Vanguard Funds

[Falang]

Emerging Markets Index
US Value Index
Small Cap Value Index

How do people like these 3 funds and is putting an entire portfolion evenly distrubuted among them properly diversifying? Any suggested tweaking?

Edit: goals, maximize long term (20 years plus) EV w/ little regard for short term fluctuations.

[mwgr5]

How much money are you planning to invest and is the money in a taxable or not taxable account, such as an IRA?

[wdcbooks]

It really looks like you are chasing the sectors with the best recent performance which can be dangerous. You would not be properly diversified with just those holdings. Your portfolio would have a heavy bent towards value, with Emerging Markets just kind of thrown in there.

At the very least I would think of adding a fund with domestic growth exposure, and exposure to non-EM international stocks. Failing that you could just use the Total Stock Market Index and be done with it.

[MatthewRyan]

The answer to your questions is 'no'.

[Falang]

[ QUOTE ]
How much money are you planning to invest and is the money in a taxable or not taxable account, such as an IRA?

[/ QUOTE ]

all of it lol

hopefully will be maxing out the SEP IRA and putting anything more i can into the same fund allocations, or is that stupid?

to the other two guys, if i were to add total stock market index to this in equal proportion (25% each) how would i be doing?

[Sniper]

How often are you willing to make changes to your port, to account for changes in your perception of which areas of the market will outperform?

[wdcbooks]

[ QUOTE ]
[ QUOTE ]
How much money are you planning to invest and is the money in a taxable or not taxable account, such as an IRA?

[/ QUOTE ]

all of it lol

hopefully will be maxing out the SEP IRA and putting anything more i can into the same fund allocations, or is that stupid?

to the other two guys, if i were to add total stock market index to this in equal proportion (25% each) how would i be doing?

[/ QUOTE ]

That would be better. The Small Cap Value sector is the most worrying inclusion. It has had a long strong run over the last 5-7 years and though it has a strong negative correlation to some other asset classes I would still prefer to see a more neutral small cap fund in its place.

[Falang]

[ QUOTE ]
How often are you willing to make changes to your port, to account for changes in your perception of which areas of the market will outperform?

[/ QUOTE ]

i'd like to make as few changes as possible, i really want this to be as passive an investment as humanly possible

[jively]

[ QUOTE ]
Emerging Markets Index
US Value Index
Small Cap Value Index

How do people like these 3 funds and is putting an entire portfolion evenly distrubuted among them properly diversifying? Any suggested tweaking?

Edit: goals, maximize long term (20 years plus) EV w/ little regard for short term fluctuations.

[/ QUOTE ]
I think you would need a tremendous amount of discipline to have an asset allocation like this. The expected return for this portfolio would be pretty good. However, the risk is high, and there will be a lot of volatility. If you could commit to this allocation for at least 5 years, without tinkering, go for it. However, if you diversify just a little bit, the risk can go down a lot:


This "efficient frontier" graph shows the relationship between return and risk. This portfolio would be near the very upper-right of the graph. When you diversify a little from here, the expected return goes down only a small amount, but the risk goes down a lot.

When you have a large risk like this, if you have a really bad year, it will be difficult to stick with it, and instead try to tinker and change your allocation. Changing allocations after the market moves is one of the biggest mistakes most investors make. (Recent examples: getting more aggressive and buying more stocks in 1998 after stocks went up 3 years in a row; selling out of stocks in 2002 when they've gone down 3 years in a row; giving up on stocks and bonds and putting all your money in real estate in 2005 after 4 big years for real estate...)

-Tom

[Falang]

jively would you also agree that adding Total Stock Market to this (at 25% each) would be a decent way to reduce the risk/return by a suitable amount?

any other suggested tweaking?