How to Fix the Flawed Tilt with the PP's Equity Component

[Kbg]

I must not be understanding your first post as it sure seems to me a 50/50 split is good enough for government work

[MachineGhost]

I must not be understanding your first post as it sure seems to me a 50/50 split is good enough for government work

"Government work"???

[sixdollars]

MG,

Great work, the only qualm I have with implementing something like this is that adding 2 to 3 more funds feels like a big hit to re-balancing simplicity.  If you find any way to implement this with less (i.e. two funds), please let me know

I'm mostly invested in VTSAX for my stock portion of the portfolio at the current time.

[Kbg]

I must not be understanding your first post as it sure seems to me a 50/50 split is good enough for government work

"Government work"???

Close enough.

[MachineGhost]

That's why Motif is ideally suited.  You can rebalance up to 30 stocks/ETF's for $9.95 and do it by setting exact weight percentages.  And since you would need to rebalance annually to match a marketcap weighted fund's rebalancing frequency, that is really nothing.  However, Schwab does look superior at this point in terms of overall fees.  I'm not too familiar with their order management system -- anyone know if they have a portfolio rebalancing by weight feature?

[MachineGhost]

I must not be understanding your first post as it sure seems to me a 50/50 split is good enough for government work

"Government work"???

Close enough.

Explain what the hell you mean?

[Dieter]

MG,

Great work, the only qualm I have with implementing something like this is that adding 2 to 3 more funds feels like a big hit to re-balancing simplicity.  If you find any way to implement this with less (i.e. two funds), please let me know

I'm mostly invested in VTSAX for my stock portion of the portfolio at the current time.

I don't have the fancy tools, but per free MorningStar Portfolio X-Ray:

VTSAX: 40% (VG Total Stock Market)
VEXAX: 60% (VG Extended Market)

Gives:
Large: 33%
Mid:    36%
Small: 31%

Or:
38/34/27 if replace Total Stock with VLCAX (VG Large Cap Index)
34/32/34 with 40% VLCAX Large Cap Index; 60% VSMAX Small Cap Index

Far from exact, but closer in two funds and more balanced cap-wise than total by itself... (73/18/9 per MorningStar)

[MachineGhost]

I thought that was interesting.  I've taken out Mega/Large in a backtest from 1972 to 2014 to see their contributions towards returns:

[align=center][img width=800]http://i.imgur.com/qmPoTXz.png[/img][/align]

The EW PP weights were:

Mega    0%
Large    0.29%
Mid    17.20%
Small    20.00%
Micro    20.00%

Difference from 100% in T-Bills.  So basically all market caps other than Mega/Large contribute 94% vs long-term market cap weighted returns.  Mega/Large contributes only 6%.  Too bad I can't eliminate Mega only.  That might have been a bigger eye opener.

[Greg]

"Government work"???

Close enough.

Explain what the hell you mean?

Good enough for government work definition:

sufficiently close; done just well enough. (Alludes to the notion that work for the government is not done with care or pride.)
"I didn't do the best job of mending your shirt, but it's close enough for government work."

[Kbg]

Let's go with sufficiently close...vice the rest.

Close enough.

Explain what the hell you mean?

Good enough for government work definition:

sufficiently close; done just well enough. (Alludes to the notion that work for the government is not done with care or pride.)
"I didn't do the best job of mending your shirt, but it's close enough for government work."

[fi50@fi2023]

I use the Paul Merriman "Ultimate Buy and Hold Portfolio" for my equity component.  It is equal weighted between US/International and diversified between, large, large value, small, and small value.  I use the "aggressive" split, which does not include any bond/cash allocation, since I address those needs elsewhere.

[ochotona]

At Schwab, no portfolio rebalancing by weight feature. But if you write a paragraph or two describing the features you'd like to see, I will forward it to their customer service for consideration. I think it would be a great thing. I have found bugs in their software, and they are quite godd at fixing them quickly based on user feedback,so I know they listen.

[ochotona]

I was on Schwab today, and submitted this email to their team for MachineGhost and the rest of us:

Product suggestion, intelligent.schwab.com

Product concept: Schwab intelligent no-cost robot-advised portfolio rebalancing and tax-loss harvesting for the self-directed investor"

An interesting way make a new service offering by "dumbing down" intelligent.schwab.com would be to allow the customer to design his or her own portfolios with fixed percentages of their own selected ETFs... then, if the portfolio drifts off the allocation, it would adjust in as tax-efficient a manner as possible.

The rebalancing should be able to be specified as follows:

- at customer supplied fixed time intervals (specified in months)
- when any rebalancing bands are crossed, also customer sepcified; for example, if the initial allocation for SCHZ is 25%, the customer could order the entire portfolio to rebalance is SCHZ drops above or below some percentage, like plus-minus 2, 5, 10, 15 %. The initial allocations and rebalance bandwidths would be custom for each ETF, of course

Thanks for you responsive service on Schwab software bugs in the past. I have report a big one in the past, and you fixed it quickly. I hope you will take a look at this suggestion.

[Jack Jones]

If one only had access to an SP500 fund and a small cap index fund, what's the best you could do? 50/50 in each?

[mathjak107]

i kind of like the equity break down in that global x permanent portfolio fund . nice mix in that section .

[Jack Jones]

If one only had access to an SP500 fund and a small cap index fund, what's the best you could do? 50/50 in each?

For the two funds I'm interested in (VSCPX and FXAIX) a 50/50 split would result in:

Market Capitalization
Size    % of Portfolio
Mega    25.8%
Large    18.2%
Mid    25.3%
Small    25.3%
Micro    5.4%

Not bad.