Comments on Vanguard Portfolio Plan

[turnipmonster]

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95% of investors cannot tolerate the swings of such a portfolio, perhaps Curtains is the exception. Will you be happy if the market takes another 47% tumble? I'd wager he won't be.

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by "cannot tolerate", you mean sell shares of their funds, right? big difference between not being happy about a 47% dive and selling shares because of it. most poker-playing ppl on this site are considerably more immune to fluctuations than your avg investor.

[Perplexity]

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It is beyond question horrible advice to jump-start with 100% of your investable assets all hitting the market on Day 1, for curtains. Anyone who says otherwise is an idiot.

No rational [or professional] investor does this. Essentially, you are saying that, using SPX as an example, it is OPTIMAL to put 100% of your funds in on Day 1. It will never go down more than a tiny bit, the optimal solution is all of it, now.
After all, the SPX has underperformed bonds for 8 years now.

Since we know the market will have a tumble of that size, it is more optimal to invest some/most now and the rest later.
Or DCA over 3, 6, etc months, whichever you prefer.

You seem to lack a basic understanding on these issues you are giving advice on.

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This is wrong. Dollar cost averaging is the suck.

You can google around for numerous articles about this.

Here's a particularly good one:

http://www.rmi.gsu.edu/FSR/abstracts/Vol2_1/v2-1a4.pdf

[Perplexity]

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1) I somewhat disagree. 95% of investors cannot tolerate the swings of such a portfolio, perhaps Curtains is the exception. Will you be happy if the market takes another 47% tumble? I'd wager he won't be.

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He explained about a dozen posts ago that the portfolio being discussed here is not close to all of his investable assets -- more like 50-70%. 50-70% in equities is pretty reasonable.

[gull]

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100% equities is fine.

I think your portfolio is risky, but that's ok. Higher expected returns will compensate that risk.

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1) I somewhat disagree. 95% of investors cannot tolerate the swings of such a portfolio, perhaps Curtains is the exception. Will you be happy if the market takes another 47% tumble? I'd wager he won't be.

2) This is a very, very flawed assumption, ftr.

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I'm not convinced it's flawed. It might be though. The case may be today that investors are actually paying to take risk. However, I'm not convinced of this, so I think it's most prudent to act on history. You're right - this conclusion may be flawed.

[curtains]

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[ QUOTE ]
95% of investors cannot tolerate the swings of such a portfolio, perhaps Curtains is the exception. Will you be happy if the market takes another 47% tumble? I'd wager he won't be.

[/ QUOTE ]

by "cannot tolerate", you mean sell shares of their funds, right? big difference between not being happy about a 47% dive and selling shares because of it. most poker-playing ppl on this site are considerably more immune to fluctuations than your avg investor.

[/ QUOTE ]


47%? I don't care, I mean I'd be a little annoyed but no chance I'd sell my shares!

Just out of curiosity when did the market drop that much? I know it dropped a lot maybe 5-6 years ago, but did it really drop that much?

[curtains]

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1) too much small cap
2) too much mid-cap [i assume this is US_only]
3) Where's your bonds/cash/dry-powder?

The market will take a 10% tumble at some point in the near future, you should always have some dry powder in reserve.

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In that case it's more than fine to be 100% equities. Since the beginning of it, the SPX has averaged 10.8%, while bonds are around 5.1%, when you are this young, and can ride out the market, it would certainly be in your best interest to be 100% equities.

[/ QUOTE ]

It is beyond question horrible advice to jump-start with 100% of your investable assets all hitting the market on Day 1, for curtains. Anyone who says otherwise is an idiot.

No rational [or professional] investor does this. Essentially, you are saying that, using SPX as an example, it is OPTIMAL to put 100% of your funds in on Day 1. It will never go down more than a tiny bit, the optimal solution is all of it, now.
After all, the SPX has underperformed bonds for 8 years now.

Since we know the market will have a tumble of that size, it is more optimal to invest some/most now and the rest later.
Or DCA over 3, 6, etc months, whichever you prefer.

You seem to lack a basic understanding on these issues you are giving advice on.

[/ QUOTE ]

As I believe someone mentioned, I don't have 100% of my money in the market. Only about 50-70% depending on a few things.

[Actual God]

I just talked to a guy from Vanguard. Based on our conversation, he suggested the following breakdown. What do you guys think? I'm newbish, but I'm trying to learn. If this is a good allocation, what are the best funds to select? And should I always max out my IRA before investing in a taxable fund? Does it matter which funds go in the IRA vs. the taxable funds? Thanks in advance.

<u>Alex from Vanguard's suggestions</u>

Stocks/Bonds - 80/20

Within the stocks -
---- US/Int'l - 80/20
---- Large/Small&amp;Mid - 70/30
---- Growth/Value - 50/50

Bonds - intermediate

[maxtower]

ETFs might be more tax efficient if you are worried about that. If you are going to be constantly adding to your positions though, I don't think ETFs will be the best choice. It depends on the amount of money we're talking about.

[Actual God]

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ETFs might be more tax efficient if you are worried about that. If you are going to be constantly adding to your positions though, I don't think ETFs will be the best choice. It depends on the amount of money we're talking about.

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I want to invest about 15K to start, and then add to it steadily as I make more money.