Personal Investments • Portfolio Review and Empower Question

Before I make the trades, I wanted to share what I think my portfolio will look like and see if you (or anyone else) had any additional thoughts.

Big Picture AA of 80/20

45% VTI (or VITSX/FZROX, depending on account)
10% VYM (for the Value tilt and lower expense ratio compared to VEIRX)
25% VTSNX (or VXUS, depending on account)
20% VBTLX (in a 403b)

I know I don't "need" VYM but the additional value tilt it provides does make me feel better and I believe I can stick with it long term. I'm looking to make this exchange my last one for a very long time.

I think if I was going to retain a tilt, then it would be Vanguard Small Cap Value ETF (VBR) per the Fama-French research paper, rather than Vanguard High Dividend Yield Index (YVM) (which is large-value rather than small-value). However, you've limited your gamble to 10% (I'm pretty sure that was one of Mr. Bogle's "if you must" thresholds), so if you really think large-value will be better than small-value, despite the PhD research (which hasn't predicted forward very well since it was published), then that's ok.

1.) I tend to gravitate towards a 90/10 AA (with 20 years until retirement) but given how richly valued the equities markets are right now, maybe 80/20 is a better move??? I haven't been in the game long enough to have any significant losses, so while my logic tells me I have a higher potential for rewards at 90/10, and that I have lots of time to recover, I haven't had the emotional pain of losing 30-50% of my portfolio. Is the standard deviation at 20% Bonds worth the drag on growth it causes? Am I missing something else?

You can look at fundamental indicators like 500-Indxe Price-Earnings Ratio (P/E) and technical indicators like Relative Strength Index (RSI) or Moving Average Convergence-Divergence (MACD) (see BigCharts), but unless your last name is Buffet, it's not likely that you (nor the vast majority of individual investors) can accurately assess that equities are overpriced or underpriced, although there are many books, articles, and subscription newsletters that will tell you that they can give you accurate indicators for forecasting the future price movement of equities, none of them are dumb enough to promise that, and the convincing ones will make you believe they know and will share that knowledge for a fee which is guaranteed to help their bottom line but no such guarantee for the "knowledge" you paid for actually having future value.

If you're nervous about a market crash of (let's say) -50%, then 90/10 is going to have a -45% drop while 80/20 is going to have a -40% drop. Are those actually different enough (to you) to improve your "Sleep Well at Night" (SWAN) factor? Because that's the reason to change your AA, not because equities are over/under priced (which is essentially market timing and the Boglehead Philosophy is to never try to time the market).

2.) If I did go with 90/10, is +5% to VTI and +5% to VXUS the logical move? Or +2.5% VYM and +2.5% VTI with +5% VXUS? Or a 1/3 each? Or am I just overthinking all this again???

I would shift to try and maintain your 90/10 AA, given a specific int'l exposure of about 35% of total stocks (so your target is 58.5% US Stock, 31.5% Int'l Stock, and 10% bonds). Given those targets, that tells me where to add/subtract to VTI (US) and VXUS (Int'l). If YVM would be >15% of total portfolio then I'd throw that into the mix, but it's probably a small enough slice that it wont' be off by more than ±5%, so just leave it as is and only tweak VTI and VXUS.

35% is in your opening post (30% Int'l / (30% Int'l + 55% US) = 35% Int'l as % of stocks), so that's why I used that int'l exposure value.

Statistics: Posted by bonesly — Mon Sep 30, 2024 9:08 pm — Replies 4 — Views 866

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