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In this update to one of the most important items in our article
library, Paul Merriman shows how a series of simple but powerful
concepts can benefit patient, thoughtful investors. This 2010 revision
updates all reported returns to include the year 2009.
If you are a serious investor, this article could be one of the most
important things you'll ever read. I'm going to show you the strategy
that's very close, though not quite identical, to the way we manage the
majority of the money we invest for our clients.
This strategy is best understood with a brief history lesson. When I
founded the company that’s now Merriman in 1983 (it was then Paul A.
Merriman & Associates), millions of investors had just suffered
large market losses over a period of almost 20 years. In fact, from
1966 through 1982, the Standard & Poor’s 500 Index had produced
negative returns after accounting for inflation.
We initially offered only strategies that used market timing systems to
actively manage risk. The systems were designed to give investors a
chance to participate in the equity market without the high risks of
buying and holding through thick and thin.
In 1992, as we began helping clients with more and more of their money,
it became increasingly clear that much of that money was invested
without timing. We sought – and found – a buy-and-hold strategy that we
believed would be worth recommending.
After all these years, we still like this strategy so much that we call
it the Ultimate Buy-and-Hold Strategy, as the title of this article
indicates.
We don’t use that word “ultimate” casually. I don’t claim this is the
best investment strategy in the world – but it’s the best I have found.
I believe almost every long-term investor can use it to advantage.
As we shall see, compared with the U.S. stock market as measured by the
Standard & Poor's 500 Index, the Ultimate Buy-and-Hold Strategy has
historically increased returns and reduced risk.
The strategy I’m going to describe is suitable for do-it-yourself
investors as well as those who use professional investment advisors. It
works in small portfolios as well as large portfolios. It’s easy to
understand and easy to apply using low-cost no-load mutual funds.
We did not invent this strategy. It has evolved from the work of many
people over a long period, including some winners and nominees for the
Nobel Prize in economics.
SETTING A HIGH STANDARD
In theory, a perfect investment strategy would be cheap, easy and
risk-free. It would make you fabulously rich in about a week. Tax-free,
of course. We haven’t found that combination, and we don’t expect to
find it. But in the real world, the strategy I'm about to describe is
the best substitute we know.
Over the long run, the Ultimate Buy-and-Hold Strategy has produced
higher returns than the investments that many people hold. It did so at
lower risk, with minimal transaction costs. It’s mechanical, so it
doesn’t require you to pore over newsletters, pick stocks, find a guru
or understand the economy.
THIS STRATEGY IN A NUTSHELL
Even though this strategy is based on academic research, it’s really
fairly simple. If I had to reduce it to just one sentence, here’s what
I would say: The Ultimate Buy-and-Hold Strategy uses no-load funds to
create a sophisticated asset allocation model with worldwide equity
diversification by adding value stocks, small company stocks and real
estate funds to a traditional large-cap growth stock portfolio.
If you think you already know what that means and you’re tempted to
skip the rest of this article, I hope you’ll resist that temptation. I
have some compelling evidence to show you. If you apply this
diligently, doing so could make a big difference in your future and
your family’s future.
If there is a “catch” to this strategy, it’s availability. You cannot
buy it in a single mutual fund. You can put together most of it using
Vanguard’s low-cost index funds; but Vanguard doesn’t offer every piece
of it. If you use more than one fund family and include ETFs, you can
get each individual piece; but in order to do that you may have to open
more than a single account, and you might have to pay more in expenses
than I would regard as ideal.
In my view, the ultimate way to implement this strategy is to hire a
professional money manager who has access to the institutional
asset-class funds offered by Dimensional Fund Advisors. (More on that
later.)
WHAT REALLY MATTERS
The Ultimate Buy-and-Hold Strategy is based on more than 50 years of
research into a deceptively simple question: What really makes a
difference to investment results?
Some of the answers may surprise you. The people behind this research
include Harry Markowitz, a 1990 Nobel laureate; Rex A. Sinquefield, who
started the first index fund; and Eugene F. Fama, Robert R. McCormick
Distinguished Service Professor of Finance at the University of Chicago
Booth School of Business.
Their expertise is pooled in a company that Sinquefield and David Booth
started in 1981 in order to give institutional investors a practical
way to take advantage of their research. Today, that company,
Dimensional Fund Advisors, manages more than $164 billion of
investments for pension funds, large corporations and a family of
terrific mutual funds that are available to the public through a select
group of investment advisors.
