is a double edged sword. No broadly diversified investor ever went belly up without involving leverage (to do so would require the whole economy to go belly up). On the other hand even modest leverage can increase theoretical returns provided you avoid the worst case scenario which on say 10% leverage would require a 90% drop.
Anyways I have no real advice for you, just things to think about.
The most proven way to increase your longterm returns is to reduce spending and increase investment. It's double effective. You get used to a lower standard of living while investing more money. So you need less money and you have more money at the same time.
Leverage is fine for a young person starting at 18 not have too much money to play with but only use 5 or 10% of portfolio for leverage.
You’re still young, I would sell BND and placed it in both VTI and VXUS
Eliminate the bonds and go full VTI. Buy as much as you can, especially when markets are down.
Bonds are bad
Ditch BND. Reconsider when youre in your 40's.
Add a small cap fund at 10%. I like VB.
Add a real estate fund at 5-10%. I like VNQ.
I'd do VTI 50%, VXUS 30%, VB 10%, VNQ 10%
VTI 55%, VXUS 30%, VB 10%, VNQ 5%
This is my personal preference, if you want to be more aggressive I recommend lowering your investment into the bond market (I don’t have anything in bonds) and putting more money into a tech/NASDAQ etf (Invesco makes great tech ETFs, my favorite is TQQQ but a lot of people like QQQM and QQQ).
Drop bonds. 80% VTI 20% VXUS
Ditch the bonds.
Is it for brokerage or tax advantage? Knowing it will help give better suggestion.
You have a long time horizon, consider replacing bonds with preferred stock or more equity.
Thank you, everyone!