Trying to understand aggressive portfolio strategies?

[manlymatt83]

I've been doing a lot of research on retirement strategies lately. I'm 34, and while luckily most of the years I've been maxing out my IRA have been during this long bull market, I honestly haven't really had a strategy... I've owned a bunch of stocks, some ETFs, but mostly have just been lucky. I want to change that.

I believe a few things, based on my research:

• small cap stocks due tend to outperform over a longer period of time...
• equal weight ETFs interest me a lot, versus direct index funds
• I believe gold is still a good hedge and would love to have it in my portfolio
• REITs are interesting as alternatives, too. Especially REITs like "O" which pay dividends monthly and seem to have a lot of fans.
• While maybe not aggressive, the trident portfolio (or similarly, the permanent portfolio) seems interesting to me. 33% in gold, 33% in treasuries, 33% in small cap value stocks.
• rebalancing is so, so important. Maybe on a percentage... so if you're allocated 60/40 and you end up at 65/35, rebalance. I 100% have the discipline to rebalance, provided I have a strategy I can follow.

I've been looking at all the robo investors, and frankly... they aren't fun to me (I like to be involved), and I don't really want to give up .25% - .50% annually just to have someone do something for me I can do with ETFs.

My brokerage recently decided to close and sell to E*Trade, so I'm considering opening a Schwab account, and building a new strategy around the commission-free ETFs they have. Does anyone have any similar methodologies to me? As a 34 year old, should I just be sticking 80-90% in stocks still, and avoiding treasuries and gold all-together? With a likely bear market coming, can I do a 33/33/33 split for 5 years and as the market hopefully corrects, rebalance out of the gold/treasuries into stocks at a lower cost? If I go 100% into stocks, how can I possibly rebalance as things change...? I won't have anything to buy into should stocks start to drop...

Thanks in advance!

 

[pete6032]

I've been doing a lot of research on retirement strategies lately. I'm 34, and while luckily most of the years I've been maxing out my IRA have been during this long bull market, I honestly haven't really had a strategy... I've owned a bunch of stocks, some ETFs, but mostly have just been lucky. I want to change that.

I believe a few things, based on my research:

• small cap stocks due tend to outperform over a longer period of time...
• equal weight ETFs interest me a lot, versus direct index funds
• I believe gold is still a good hedge and would love to have it in my portfolio
• REITs are interesting as alternatives, too. Especially REITs like "O" which pay dividends monthly and seem to have a lot of fans.
• While maybe not aggressive, the trident portfolio (or similarly, the permanent portfolio) seems interesting to me. 33% in gold, 33% in treasuries, 33% in small cap value stocks.
• rebalancing is so, so important. Maybe on a percentage... so if you're allocated 60/40 and you end up at 65/35, rebalance. I 100% have the discipline to rebalance, provided I have a strategy I can follow.

I've been looking at all the robo investors, and frankly... they aren't fun to me (I like to be involved), and I don't really want to give up .25% - .50% annually just to have someone do something for me I can do with ETFs.

My brokerage recently decided to close and sell to E*Trade, so I'm considering opening a Schwab account, and building a new strategy around the commission-free ETFs they have. Does anyone have any similar methodologies to me? As a 34 year old, should I just be sticking 80-90% in stocks still, and avoiding treasuries and gold all-together? With a likely bear market coming, can I do a 33/33/33 split for 5 years and as the market hopefully corrects, rebalance out of the gold/treasuries into stocks at a lower cost? If I go 100% into stocks, how can I possibly rebalance as things change...? I won't have anything to buy into should stocks start to drop...

Thanks in advance!

https://www.bogleheads.org/wiki/Lazy_portfolios

 

[manlymatt83]

https://www.bogleheads.org/wiki/Lazy_portfolios

Interesting!

If I have the heart not to sell everything in a market plunge, would simply going 100% S&P be better historically?

 

[pete6032]

Interesting!

If I have the heart not to sell everything in a market plunge, would simply going 100% S&P be better historically?

It really depends on the time frame you are looking at, but, over the long term, I believe the answer is yes. However you may not want a 100% stocks portfolio 30 years from now when you're ready to retire.

 

[manlymatt83]

It really depends on the time frame you are looking at, but, over the long term, I believe the answer is yes. However you may not want a 100% stocks portfolio 30 years from now when you're ready to retire.

Yeah, looking at 30 years+

 

[Zeze]

Crypto.