NOT FOR EVERYBODY
Before we get into the meat of this strategy, there are a few things
you should know. Every investment and every investment strategy
involves risks, both short-term and long-term. That means investors can
always lose money. The Ultimate Buy-and-Hold Strategy is not suitable
for every investment need. It won’t necessarily do well every week,
every month, every quarter or every year. As investors learned the hard
way in 2007 and 2008, there will be times when it loses money. You have
been warned.
Like most worthwhile ways to invest, this strategy requires investors
to make a commitment. If you are the sort of investor who dabbles in a
strategy to check it out for a quarter or two, don’t even bother with
this. You will be disappointed, and you’ll be relying entirely on luck
for such short-term results.
I am often asked how this strategy did last year or how it’s doing so
far this year. Some people tell me they think investors should be in
some particular kind of asset over the next few months or the next
year. Almost always, this is the result of something they have read or
heard without checking it out thoroughly on their own. These people
aren’t likely to succeed with this ultimate strategy because they are
focused on the short term.
The Ultimate Buy-and-Hold Strategy is not based on anything that
happened last year or last quarter. It’s not based on anything that is
expected to happen next quarter or next year. It makes absolutely no
attempt to identify what investments will be “hot” in the near future.
If that’s what you want, you should look elsewhere, because you won’t
find it here.
This strategy is designed to produce very-long-term results without
requiring much maintenance once the pieces are in place. If that is
what you want, I hope you’ll keep reading.
IT’S THE ASSETS THAT MAKE THE DIFFERENCE
The most important building block of this strategy is your choice of
assets. Many investors think success lies in buying and selling at
exactly the right times, in finding the right gurus or managers, the
right stocks or mutual funds. But being at the right place at the right
time depends on luck, and luck can work against you just as much as for
you.
Here’s the truth: Your choice of asset classes has far more impact on
your results than any other investment decision you will make. I know
this flies in the face of a lot of conventional wisdom and almost all
the marketing hype on Wall Street, so I want to repeat it. Your choice
of the right assets is far more important than exactly when you buy or
sell those assets. And it’s much more important than finding the very
“best” stocks, bonds or mutual funds.
A 1986 study, largely confirmed by a follow-up study five years later
and often cited by investment managers, tracked the investments of 91
large pension funds from 1974 to 1983. The researchers concluded that
more than 93 percent of the variation in returns could be attributed to
the kinds of assets in the portfolio. Most of the remaining variation
was due to stock picking and the timing of purchases and sales.
 
BASIC BUILDING BLOCKS
So how do you choose the right asset classes? I’ll show you how,
illustrating the process with a series of pie charts. We’ll start with
Portfolio 1, a very basic investment mix. Assume the whole pie
represents all the money you have invested. This version of the pie has
only two slices, one for bonds (labeled the Barclay's Govt. Credit
Index) and one for equities (labeled the Standard & Poor’s 500
Index).
(The returns cited throughout this article are not those of our managed
strategy and do not reflect any potential transaction costs, fees or
expenses that investors must inevitably pay. These figures represent
the returns of asset classes, not specific investments.)
Portfolio 1’s 60/40 split between equities and bonds is the way that
pension funds, insurance companies and other large institutional
investors have traditionally allocated their assets. The equities
provide long-term growth while the bonds provide stability and income.
Let me say up front that we don’t believe 60 percent equity and 40
percent fixed-income is the right balance for all investors. Many young
investors don’t need any bonds in their portfolios. And many older
folks may want 70 percent or more of their portfolios in bonds.
However, the 60/40 ratio of Portfolio 1 is a good long-term investment
mix. It’s an industry standard, and I’ll use it throughout this article
to illustrate my points.
For 40 years, from January 1970 through December 2009, this portfolio
produced a compound annual return of 9.5 percent. That’s not bad,
especially considering this period included four major bear markets. I
believe that long-term return should be more than enough to let most
investors achieve their long-term goals.
Therefore, for this discussion I will use a long-term annual return of
9.5 percent as a standard or benchmark against which to measure the
strategy I’m presenting. You’ll see this strategy unfold in a series of
pie charts as we split the pie into thinner and thinner slices by
adding asset classes.
Remember that we also must look at risk. Adding return while also
increasing risk is certainly possible, but it’s not what we’re after
here. We want risk to remain the same – or ideally, to decline.
Therefore, another measure I’ll use to gauge this strategy is standard
deviation.
