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Strategy Research, Smart Money Intelligence, Fund Analysiswww.MyPlanIQ.com: Asset Allocation for 401(k), ETFs, Annuities, ... |
Frank Armstrong's Ideal Index Portfolio
ASSET ALLOCATION STRATEGY
Frank Armstrong’s Ideal Index Portfolio:
- 31% in Vanguard Total International Stock (VGTSX)
- 30% in Vanguard Short-Term Bond (VBISX)
- 9.25% in Vanguard Small Cap Value (VISVX)
- 9.25% in Vanguard Value (VIVAX)
- 8% in Vanguard REIT (VGSIX)
- 6.25% in Vanguard Small-Cap Growth (VISGX)
- 6.25% in Vanguard 500 Index (VFINX)
The portfolio uses index funds because index funds eliminate manager risk. It overweights small-cap stocks because of the reason that historically small-cap stocks have outperformed large caps stocks. The portfolio has a strong value tilt, because academic theory predicts that, over very long periods, the style of investing that stresses beaten-down stocks will do better than the high-flying growth approach.
Theoretically, the mix of indices these funds represent could be expected to deliver annualized returns of 11.02%. But in real world it is impossible to achieve because of expense ratios and the friction costs of securities ownership.
Frank Armstrong uses Monte Carlo analysis to produce forecasts expressed as probabilities.Here are the probabilities that result from investing $25,000 a year in this mix of funds:
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Inflation-adjusted portfolio returns
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See Also
1.Kirk Report: Frank Armstrong's Ideal Index Portfolio.