Honestly you feel like a sucker getting excited about 20% annual gains if that ever happens.

Join the dark side and enjoy 200x of that 20%.

 

[manlymatt83]

Crypto.

Honestly you feel like a sucker getting excited about 20% annual gains if that ever happens.

Join the dark side and enjoy 200x of that 20%.

I own some Crypto personally. Mostly just looking for an IRA strategy at this point. What I should balance in my $5500/year tax deferred account.

 

[s0me0nesmind1]

I own some Crypto personally. Mostly just looking for an IRA strategy at this point. What I should balance in my $5500/year tax deferred account.

You should rebalance to 50% hookers, 50% blow.

 

[zinfamous]

Crypto.

Honestly you feel like a sucker getting excited about 20% annual gains if that ever happens.

Join the dark side and enjoy 200x of that 20%.

yes, for anywhere between 1 month and 24 months or so of time. then you are also looking at -1000% gains, as possible.

alternatively, I have a bushel of cheap tulips that I'm looking to unload.

 

[Zeze]

yes, for anywhere between 1 month and 24 months or so of time. then you are also looking at -1000% gains, as possible.

alternatively, I have a bushel of cheap tulips that I'm looking to unload.

2018 is bullish. I'm already up 220%~, this is despite the currently prolonged big January dip (entire crypto market cap halved!).

 

[zinfamous]

2018 is bullish. I'm already up 220%~, this is despite the currently prolonged big January dip (entire crypto market cap halved!).

the mistake you keep falling into is believing that you know more than nothing. You don't, neither do I, and neither does anyone else. From analyst to analyst, traders will write themselves into explaining what is going on behind an obvious dip or an obvious ride, from day to day, gleefully contradicting themselves but always sure that today, they always knew what was happening yesterday, long before yesterday. Of course it is easy to sound brilliant then. Until you are very much wrong the following day.

We've got well over a hundred years of data that tells us that in the short term, we still don't really know that much about the market but in the long term, we can make very solid predictions about how things are moving. With crypto, we don't really know anything. It's like investing in some unstable central american dictatorship: it's a wild and euphoric high at the beginning, if your timing is right and you are good with the regime, but it can all turn south in a second if the real powers in charge--say the world bank or various feds decide that they are just going to do their own crypto, or simply stop honoring such transactions...because they can--want it to. You're left holding the bag and your gleeful high looks very very stupid....until you convince yourself the next day that you knew it all along.

A lot of naive nerds are going to get/have gotten very, very rich off of crypto, but vastly, vastly more are going to end up penniless because of the same euphoria that has happened again, and again, and again. This very much is tulips and it's best not to pretend that grey-area math backing it is going to make it any different from the very real weakness of this ponzi scheme. I know you started this thing tremendously cautious and very reasonable--but I see you falling into the new year "everything is bullish!" fake hype. I encourage you to step back and remember where you were a few months ago and if none of that makes sense to you anymore, at the very least stop projecting this euphoria as a different kind of sage advice.

In the end, the market will very likely always win. Of course that doesn't mean that being in position to and taking a chance to grab 200-1000% games during the window that they are available is a terrible idea. It's a great idea. Just don't pretend that it is guaranteed.

 

[ImpulsE69]

I will state, people who are much smarter about this than me, have made their money in crypto and are now walking away from it.

 

[Zeze]

the mistake you keep falling into is believing that you know more than nothing. You don't, neither do I, and neither does anyone else. From analyst to analyst, traders will write themselves into explaining what is going on behind an obvious dip or an obvious ride, from day to day, gleefully contradicting themselves but always sure that today, they always knew what was happening yesterday, long before yesterday. Of course it is easy to sound brilliant then. Until you are very much wrong the following day.

We've got well over a hundred years of data that tells us that in the short term, we still don't really know that much about the market but in the long term, we can make very solid predictions about how things are moving. With crypto, we don't really know anything. It's like investing in some unstable central american dictatorship: it's a wild and euphoric high at the beginning, if your timing is right and you are good with the regime, but it can all turn south in a second if the real powers in charge--say the world bank or various feds decide that they are just going to do their own crypto, or simply stop honoring such transactions...because they can--want it to. You're left holding the bag and your gleeful high looks very very stupid....until you convince yourself the next day that you knew it all along.