Standard deviation is a statistical way to measure risk. (If you want
to understand this statistically, there are plenty of resources online
that will tell you how it’s defined and applied.) For our purposes
here, what you need to know about standards deviation is that a lower
number is better, indicating a portfolio that is more predictable and
less volatile. The standard deviation of Portfolio 1 is 12 percent, so
we’ll use that as the benchmark.
Historically, millions of investors would have been better off with
Portfolio 1 than they were with their actual portfolios, which included
too little diversification and too much risk. If those investors did
nothing more than adopt this simple mix of assets – which is easily
duplicated using a couple of no-load index funds, they would be more
likely to achieve their long-term investment goals.
Because of that, and because it is used by institutional investors who
must get the equation right for the long term, I believe Portfolio 1 is
a relatively high standard from which to start. In my view, anything
worthy of being called an “ultimate” strategy must beat Portfolio 1 in
two ways. It must be worthy of a reasonable expectation that it will
produce a return higher than 9.5 percent and at the same time have a
standard deviation of 12 percent or less.
Most of the Ultimate Buy-and-Hold Strategy is concerned with the 60
percent equity side of the pie. That’s where the main focus will be in
this article. But it’s very important to get the fixed-income part of
this strategy right.
Most people include bond funds in a portfolio in order to provide
stability, which can be measured by standard deviation. Many investors
also expect bond funds to produce income, which of course is part of
any investor’s total return. The higher the percentage of bonds that
make up a total portfolio, the more stability that portfolio is likely
to have – and the less long-term growth it is likely to produce.
GETTING BONDS RIGHT
Whether your portfolio is heavy or light on bonds, it matters what kind
of bonds you own. In general, longer bond maturities go together with
higher yields and higher volatility (higher standard deviation, in
other words). However as you extend maturities beyond intermediate-term
bonds, the added volatility (risk) rises much faster than the
additional return.
In the past, we recommended short-term corporate bond funds for this
part of the portfolio. After more study, we refined our approach two
ways. First,the fixed-income portfolio now is exclusively in government
fixed-income funds. Second, this segment of the portfolio is now made
up of 50 percent intermediate-term funds, 30 percent short-term funds
and 20 percent in TIPS funds for inflation protection. (TIPS funds
invest in U.S. Treasury inflation-protected securities, which
automatically adjust their values and interest payments to changes in
the Consumer Price Index.)
For a variety of reasons, we expect this combination to produce
slightly higher returns with a little bit of additional risk. In an
all-fixed-income portfolio, this would leave us with that higher risk.
But because the additional risk comes from the longer term of the bonds
(instead of from the possibility of a corporate default), this extra
risk is non-correlated with the risk of the stock market. That means
that when we combine this fixed-income mix with a diversified equity
portfolio, the volatility of the entire portfolio goes down.
I know it’s counter-intuitive to think you can reduce risk by adding
risk. But in this case, as the result of a lot of careful thought and
study, we believe you can do just that. This is what I call “smart
diversification” at work, and we’ll encounter it again when we examine
the equity side of the portfolio.
Why do we exclude corporate fixed-income funds? In a nutshell, because
they entail some risk of default – a risk that tends to increase at the
very times when we want stability the most. We believe in taking
calculated risks on the equity side of the portfolio and being very
conservative on the fixed-income side. U.S. Treasury securities are the
safest in the world and virtually eliminate the risk of default.
Making these changes gives us Portfolio 2. From 1970 through 2009, this
combination had an annualized return of 9.5 percent and a standard
deviation of 11.4 percent. This change gives the portfolio more
stability (less risk) at the same return.
This refinement from Portfolio 1 is modest. But there’s much more to
come as we tackle the 60 percent of the portfolio devoted to equities.
GETTING EQUITIES RIGHT: ADDING REAL ESTATE
Despite recent history, investors are familiar with the long-term
attraction of owning real estate. When this asset class is owned
through professionally managed real estate investment trusts known as
REITs, it can reduce risk and increase return.
From 1975 through 2009, REITs compounded at 13.6 percent, outpacing the
Standard & Poor’s 500 Index (which returned 11.7 percent over that
same period). This was an unusually productive period for REITs, and
academic researchers expect the future returns of real estate and of
the S&P 500 Index to be similar to each other – though not as high
as they were during this period.
As you will see in Portfolio 3, when REITs made up one-fifth of the
equity part of this portfolio, the annual return rose slightly to 9.8
percent; more important for our purposes, the standard deviation (risk)
fell to 10.8 percent. At this point we have accomplished our objective
of adding return and reducing risk. Over this long period, the bottom
line is an additional $355,598 in cumulative return. This is an
excellent start, but the best is yet to come.
