Frank Armstrong III, investment advisor and author, offers the following seven fund “Ideal Indexed” portfolio in his book, The Informed Investor: A Hype-Free Guide to Constructing a Sound Financial Portfolio (published December 16, 2003).
The portfolio employs a 70% equity /30% fixed income split, consisting of six equity asset class funds and one fixed income fund.
The equity slice holds a 31% portfolio allocation to international stocks. The US stock allocation has a value tilt, as the value allocations are larger than the blend and growth allocations. The asset class allocations include:
- US large blend stocks : 6.25%
- US large value stocks : 9.25%
- US small growth stocks: 6.25%
- US small value stocks : 9.25%
- US REITS : 8.00%
- International stocks: 31.00%
- US short-term bonds: 30.00%
The chart below (click to enlarge) shows the portfolio allocation (rounded values in the pie chart).
|Small Growth Index||VISGX||0.24%|
|Small Value Index||VISVX||0.24%|
|Total International Index||VGTSX||0.22%|
|Short-term Bond Index||VBISX||0.20%|
The tables below gives returns for the portfolio, using Vanguard investor share index funds. Investors with larger fund balances can use lower cost admiral shares, and exchange-traded funds are available at potentially lower cost. The returns period includes portfolio performance during the two bear markets in the 2000 – 2010 decade, as well as subsequent recoveries. Keep in mind that past performance does not forecast future performance.
|3yr standard deviation||10.17%|
|5yr standard deviation||9.85%|
|10yr standard deviation||14.14%|
|15yr standard deviation||13.68%|
See Frank Armstrong Ideal Indexed portfolio, google drive spreadsheet for return computations.