A lot of naive nerds are going to get/have gotten very, very rich off of crypto, but vastly, vastly more are going to end up penniless because of the same euphoria that has happened again, and again, and again. This very much is tulips and it's best not to pretend that grey-area math backing it is going to make it any different from the very real weakness of this ponzi scheme. I know you started this thing tremendously cautious and very reasonable--but I see you falling into the new year "everything is bullish!" fake hype. I encourage you to step back and remember where you were a few months ago and if none of that makes sense to you anymore, at the very least stop projecting this euphoria as a different kind of sage advice.

In the end, the market will very likely always win. Of course that doesn't mean that being in position to and taking a chance to grab 200-1000% games during the window that they are available is a terrible idea. It's a great idea. Just don't pretend that it is guaranteed.

Well written mostly except you Can deduce some info than just saying "at 11,000 feet, this crap is unpredictable". Yes Blockchain & distributed ledger WILL provide new use cases for businesses in numerous applications (supply chain, currency, crm, etc).

Keep in mind I hold 0 in blockchain used for alternative currency. All of mine are related to supply-chain. Feds/Banking cracking down will have less effect (although it will negatively impact due to Bitcoin pairing).

I also challenge you to dive a bit deeper than constantly repeating your position - especially this new coin called PLY (Pulleys - how do they work)

 

[pete6032]

I own some Crypto personally. Mostly just looking for an IRA strategy at this point. What I should balance in my $5500/year tax deferred account.

I would highly recommend reading through the Bogleheads website in my reply. Before I read through the Bogleheads material I was convinced that I could beat the market by making better investments than anyone else because, hey, I'm a smart guy and most people are idiots. After reading Bogleheads I realized its much better to get rich slowly, and that its more profitable to grow slowly but surely with the market. Vanguard funds have some of the lowest fees around.

 

[snoopy7548]

I would highly recommend reading through the Bogleheads website in my reply. Before I read through the Bogleheads material I was convinced that I could beat the market by making better investments than anyone else because, hey, I'm a smart guy and most people are idiots. After reading Bogleheads I realized its much better to get rich slowly, and that its more profitable to grow slowly but surely with the market. Vanguard funds have some of the lowest fees around.

I converted to the Boglehead strategy about four years ago and never looked back. The only things you can control are expense ratios and your asset allocation, time in the market beats timing the market, etc. Lazy 3-fund portfolio = the best thing since sliced bread.

 

[DaveSimmons]

Yeah, looking at 30 years+

The idea is to stay mostly in stock index funds until you're nearing retirement, then start shifting to bonds and CDs. So you'd go with mostly stocks now then start shifting in around 20 years (new investments, dividends, maybe selling stock funds during a bull market).

I have $0 in gold, since I figure any situation that wipes out the dollar is going to be Mad Max times where your shiny metal is useless and you need guns, food and power armor.

I have a decent amount in cash ("high interest" online savings :-b ) for peace of mind for emergencies, job change, etc. and so I never need to sell index funds during a bear market.

I have most of my money in stock index funds, but am gradually adding bond funds as I get closer to retiring.

I have $0 in altcoins, because I see them as a speculative bubble and I don't believe I can time the market to cash out before they pop. Blockchain and coins will be used by megacorps and nation-states, but they have no reason to use existing ones instead of creating their own and all of the major IP existed before bitcoin and is not controlled by any patents (as far as I know).

To me, boring is good. I treat investing as work not a hobby, so I don't set aside any of my money to play with or speculate on. It goes to the funds, and I then ignore them since they'll be staying there for years. With this approach I probably only spend 10-15 hours a year on investing.

 

[dullard]

I believe a few things, based on my research:
small cap stocks due tend to outperform over a longer period of time.

Lets break that down even further. http://www.efficientfrontier.com/ef/902/vgr.htm Small VALUE stocks tend to overperform, albeit at a higher risk. Small GROWTH stocks are both the most risky and the worst performers. You should have some small growth stocks, but don't overdo it. If there was anything to leave out of a portfolio, I would leave small growth out.

equal weight ETFs interest me a lot, versus direct index funds

Don't put time and energy into that area. The difference is often so minor, and there is no way to really tell which will be better in the future, that you are better off focusing your time and energy into other investment decisions.