GETTING EQUITIES RIGHT: SIZE MATTERS
The standard pension fund’s equity portfolio, shown here in
Portfolios 1 and 2, consists mostly of the stocks of the 500 largest
U.S. companies. These include many familiar names like ExxonMobil,
General Electric, Johnson & Johnson, Microsoft, Pfizer and Proctor
& Gamble. Each of these was once a small company going through
rapid growth that paid off in a big way for early investors. Microsoft
was a classic case in the 1980s and 1990s.
Because small companies can grow much faster than huge ones, a
fundamental way to diversify a stock portfolio is to invest some of
your money in stocks of small companies.
To accomplish this, the next step in building the Ultimate Buy-and-Hold
Strategy is to add small-cap stocks to the equity part of the
portfolio. To represent small-cap stocks, we have used the returns of
the Dimensional Fund Advisors U.S. Micro Cap Fund, which invests in
the smallest 5 percent of U.S. companies.
The result is Portfolio 4, a pie that now has four slices and which
from 1970 through 2009 produced an annualized return of 10 percent,with
a standard deviation of 11.1 percent. With these three changes, we
added about $716,000 to the cumulative return, an increase of 18.7
percent.
I think that is very impressive, and I’d like you to pause for a moment
and think about that. The additional return is more than seven times
the entire initial investment of $100,000. How much work did it take to
capture that extra return? I’m betting you could set this up with less
than 20 hours of your time. But let’s be conservative and say that it
took you 40 hours, a full standard work week. Divide the extra return
by those hours and the payoff amounts to nearly $18,000 per hour. I
don’t know anywhere else you can get paid that much for your time. If
you do, I hope you’ll let me know! Could I now interest you in doubling
that extra return, and doing so within the same allotted 40 hours of
the calculation above?
GETTING EQUITIES RIGHT: ADDING VALUE
The next step is to differentiate between what are known as growth
stocks and value stocks. Typical growth investors look for companies
with rising sales and profits, companies that either dominate their
markets or seem to be on the brink of doing so. These companies are
typical of those in the S&P 500 Index of Portfolio 1.
Value investors, on the other hand, look for companies that for one
reason or another may be temporary bargains. They may be out of favor
with big investors because of things like poor management, weak
finances, new competition or problems with unions, government agencies
and defective products.
Value stocks are regarded as bargains that are expected to return to
their supposedly “normal” levels when the market perceives their
prospects more positively. Some well-known examples, taken from the
largest holdings of the Vanguard Value Index Fund in January 2010,
include J.P. Morgan Chase, General Electric, AT&T and Chevron.
Identifying such companies can take a lot of analysis, based on many
assumptions that might or might not prove out.
The Ultimate Buy-and-Hold Strategy instead uses a purely mechanical
approach to identify value companies. This approach starts by
identifying the largest 50 percent of stocks traded on the New York
Stock Exchange and then including all other public companies of similar
size. These companies are then sorted by the ratio of their price per
share to their book value per share. The top 30 percent of this list,
the companies with the highest price-to-book ratios, are classified as
large-cap growth companies. The bottom 30 percent are classified as
large-cap value companies. The process is the same for small-cap stocks.
Although the most popular stocks are growth stocks, much research shows
that historically, unpopular (value) stocks outperform popular (growth)
stocks. This is true of large-cap stocks and small-cap stocks, and it’s
true of international stocks as well. From 1927 through 2009, an index
of large U.S. growth stocks produced an annualized return of 7.5
percent; large U.S. value stocks, by contrast, had a comparable return
of 10.6 percent. Among small-cap stocks over the same period, growth
stocks returned 8 percent, and value stocks returned 13.1 percent.
Therefore, we create Portfolio 5 by adding slices of large-cap value
and small-cap value so that the equity side of the portfolio is divided
equally five ways.
This boosts the portfolio’s historic return to 10.9 percent, still with
a slightly lower standard deviation than Portfolio 1. And notice how
much this adds to the 40-year cumulative return: more than $2 million.
That is more than three times the “added value” that came from
Portfolio 4.
To recap, we started with a standard industry portfolio mix, refined
the fixed-income portion and added real estate, small and value stocks
to the equity portion. The result is an increase of nearly 15 percent
in annualized return (and of about 61 percent in cumulative return) at
essentially the same level of risk.
Now there is one more very important step in creating the Ultimate Buy-and-Hold Strategy.
