3 Investment Gurus Share Their Model Portfolios


This asset mix may be appropriate for investors who seek aggressive growth and who can tolerate wide fluctuations in market values, especially over the short term. Wednesday Newsletter — Grow your money. Like Swensen, Tai advocates broader diversification than many individual investors often achieve.

Moneywise’s easy portfolios


Even in higher-risk, higher-return asset classes such as stocks you can only expect high-single digit or low double-digit returns over long periods of time. So if you end up paying 1 percent to a financial adviser, and then 1 percent to 2 percent on top of that in mutual fund fees and then adjust for inflation 2 percent to 3 percent a year , you're losing half of your returns or more, Swensen says.

The odds, he says, are overwhelmingly in favor of index funds. So Swensen says very-low-fee index funds make the most sense for individual investors. He says if you compare performance of higher-priced actively managed mutual funds to lower-cost index funds, "when you look at the results on an after-fee, after-tax basis over reasonably long periods of time," the odds, he says, are overwhelmingly in favor of index funds. When it comes to investing, Swensen says, "there is no such thing as one size fits all.

Essentially, what Swensen is saying is that when you're investing for long periods of time — 20 or 30 years, for example — you are likely to make more money holding a sizable portion of your portfolio in stocks or other assets with a high expected rate of return. That's because historically, stocks offer greater returns than "safer" alternatives such as U. Treasury bonds over the long term. But in the short term, stocks tend to be much more volatile.

So as people near retirement age, many investment advisers suggest shifting more assets to the "safer than stocks" category. If the stock market crashes and you need to be spending money out of your portfolio as income in retirement, you don't want to suddenly lose 20 or 30 percent of your savings and be forced to sell stocks at a low price.

If you're younger and stocks crash, you can just hang tight and wait for the market to recover. But it's not all about age. It's also about appetite for risk. Risk-averse investors may want to hold a combination of the model portfolio and cash, which will reduce overall risk," Swensen says. As investors grow older, tolerance for risk may decrease. Each individual needs to find a portfolio that matches their risk preferences.

Gretchen Tai Courtesy of Gretchen Tai hide caption. Active management and fees. She says whether you go with active or passive management, try to keep the total fees you are paying in your portfolio at or below 0. That's half of 1 percent. Many financial advisers charge twice that — on top of any mutual fund fees you're paying.

But Tai says she doesn't think most people need financial advisers. But all of the top advisers and economists NPR interviewed said you don't want to overpay for a financial adviser. Like Swensen, Tai advocates broader diversification than many individual investors often achieve. Given the current interest rate environment, Tai believes that "a more flexible approach" to the traditional age-based rules to bond allocation might be more appropriate.

So, Tai says her suggested portfolio is a good approach until you reach retirement age. At that point, she says, investors need to look at their nest egg: If it's big enough to live on along with Social Security, "then it's OK to reduce higher-risk assets such as stocks more quickly to 40 percent.

Jack Bogle Courtesy of Vanguard hide caption. Bogle says to invest through low-cost index funds. More information can be found at The Coffeehouse Investor. It slices up the domestic portion, but uses a total international fund. He introduced the Coward's Portfolio in The "coward" refers not to the investor's risk tolerance but to the strategy of hedging one's bets and having slices of a number of asset classes. This portfolio is similar to the Coffeehouse Portfolio except that short term bonds are used, and the international portion is divided into equal slices of Europe, Pacific and Emerging markets.

Like Bernstein he advocates short term bonds. If the domestic slices were replaced by a total market fund, this portfolio would be very close to the 3-Fund portfolios, with a slice of REIT added. His lazy portfolio uses low-cost, tax-efficient total market funds, a healthy dose of real estate, and inflation-protected securities TIPS.

The Permanent Portfolio was devised by free-market investment analyst Harry Browne in the s as a buy-and-hold portfolio that contains a healthy allocation to gold. The portfolio holds equal allocations of domestic stocks, gold, short-term treasury bonds, and long term treasury bonds. Forum members Craig Rowland and J.

Lawson have written a book, ' The Permanent Portfolio: The portfolio can be implemented with an investment in a low cost US total stock market index fund, along with direct investments in gold bullion coins, US treasury bills, and US treasury bonds. It can also be implemented with low-cost exchange-traded funds.

Below are a few examples of lazy portfolios also called simple portfolios that can be utilized by Canadian domiciled investors. Suitable alternatives from other vendors for two of the three ETFs in the table above are mentioned in the following pages: Canadian bonds and Canadian equities.

This 3-fund portfolio may appear overly simplistic. Certainly the brokerage statements will look very boring. Yet this portfolio has the following characteristics:. For equities, his Canadian: Global mix is 1: The four index fund portfolio is recommended for investors not wishing to open a brokerage account.

The following table is an example of a simple index portfolio built with "FPX Balanced" allocations, using four TD e-funds as a example of low-cost index mutual funds:. Further discussion of this example is found in Building a portfolio , including links to index mutual funds from other vendors. International mix is 1: Sticking with our Equivalent ETFs from other vendors could also be used, and are listed in the following pages: Canadian bonds , Canadian equities , US equities and International equities.