I believe gold is still a good hedge and would love to have it in my portfolio

Gold is an okay way to diversify. Having gold is good in a portfolio. But, don't overdo it. You have roughly 30 years until retirement. If say 30 years ago, you invested $10,000 in gold, you would now have $31,632. Sounds great. Until you realize that if 30 years ago, you invested $10,000 in a general S&P500 tracking fund, then you would now have $207,899. https://www.portfoliovisualizer.com...folio3=Custom&TotalStockMarket2=100&Gold1=100

Keep your gold exposure under about 10% of your whole portfolio. In small quantities, gold is a great way to diversify and rebalance, but with too much, you will realize that the only way to make money with gold is to find a bigger sucker than you as gold doesn't have profits like companies do.

REITs are interesting as alternatives, too. Especially REITs like "O" which pay dividends monthly and seem to have a lot of fans.

Same comments as with gold. Have a REIT, but keep it to under ~10% of your portfolio. What is especially important is if you own your own home, to remember that the house value is part of your portfolio. With that in mind most homeowners are way, way, way over-invested in real estate. So adding a REIT on top of a house puts you even further into real estate. Real estate is great, but you can do so much better if you also invest in other stocks.

While maybe not aggressive, the trident portfolio (or similarly, the permanent portfolio) seems interesting to me. 33% in gold, 33% in treasuries, 33% in small cap value stocks.

Trident is certainly not aggressive and doesn't tend to do well over the long run. You have 30+ years until retirement, you do not need a conservative clunker like trident. $10,000 invested in trident 30 years ago would now be worth $128,200, but $10,000 invested in just a simple S&P500 tracking fund 30 years ago would be worth $207,899. Trident growth was about half that of just a simple fund. https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults

rebalancing is so, so important. Maybe on a percentage... so if you're allocated 60/40 and you end up at 65/35, rebalance. I 100% have the discipline to rebalance, provided I have a strategy I can follow.

Rebanancing is good, but it isn't as good as people claim it is. Pick a portfolio allocation that you want. Rebalance once a year, or even once every other year. Simple as that. This way you are forced to periodically sell high and use that money to buy low.

As a 34 year old, should I just be sticking 80-90% in stocks still, and avoiding treasuries and gold all-together? With a likely bear market coming, can I do a 33/33/33 split for 5 years and as the market hopefully corrects, rebalance out of the gold/treasuries into stocks at a lower cost? If I go 100% into stocks, how can I possibly rebalance as things change...? I won't have anything to buy into should stocks start to drop.

With 30+ years until retirement, yes you want to be 80% to 90% stocks. Hoping for a stock crash is usually a loser's bet. You might do well with it, but in the long run, making that gamble has never paid off. Over 30 years, stock funds always go up. You also can rebalance with 100% stocks. You can rebalance between US and foreign stocks, rebalance with value vs growth stocks, rebalance with large vs small stocks, etc.

If I have the heart not to sell everything in a market plunge, would simply going 100% S&P be better historically?

Pick one of the lazy portfolios and forget about it. Or, I would suggest the Sheltered Sam portfolio here (since you are talking about a tax sheltered IRA): https://www.bogleheads.org/wiki/Talk:Slice_and_dice#2002_-_The_Four_Pillars_of_Investing_pp.265-273

Historically you'll do far better doing that than anything you have proposed above. Investing is about your future. You want investing to be simple and boring. That way, you are almost guaranteed to have a great future. Do what Warren Buffet says to do: buy boring mutual funds. https://www.cnbc.com/2017/10/03/aft...fett-says-hed-wager-again-on-index-funds.html

 

[WhoBeDaPlaya]

50% FGCKX, 40% VIMAX, 10% bonds.
Done.

Insanely good returns last year (~37%)
Insanely good returns so far this year (~8-10% this MONTH alone!)

 

[DaveSimmons]

50% FGCKX, 40% VIMAX, 10% bonds.
Done.

Insanely good returns last year (~37%)
Insanely good returns so far this year (~8-10% this MONTH alone!)

Some people do like them but I stay far, far away from actively managed stock funds. Besides the high expense ratios compared to index funds they mostly do worse than the S&P 500 over time. Hot today, big losses a year or two or five from now.

 

[WhoBeDaPlaya]

I stay far, far away from actively managed stock funds. Besides the high expense ratios compared to index funds they mostly do worse than the S&P 500 over time. Hot today, big losses a year or two or five from now.

Errr no, not in this case. FGCKX's ER is a higher (0.66) than Fidelity's S&P500 index (0.03 or 0.06),
but over the long run it has returned 1.5-2% more, which more than offsets the higher ER, so that's the only exception I made.

One can just buy a total market index like VTSAX to keep things simple, but I prefer weighting mid + large cap.

