Port v.5 Portfolio

[oldmannickels]

I recently went to a retirement course for work and the instructor talked about a portfolio construction method called Port v.5 that outperformed S&P 500 index since 1975 with lower volitility. Has anyone ever heard this, looking to do more research?

Mix is:
40% Short Term Bonds
60% Equities split as follows:

7.5% US Stock
7.5% Large International Stocks
7.5% Small US Stocks
15% Small International Stocks
7.5% Large Value US Stocks
7.5% Large Value International Stocks
7.5% Small US Value Stocks


Also, people in this class are assuming $120k in expenses in retirement...

[Radagast]

Looks a lot like the Merriman Ultimate Buy and Hold Portfolio, but not quite as elegant. You should also research the TrevH four slice simplification. Nothing wrong with it, but with 40% in short term bonds you should not necessarily expect it to stay ahead of the S&P500.

[GreatLaker]

I also thought this looks a lot like the Merriman Ultimate Buy and Hold Portfolio.
http://paulmerriman.com/ultimate-buy-hold-strategy-2016/#

What did the instructor think of the portfolio?

Some comments:

• It has large tilts to value and small cap stocks
• These are historically more risky so investors demand higher reward for investing in them, hence the higher performance
• such performance in the past does not guarantee similar performance in the future. Availability of more information much faster today seems to have increased the difficulty of finding value, and eroded the benefit
• Merriman makes a very compelling case for it
• In the Four Pillars of Investing author Bill Bernstein explains a similar portfolio strategy
• It's harder to implement than a simple 3 fund Bogleheads type portfolio, especially across multiple accounts
• small cap and value stocks often go through long periods of underperforming and outperforming the overall market
• you need a strong belief in the strategy and a lot of tenacity to hold on during the low performing years

[oldmannickels]

The instructor was more of a presenter than an instructor and didn't know the data behind the numbers in the table.

Merriman's case is really interesting though.....will need to think about it.

[GreatLaker]

If you get tired of that one there is:
150 Portfolios Better Than Yours
http://whitecoatinvestor.com/150-portfolios-better-than-yours/

[ChpBstrd]

If you ask me, it's kinda schizo to go 40% into international stocks and 40% into short term bonds. If you graphed that portfolio by risk, it would look like a "U". Why not flatten that thing out and pay lower fees and international taxes while you do it?

The simple way to beat the S&P 500 (e.g. SPY) is to buy a small cap fund (e.g. VB). But then, of course, you're just trading higher volatility for higher return.

[Radagast]

Looks fine to me. It has 40% in safe bonds, 30% in US stocks, and 30% in international stocks which should avoid any huge risks. It has lots of small and value tilts which in theory are supposed to keep the return high despite the huge bonds drag, though it's anybody's guess whether they will actually succed in doing that.