GETTING EQUITIES RIGHT GLOBALLY
The final step toward Portfolio 6 takes us beyond the borders of the
United States to invest in international stocks. U.S. and international
stocks both go up and down, but often they do so at different times and
different speeds. Because of this, international stocks are
diversifiers that can reduce volatility. However, U.S. and
international stocks can decline at the same time, as we saw in 2008.
Like U.S. stocks, international stocks have a long-term upward bias.
Yet when the shorter-term movements of U.S. and international stock
markets offset each other, as they often do, the combination has a
smoother long-term upward curve than either one by itself.
There are two major reasons that international stocks help diversify
U.S. stocks. First, they trade and operate in different economic
environments with different growth rates and monetary policies. Second,
currency fluctuations affect their prices when translated into U.S.
dollars.
The virtues of small-cap stocks and value stocks apply equally to
international stocks as to U.S. stocks. Portfolio 6 slices the equity
portion equally 10 ways, adding international large, international
large value, international small, international small value and
emerging markets.
Emerging markets stocks have outperformed the Standard & Poor's 500
Index over long periods of time. They represent countries that are
growing rapidly, and they have become an increasingly important part of
the world's total market capital.
As you’ll see, the annualized return of Portfolio 6 jumps to 12 percent
and the standard deviation is 12 percent. Cumulatively over 40 years,
this portfolio produced a gain of $9.2 million, more than twice as much
as Portfolio 1. If you go back to my premise that you could implement
this strategy in a total of 40 hours, the added-value return works out
to about $135,000 per hour for your time. (Too bad you can’t do that
for a whole career!)
This completes the basic makeup of the Ultimate Buy-and-Hold Strategy,
which over this time period increased annualized return by 25 percent
without increasing volatility. This investment strategy is not
complicated, and it’s based on solid research, not hocus-pocus. It
doesn’t require a guru. It doesn’t require investors to figure out the
economic landscape or make predictions about the future.
With 2008 and early 2009 fresh in our minds, let me say a few things
about risk. While the standard deviation of Portfolio 6 is the same as
that of Portfolio 1, I think the real risk was much lower. Consider
that Portfolio 1 contained only about 500 stocks. Now consider all the
stocks held by all the funds in Portfolio 6. At the end of 2009,
according to Dimensional Fund Advisors, those funds owned a total of
11,600 stocks. Even accounting for duplications, Portfolio 6 entails
ownership in many thousands of stocks, not just 500. To my way of
thinking, that much diversification is very worthwhile in terms of
peace of mind.
PUTTING THIS STRATEGY TO WORK
The trickiest part of the Ultimate Buy-and-Hold Strategy is getting the
level of risk right for each individual investor. The most important
asset-class decision an investor makes is how much to have in
fixed-income and how much in equities. In these illustrations we have
used a 60/40 mix. That is an industry standard, and I believe that over
a long period of time many investors can use it to accomplish their
goals at reasonable levels of risk.
But this may not be right for you. For help in applying risk-vs.-reward
to your own situation, I suggest you read one of our most important
articles, “Fine tuning your asset allocation.”
As I mentioned earlier, there’s no single mutual fund that puts all the
pieces of this together under one roof. For help in finding funds, I
recommend another article, “The best mutual funds: DFA or Vanguard?”
For an excellent discussion of the value of non-correlated assets, I
recommend a fine article by my son, Jeff Merriman-Cohen, called “The perfect portfolio.”
A NOTE ON USING THIS STRATEGY IN TAXABLE ACCOUNTS
This combination of asset classes works best in tax-sheltered accounts
such as IRAs and company retirement plans. In taxable accounts, we
recommend leaving out the REIT fund and dividing that portion of the
portfolio equally among the other four U.S. equity classes. I say this
because real estate funds produce much of their total return in the
form of income dividends that do not qualify for the favorable tax
treatment afforded to most other dividends.
Many investors implement this strategy in taxable accounts to
supplement their employee retirement plans in order to capture asset
classes not available in those plans. Investors who take this approach,
which we favor, should hold REIT funds in their tax-sheltered accounts.
WHAT’S WRONG WITH THIS STRATEGY?
Even though this is the best buy-and-hold strategy that I know for
serious long-term investors, it isn’t flawless. Investment markets are
not highly predictable, and this strategy might not work as well in the
future as well as it did in the past.
The equity side of this portfolio is overweighted to value stocks. Yet
it is quite possible that value stocks will underperform growth stocks
over the next five, 10, 15 or 20 years. The portfolio also contains
lots of small-cap stocks. But it’s possible that large-cap stocks will
do better than small ones in the future. This portfolio contains more
exposure to international stocks than most advisors recommend.
