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My Investment Portfolio: Full Disclosure

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In writing about safe, simple investing, I often mention that I hold just 9 funds in 2 accounts. And often people ask me about those specific investments or accounts….

I’ve been reluctant to talk about this, for a variety of reasons. Originally I had some privacy concerns, though with a year of blogging behind me, I’m largely over those now. More importantly, portions of my portfolio stretch back almost two decades and don’t look exactly how I’d build one, or recommend one, today. For example, there are some actively managed funds and some commodity positions that I wouldn’t recommend to a new investor.

Most importantly, I simply don’t want to be in the position of recommending specific investments, much less an entire portfolio, to anybody. I’m not a professional advisor. I’m just an engineer who retired early. This blog is meant as financial education, not investment advice.

That said, when my last newsletter went out discussing my simple investing philosophy, a bunch of people responded, asking about my portfolio. And I’ve learned from past articles just how much people appreciate being able to read about a real-world retiree’s actual experience.

Also, even though I can’t recommend my entire portfolio to anybody, a number of the individual holdings are essential building blocks for mainstream passive index investors, so that might be of interest. I also believe it’s good for people to see that it doesn’t take any investing wizardry to survive market downturns and retire early. Though there have been some changes in my individual holdings over the years, the essential nature of the portfolio has remained intact for more than a decade.

So I’ve decided to make a snapshot of my portfolio public, for what lessons can be learned from my situation and decisions….

Disclaimer

Even though this portfolio hasn’t changed much in a decade, I make no promises that I won’t change it in the future, or that I’ll necessarily keep this blog up to date with my changes.

I’ll probably talk about specific investment decisions on occasion, or about my investing philosophy in a general way, but none of this is to imply you should follow my investment moves.

This is not a model portfolio that I would recommend for anybody. This is not professional investing advice.

That said, here then are my 9 holdings, with their symbols, current allocations, and some comments on what they are, and why I hold them:

Broad Market/Bond/Balanced Funds

Anybody with the right risk tolerance and time horizon might hold these:

  • Vanguard Wellesley Income (VWINX/VWIAX) [34%] — one of the oldest and most respected balanced funds. Technically, this is an actively managed fund. But the very low expense ratio and conservative investment philosophy mean it behaves similarly to a passive index fund. Routinely rebalanced to approximately 40% stocks/60% bonds, it’s my rebalancing strategy diversifier, since I do little explicit rebalancing on my own.
  • Vanguard FTSE All-World ex-US Index (VFWIX/VFWAX) [12%] — a low cost index fund with exposure to most of the markets of interest outside the U.S. including Europe, Asia, Canada, and emerging markets.
  • Vanguard Total Stock Market Index (VTSMX/VTSAX) [8%] — an extremely low cost index fund with exposure to the entire U.S. stock market. This includes small, mid, and large-cap and growth plus value stocks.
  • Vanguard Inflation-Protected Securities (VIPSX/VAIPX) [6%] — full faith and credit federal government securities that adjust based on inflation. Not necessarily a strong performer in normal times, this is some insurance against extreme inflation scenarios.
  • Vanguard Intermediate-Term Treasury (VFITX/VFIUX) [5%] — full faith and credit U.S. Treasury bonds. Essentially zero risk of default. Intermediate-term offers somewhat better yield than short-term, without taking on the risk and volatility of long-term bonds.
  • Vanguard Short-Term Investment-Grade (VFSTX/VFSUX) [5%] — higher quality investment-grade mostly corporate bonds with short maturities. Diversification keeps the possibility of significant defaults extremely low. Lower interest rate risk thanks to short term. A simple way to get higher yield than most money market funds without taking on much risk. But note that share price will fluctuate.

Specialty/Sector Funds

For experienced investors only:

  • SPDR Gold Shares (GLD) [9%] — simple, inexpensive way to own gold bullion. Some say gold is not an investment because it doesn’t pay income. In my experience it is simple insurance for when nothing else is going right in the world or in your portfolio. Note: I’ve owned this for many years, during which time gold has risen steadily. Whether or not it’s a good buy for you now, or ever, depends on your situation.
  • Third Avenue Real Estate Value (TAREX) [7%] — actively managed, value stock picking, globally diversified real estate fund from the firm of legendary value investor Marty Whitman. Due to the long investment time horizon and a high expense ratio, not suitable for the average investor. A low-expense REIT index fund could be better.
  • T. Rowe Price New Era (PRNEX) [5%] — a very old and established, actively-managed fund that invests in natural resources industries such as energy, mining, and agriculture. Could be a strong investment in a world with high inflation and shortages of raw materials. But you may be able to cover the same territory with a less expensive index fund.

Final Notes

In addition to the above, I’m holding about 8% cash right now. Overall, I’m about 44% in stocks, with the rest in bonds, cash, and gold.

Why don’t I own more ETF’s? Nearly all of my Vanguard holdings are in lower-cost Admiral shares, which carry roughly the same expense ratios as comparable ETFs. Also, I simply don’t need the intraday trading capabilities of ETFs, when I can easily go a year without trading. Lastly, having a mixture of ETFs and mutual funds would make it hard to do a simple exchange for rebalancing. So I mostly continue to hold mutual funds.