 

[brianmanahan]

One can just buy a total market index like VTSAX to keep things simple, but I prefer weighting mid + large cap.

small cap returns have had a roughly %3 premium over large cap returns for the past 80 years though

 

[WhoBeDaPlaya]

small cap returns have had a roughly %3 premium over large cap returns for the past 80 years though

Won't dispute that, but I just like keeping it mid + large.
Love the Buffet / Boglehead strategy - just leave the dough in there and forget about it.
It's boring, and not sexy; exactly the way it should be.

I guess you could spice things up with REITs, etc. if you wanted to.

 

[zinfamous]

Well written mostly except you Can deduce some info than just saying "at 11,000 feet, this crap is unpredictable". Yes Blockchain & distributed ledger WILL provide new use cases for businesses in numerous applications (supply chain, currency, crm, etc).

Keep in mind I hold 0 in blockchain used for alternative currency. All of mine are related to supply-chain. Feds/Banking cracking down will have less effect (although it will negatively impact due to Bitcoin pairing).

I also challenge you to dive a bit deeper than constantly repeating your position - especially this new coin called PLY (Pulleys - how do they work)

dude, put up some PLY coins and I'll invest!

My core position that I keep repeating is simply that neither you, nor I, nor anyone else really knows the future, but of course anyone can sound brilliant when figuring out how to talk about yesterday. I think it's pretty clear that altcoins in general and to some degree the larger cryptos are indeed a very temporary bubble waiting to explode, but yes--I think the real future is in the "supply mechanism." The underlying technology.

I see it as the underlying security/authentication infrastructure for modern municipalities and global corporations. An individual coin is inherently valueless looking at the long term, because any or all of them can simply be devalued in an instant if any number of fed banks or the world bank decide to throw in. There is nothing to stop them from doing this beyond the simple will to do it....being convinced well enough that there is an inherent threat to world currency and catastrophic economic collapse.

 

[Sho'Nuff]

I've been doing a lot of research on retirement strategies lately. I'm 34, and while luckily most of the years I've been maxing out my IRA have been during this long bull market, I honestly haven't really had a strategy... I've owned a bunch of stocks, some ETFs, but mostly have just been lucky. I want to change that.

I believe a few things, based on my research:

• small cap stocks due tend to outperform over a longer period of time...
• equal weight ETFs interest me a lot, versus direct index funds
• I believe gold is still a good hedge and would love to have it in my portfolio
• REITs are interesting as alternatives, too. Especially REITs like "O" which pay dividends monthly and seem to have a lot of fans.
• While maybe not aggressive, the trident portfolio (or similarly, the permanent portfolio) seems interesting to me. 33% in gold, 33% in treasuries, 33% in small cap value stocks.
• rebalancing is so, so important. Maybe on a percentage... so if you're allocated 60/40 and you end up at 65/35, rebalance. I 100% have the discipline to rebalance, provided I have a strategy I can follow.

I've been looking at all the robo investors, and frankly... they aren't fun to me (I like to be involved), and I don't really want to give up .25% - .50% annually just to have someone do something for me I can do with ETFs.

My brokerage recently decided to close and sell to E*Trade, so I'm considering opening a Schwab account, and building a new strategy around the commission-free ETFs they have. Does anyone have any similar methodologies to me? As a 34 year old, should I just be sticking 80-90% in stocks still, and avoiding treasuries and gold all-together? With a likely bear market coming, can I do a 33/33/33 split for 5 years and as the market hopefully corrects, rebalance out of the gold/treasuries into stocks at a lower cost? If I go 100% into stocks, how can I possibly rebalance as things change...? I won't have anything to buy into should stocks start to drop...

Thanks in advance!

When considering whether to actively manage your portfolio (agressive investing) or invest in an index, it is hard to argue with Warren Buffet.

https://www.usatoday.com/story/mone...-against-hedge-funds-girls-charity/996993001/

 

[manlymatt83]

I would highly recommend reading through the Bogleheads website in my reply. Before I read through the Bogleheads material I was convinced that I could beat the market by making better investments than anyone else because, hey, I'm a smart guy and most people are idiots. After reading Bogleheads I realized its much better to get rich slowly, and that its more profitable to grow slowly but surely with the market. Vanguard funds have some of the lowest fees around.

Thank you! I've been reading the pages over there for a few days now since you suggested them, and even made a few posts. Appreciate it. I think the knowledge there is really solid.