International stocks could underperform U.S. stocks in the future.
Likewise, it’s possible that fixed-income funds, which make up a
minority of this portfolio, could do better than equities in the
future.
All this uncertainty is simply inevitable. Still, I believe the
Ultimate Buy-and-Hold Strategy deals very well with it. If you own this
portfolio, you aren’t dependent on any particular asset class. You have
them all. And no matter which ones are doing well, you will own them.
To my mind, this is the best an investor can do. And when you have done
your best, it’s time to turn your attention to something else. A very
good “something else” is to make sure you are living your life the way
you want to.
Paul Merriman is founder of Merriman.
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This
document contains hypothetical results.
Although we have done our best to present this information fairly,
hypothetical performance is still potentially misleading. Hypothetical data does not represent actual
performance and should not be interpreted as an indication of actual
performance. This data is based on
transactions that were not made.
Instead, the trades were simulated, based on knowledge that was
available only after the fact and thus with the benefit of hindsight. Results
do not include the impact of taxes, if any.
Past returns are not indicative of future results.
Data Sources:
The following data sources were used to develop the tables
and figures in this workshop. Note that
many of our return series rely on academic simulations gathered and developed by
Dimensional Fund Advisors (DFA). All
performance data are total returns including interest and dividends. Simulated
data subtracts the current expense ratio for the comparable fund, except for
the S&P 500 Index.
Equities
Emerging
Markets DFEMX
to May 1994, DFA simulation back to Jan 1987.
Emerging
Market Core DFCEX
from May 2005.
Emerging
Market Small Cap DEMSX
back to 1999, DFA simulation back to Jan. 1987.
Emerging
Market Value DFEVX
back to 1999, DFA simulation back to Jan. 1987.
International
Large Cap DFALX
back to 1992, MSCI EAFE back to 1970.
International
Large Cap Value DFIVX
from March 1994, DFA simulation back to 1975.
International
Small Cap DFISX
back to Oct. 1996, DFA simulation back to 1970.
International
Small Value DISVX
back to 1995.
Large
Cap DFLCX
back to 1991, S&P 500 back to 1970.
Large
Growth Index DFA
simulation back to 1927.
Large
Value DFLVX
back to 1994, simulation back to 1970.
Large
Value Index DFA simulation
back to 1927.
Micro Cap (or
Small Cap) DFSCX
back to 1983, Dimensional US Micro Cap Index to 1970.
Real Estate Investment
Trusts DFREX back to
Jan. 1993, Don Keim REIT Index 1975-1992, NAREIT 1972-1974.
S&P 500 S&P 500 Index, provided by Standard & Poor's Index
Services Group, through DFA.
Small
Growth Index DFA
simulation back to 1927.
Small
Value DFSVX
back to 1994, DFA simulation back to 1970.
Small
Value Index DFA
simulation back to 1927.
Bonds
Barclays Government Credit.
Index 50% long-term corp., 50%
long-term government for 1970-1972 (from DFA Matrix 2004), Barclays
Government/Credit Bond Index from 1973 to present, through DFA.
Barclays U.S.
TIPs Back
to March 1997 to June 2000, Morningstar.
DFA TIPs DIPSX
starting January 2007
DFA Intermediate Government
Bonds DFIGX, Morningstar
Vanguard
Short-Term Treasuries VFISX, Morningstar.
Vanguard
Intermediate-Term Treasuries VFITX,
Morningstar.
Vanguard
Inflation Protected Securities VIPSX,
Morningstar from July 2000 to December 2006.
- Yearly
rebalancing
- U.S. Equity
Allocation: 20% each in LC, LCV,
SC, SCV, and REITs
- International
Allocations:
1970-1974:
50% Int. LC, 50% Int.
SC
1975-1986:
25% Int. LC, 25% Int. LCV, 50% Int.
SC
1987-1994: 20% Int. LC, 20% Int. LCV, 10% EM, 5% EMS, 5%
EMV, 40% Int. SC
1995-2005: 20% Int. LC, 20% Int. LCV, 10% EM, 5% EMS, 5%
EMV, 20% Int. SC, 20% Int. SCV
2006 - 2009: 20% each in Int. LC, Int.
LCV, Int. SC, Int. SCV, and EM Core
·
Bond
Allocation is:
1970 - 1996:
30% Short-Term Treasury, 70% Intermediate-Term Government
1997 – 2009:
30% Short-Term Treasury, 50% Intermediate-Term Government, 20% TIPs.
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