Why don’t I sell my more expensive actively-managed funds and replace them with low-cost passive index funds? In some cases there would be punishing tax consequences, because I’ve held the funds in question for many years and have large capital gains. But there are two other important reasons. First, I simply don’t make any large investment moves without an overwhelming need. That has proven a profitable strategy over the long haul. Second, owning a very few actively-managed funds serves to hedge the passive index investing strategy for most of my money. If passive index investing has a long dry spell, perhaps my few, but seasoned, active money managers will bring home the bacon. But I doubt it. That’s why the majority of our investments are in low-cost passive index funds and a low-cost low-turnover balanced fund.

As for my two investing accounts, that’s indeed very simple. Our entire investment portfolio is currently split about half and half between a tax-sheltered retirement account, and a taxable account. The retirement account is entirely at Vanguard, and the taxable account is entirely at Schwab (and also holds some Vanguard funds). I continue to be very happy with both companies. And I also sleep a little easier with our assets diversified in two places. I don’t harbor any real concerns about either of these company’s financial health, or the layers of insurance and financial controls protecting my holdings. But in the event there were short-term issues, like a computer snafu or identity theft, I like that all our funds are not behind a single door.

Comments

  1. Cool. But for those interested in retiring early, what about the amounts?

    Thnx!

    Sam

  2. Glad to see you posting again! I thought you'd be off the radar until January. Thanks for posting your allocations. It's always nice to see how others in the early retirement arena are invested. Given that your portfolio is relatively light on stocks, do you have concerns about running out of money during your long retirement? Did the calculators you used indicate a high probability of having a lasting portfolio with these allocations? Are concerns on that front why you have previously posted about the future likelyhood of incorporating annuities?

  3. Hi Darrow….

    Interesting collection you've acquired there. It will be interesting to see what it looks like a year from now.

    A few years back, when I decided to simplify, I faced some of the challenges you mentioned in unloading long-held taxable funds. My solution was to draw the money I needed first from them, depleting them over time and less painfully.

    I'm curious, why do you hold some of your Vanguard funds thru Schwab?

  4. Thanks for this Darrow.

    It is helpful to know what is working for someone in the present day world. I found it helpful when Mike Piper at Oblivious Investor posted his portfolio as well.

    It nice to compare what people are doing with their investments at different times in their lives. Right now we are at least 12-15 years from retirement. It is helpful to know what our portfolio could look like with regard to asset allocation and possibly mutual fund selection.

    We currently hold 3 of the same Vanguard funds you have. The VTSAX, VAIPX, VFIUX. We also hold the Vanguard Total International VTIAX. Is there a reason why you dont hold it and does your holding Vanguard FTSE All-World ex-US Index substitue for it?

    I am going to research VFSTX/VFSUX as a candidate for a portion of our emergency fund that is currently in an Ally Bank savings account earning VERY little. šŸ™

    Happy holidays and happy trails, Mike

  5. Darrow Kirkpatrick says:

    Sam: Thanks. It's not an exact science, but I do talk about amounts in my free eBook that anybody can sign up for and download. And a number of my Related Articles collected together under Your Retirement Fuel Gauge also touch on the topic.

  6. Darrow Kirkpatrick says:

    prob8: Thought I'd get a post out so everybody would know I was still here! (The next one probably won't be until sometime in January.) To answer your questions — I think anyone who studies this area of personal finance has at least some healthy concern about running out of money. In my case, it's not because of a less-than 50% stock allocation. In general, most models I've used don't forecast huge variation in portfolio survival rates for allocations in that range. I do believe that annuities, plus a flexible low-cost lifestyle, are some of the most powerful tools at our disposal for ensuring a comfortable retirement going forward. But I'm not ready, or in need of, any big changes in strategy at this point.

  7. Darrow Kirkpatrick says:

    Jim: Hi, thanks for the comment and for visiting the blog! Yes, I too will draw down those taxable holdings with big gains over time. Haven't needed to much yet, but did sell a small amount as described here.

    I hold those Vanguard funds at Schwab simply out of habit and for simplicity. All our taxable money is there, and I like seeing it in one place, instead of having another sub-account at Vanguard. The extra expense is minimal since I rarely trade, though I will have to give some thought to what I'm missing by not getting access to Admiral shares at Schwab….

  8. Darrow Kirkpatrick says:

    cowboy Mike: Thanks — it's good to hear from you. I did hold Vanguard Total International for a while but moved to the FTSE All World ex-US a couple years ago because, at that time, Total International didn't have any exposure to Canada. It appears that is no longer case since Vanguard changed the underlying index used by Total International in 2010. The two funds are very similar now. The main difference that I can see is that Total International has exposure to small cap stocks.

  9. Good stuff Darrow. About what fraction of your investments are pre-tax (IRA, 401K) vs. after-tax (cash, gold). I’m running about 60-40. Any advice on this mix?

    • Hi Tom, nice hearing from you and thanks for the feedback! That’s an interesting question. My investments are still about 50/50 taxable vs. tax sheltered. But I don’t believe there is a one-size-fits-all answer. A typical worker retiring at traditional retirement age is urged to max out retirement contributions, and might have most of their assets in a tax-sheltered account. But, as a potential early retiree, I actually took care to save substantial assets outside of retirement accounts so I wouldn’t be penalized for early withdrawals needed for living expenses before reaching age 59-1/2. Though I did always contribute the maximum possible to get any matching funds in my retirement accounts. I think the only way to get an accurate answer to this question is to model it for your own scenario. When I did that while approaching retirement in my late 40’s, it generally showed that 50/50 was about the right mix for me, so that our taxable assets would last up to around age 59-1/2. Though at this point, it appears they should last a good bit longer.