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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.

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