Investing - Theory, News & General • how well do these asset classes work together?

I am thinking of re-jiggling my portfolio allocations. Want to eliminate momentum as a separate risk factor, and add some asset classes that were not available years ago in good funds, but now they are, perhaps arguably.

As you might see from this, I am a believer in "Total Stock Market" approaches, but I also want to spike my portfolio with more risk factors that are expected to bring better returns over a very long time. In each of those "spicy" non-TSM widgets, I considered the expense ratios of a few candidate funds, but often selected NOT the lowest expense ratio funds, if they give a better risk factor loading.

US Equity (50% of equity):

• 65% VTI Vanguard Total Stock Market

• 25% ISCV iShares Morningstar Small Cap Value (love it for a profitability screen and good factor loading, both at an amazingly low 6 bps expense ratio. XSVM, RZV, VIOV, DFSV are all good alternatives, I think.)

• 10% SCHH Schwab US REITs (cheaper than VNQ. Inclusion of REITs on top of TSM is questionable from the efficient market point of view, I am aware. I include it because much of real estate is not publicly-owned, and I want to compensate for that fact.)

International Equity (50% of equity):

• 55% VXUS Vanguard Total International Stock Index

• 20% AVDV Avantis International Small Cap Value (no Emerging Markets included, which is a bit of a bummer, but maybe it's a blessing in disguise - Small Value Emerging Markets might be just too much risk. DISV second choice. ISVL third, although its $180m in assets is too low for comfort, I think.)

• 15% DFAE DFA Emerging Markets Core Equity (Vanguard's VWO is cheaper, but I like that DFA employs factor filters.)

• 10% VNQI Vanguard Global ex-US Real Estate Index (similar reasoning for including it than the domestic real estate; see above.)

Fixed Income:

• 70% BIV Vanguard Intermediate-Term Bond Index

• 30% SWRSX Schwab TIPS fund (My accounts are at Schwab, so this would be commission-free)

I did not get into the stock/bond % breakdown here, even though it's one of the most important determinants of expected risk/return profile, of course. I am more interested in hearing the critique disembodied from anybody in particular's risk/return profile, which is why this is posted here and not in the "Personal Investments" folder.

What do you think about how well these asset classes work together in these percentages? Is there anything else I should include or eliminate, increase or decrease?

Statistics: Posted by seugene — Mon Mar 18, 2024 7:51 am — Replies 0 — Views 77

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