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.
Ocean City, MD
Hebner, in his “Index Funds” book, color codes different portfolios. Here is a little data from his “Bright Red” portfolio, a portfolio that carries no bonds and is skewed to the value side of the investing spectrum. Here is the 12-year data concluding in December of 2006.
For the 144 months he looked at 457 rolling periods. The “Bright Red” portfolio turned in a 14.42% annualized return with an average annualized standard deviation of 3.85%. The lowest rolling return was 7.44% and the highest at 25.08%. However, it needs to be noted, the period examined was from 1/63 – 12/74.
The portfolio did well from 1/57 – 12/06 where the annualized return was 14.22%.
If you have questions, be sure to ask about the “Bright Red” portfolio.
Physlab
