If you are looking for a portfolio where you can “Set It and Forget It,” the recommendations below are about as close as you can get to accomplishing this goal. Here are the ETFs to consider.
- VTI – 40% Total Stock Market Index
- VEU – 35% All World ex. US Index
- VWO – 15% Emerging Market Index
- BND – 10% Total Bond Index
You might want to adjust the percentages for these four ETFs to match your situation. Whatever percentages you set, then apply the 35% limits discussed in an earlier post. Rebalance when an asset class is out of balance. Otherwise, do nothing.
Lowell Herr
Photograph: Afternoon sun off coast of Italy.
Here is an exercise that will prove informative to investors who construct portfolios using stocks. Follow these instructions.
- Make up a list of the stocks in your portfolio.
- Go to Morningstar and determine which asset class or style box each stock occupies. Type MSFT in the Quotes option and then click on Snapshot. In the example we see MSFT is a Large-Cap Growth stock.
- Now find an ETF for each style box that contains at least one stock in your portfolio. Since Barclay’s iShares have been around longer than Vanguard’s ETFs, one would do better to go with the iShare. For example, the iShare to compare with the Microsoft stock is IVW as it is a Large-Cap Growth ETF.
- Now open up the Yahoo Finance page. Using a five-year period, compare the stock with the appropriate ETF. In the example, you will see that IVW outperformed MSFT by a little over 20% over five years.
- Perform this comparison with every stock in your portfolio and write down your results. If you held the stocks over a different period, use a comparison that is closest to the holding time.
- There is one more thing you need to examine. Does your portfolio include stocks in all of the “Big Nine” Morningstar style boxes? Does the portfolio include international stocks from developed countries or areas such as Europe? Does the portfolio include stocks from emerging markets? Are there any REITs or commodities in the portfolio? If not, why not?
If most of your stocks outperformed the appropriate ETF, you are a fine stock picker and you should continue to build your portfolio the way you always have. If, however, your portfolio is not well diversified and/or the stocks are not performing as well as the benchmark ETF, then questions arise as to how one is going to change the construction of the portfolio.
Lowell Herr
Photograph: Art aboard Celebrity cruise ship.
A good friend recently returned a Point & Shoot camera as the image quality left a lot to be desired. Why are many of the newer P&S cameras, with their high pixel count, disappointing customers? It is sensor size. A “full-frame” sensor is one that is the size of a standard 35mm camera. Most of the higher end digital cameras have sensor sizes that go by 1/1.5 or 1/1.6. A few are full-frame, and they are expensive. The 1/1.6, for example, simply means the sensor size is smaller than a full-frame sensor. For more detailed information, check out this site.
I looked up a number of sensor sizes for P&S cameras and it is common to see them as small as 1/2.5. Look at the relative sensor sizes shown in the above link and one quickly sees just how small a 0.4 (1/2.5) really is. When one gives up this much real estate, just upping the number of pixels is not going to cut it when it comes to improving picture quality.
When researching camera data, it is not always easy to find the sensor size of a P&S camera. Do your research on this one. I doubt I will ever purchase a camera that does not have at least a 1/1.6 or larger sensor in it.
Lowell Herr
Photograph: Flower photographed with an Olympus E-10 camera. The ISO was set to 80 and the focal length to 22 mm. Exposure was 1/640 sec and f / 5.6.
