Before I progress very far down the path of why Asset Allocation and broad portfolio diversification will lead to better than market performance while reducing risk, note that such a portfolio was started several weeks ago and that effort will continue. A spreadsheet laying out all the transactions will be available.
Research results will be presented and discussed so do come back to read the basis for an investment approach I choose to call, Mosaic Investing.
Physlab
Photograph: Ferris Wheel in London
Lowell Herr
Without going into great detail why these equities were selected, let me explain what ETFs and stock were used to launch this portfolio. Here are the investments used thus far. They include: EFA, IJJ, DJP, VBR, VTV, VUG, VBK, VOT, VEU, VNQ, VWO, and FAST. All are ETFs with exception of FAST, a stock, and DJP, a ETN which is an exchange traded note. DJP is the commodity investment.
I will continue to explain more about asset allocation and the multiple-factor-model used to construct this portfolio. At some point I will also include a very simple portfolio, a portfolio one might title, “Portfolio for Dummies” or “Portfolio for Beginners.” It is really a portfolio for thoughtful investors.
Physlab
Photograph: Westminster Abbey in London, England
Mykonos Island, Greece
Hebner recommends the following asset allocation for someone with maximum risk tolerance.
Large-Cap Core – 12%
Large-Cap Value – 12%
Micro-Cap Core – 20%
Small-Cap Value – 20%
REITs – 5%
International Value – 6%
International Small-Cap – 6%
International Small-Cap Value – 6%
Emerging Markets – 4%
Emerging Markets Value – 4%
Emerging Markets Small-Cap Value – 5%
I note that this portfolio does not include any growth or the growth is contained within the core holdings. Hebner has 20 such portfolios one can select from based on ones tolerance for risk.
