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Kiplinger’s Simple Long-Term Portfolio
By JLP | February 22, 2008
I was thumbing through Kiplinger’s Mutual Funds 2008 and saw their model portfolio for long-term investors. They define long-term as 10 or more years away. This is an all-stock portfolio:
| Kiplinger’s Long-Term Portfolio (Using Vanguard Funds) |
||
|---|---|---|
| 35% | Large-Cap Domestic Stocks | Vanguard 500 Index (VFINX) |
| 25% | Small-Cap Domestic Stocks | Vanguard Small-Cap (NAESX) |
| 25% | Large-Cap International Stocks | Vanguard Total International Stock Fund (VGTSX) |
| 10% | Real Estate Investment Trust | Vanguard REIT (VGSIX) | 5% | International Emerging Markets | Vanguard Emerging Market Stock Fund (VEIEX) |
I think this looks like a pretty good portfolio assuming you can meet Vanguard’s minimums, which as I understand them, would require a minimum of $60,000 if you wanted to purchase all five funds at the above allocations as Vanguard has a minimum of $3,000 per fund. You could always start out with a smaller number of funds and diversify as your account grows. Or, you could start off with Vanguard’s Star Fund (VGSTX), which has a $1,000 minimum and offers a conservative (VERY conservative) allocation among different Vanguard funds (click here to find out more).
Topics: Index Funds, Investing |
February 22nd, 2008 at 11:55 am
Lower buy-in using ETF equivalents (VV, VB, VEU, VNQ, VWO)
February 22nd, 2008 at 12:40 pm
There’s power in simplicity, I like this portfolio. I’ve always wanted to use Vanguard, but the minimums at Vanguard are always a bummer for younger folks. I’ll check out the VGSTX. It would be interesting to find an equivalent set of funds with lower minimums.
February 22nd, 2008 at 1:21 pm
I’m surprised that didn’t include the total bond market fund (VBMFX). Why do you think they left it out?
February 22nd, 2008 at 1:25 pm
Jason,
It’s because it’s an all-stock portfolio.
February 22nd, 2008 at 1:35 pm
Duh. That’s what I get for not reading the intro text.
February 22nd, 2008 at 1:49 pm
The only part I’m not crazy about is the REIT allocation. If you invest in large and small cap market index funds, you will already have REIT exposure relative to their overall market cap (just like any other part of the market), but when you give them their own allocation, you are just overweighing one particular sub-sector of the market. Why?
When you saw these simple, long-term portfolios 10 years ago, they looked very similar. Except, 10 years ago, instead of a 10% allocation to REITs there was a 10% allocation to Internet.
February 22nd, 2008 at 2:07 pm
Simple is good. I decided my IRA this year would be a margaritaville portfolio. I used ETFs precisely because you can get into them cheaper.
33% US stocks (VTI)
33% Non-US stocks (VEU)
33% Inflation-protected securities (TIP)
It’s been uninspiring so far (because the market is down) but you can’t beat it for easy. Well, you can with a lifecycle fund, but I liked this anyway.
February 22nd, 2008 at 2:36 pm
I started off in July with $1000 in the STAR fund and have since bought each of these funds as I come across $3000… You don’t have to start right off with the perfect allocation, work up to it. Vanguard makes it very easy to transfer between funds also, no excuse, just start today!
February 22nd, 2008 at 2:40 pm
Jason,
Actually, I added that intro text after you asked your question. I meant to add the intro but forgot to.
Anyway, sorry for the confusion.
February 22nd, 2008 at 5:15 pm
It seems a little heavy both on domestic stocks and REITs; I would’ve expected emering markets to be closer to 10% or 20%, and domestic stocks/REITS to be lower.
February 22nd, 2008 at 5:21 pm
Where do you get a required minimum of $60K to start if each of the funds only requires 3K? I rolled my 401K from my last job into three Vanguard funds (that’s all I could afford with the 3K minimums). I chose the 500 index, small-cap domestic, and mid-cap domestic and spread my money equally into each without really knowing what the heck I was doing. I’m young, so I was fine with the 100% stock mix. Would it be worth it for me to sell the mid cap domestic and get the international fund instead or should I just let it ride for now and buy into the international fund at a later time?
February 22nd, 2008 at 5:50 pm
I guess the other question is why Kiplinger thinks an all-stock portfolio is appropriate for a 10-year horizon as opposed to one that includes some bonds. I’m not saying it’s wrong to go all-stock, I’d just like to understand the reasoning behind it.
February 22nd, 2008 at 6:07 pm
Shiwala, if you want to buy in a $3k min fund at 5% of your portfolio, you need a total portfolio of (3,000/.05)= 60k.
You can half the buy in by simply buying an int’l index instead of slicing and dicing the int’l to large cap and EM.
JLP, for a financial advisor, you really don’t define your terms. Vanguard STAR is conservative? For whom? A 20 year old investing for retirement? Probably. But the requisite “10 year time period” doesn’t mean a balanced fund is too conservative.
February 22nd, 2008 at 7:14 pm
Ryan,
Sorry if I was unclear.
When you go from an all-stock portfolio to the Vanguard STAR Fund, the STAR Fund does look conservative:
February 23rd, 2008 at 8:45 am
I would also query the use of an all stock portfolio. An allocation to bonds has been mentioned above. The other thing that is worth considering is an allocation to commodities through one of the ETFs (or similar) that track a basket of commodities.
February 23rd, 2008 at 9:10 am
Though technically not a load, there is a 0.5% “Purchase Fee” associated with the Vanguard Emerging Market Stock Fund. It is paid directly to the fund according to Vanguard’s web site.
February 25th, 2008 at 7:40 pm
why not consider one of Vanguard’s target retirement funds?….theyve been often criticized for being too conservative…..thus, even though my expected retirement year is 2030, i invest in the Target Retirement 2040 fund, which gives me slightly more exposure to stocks vs the 2030 fund…