Portfolio Optimization Resources?

[disneysteve]

So far I've taken a $3,000 position in the Dodge and Cox Stock fund

Also, you chose an actively managed fund with an ER of 0.51% which is 17 times more expensive than VTI which I suggested earlier.

What does that buy you? Dodge and Cox has underperformed VTI for 3 mo, 1 yr, 5 yr, and 10 yr. It has underperformed the S&P 500 for 3 mo, 1 yr, 5, 10, and 20 yr. So you're paying a fortune in fees for a fund that has very consistently lagged the indexes for at least the past 2 decades.

I'm curious why you chose that fund?

Stop trying to beat the market.

[scfr]

Guys - circling back around here.

Here is where I came down on the decision.

I decided to do two things.

First - get educated on the topic of asset allocation. I got two books -

1) All About Asset Allocation, Second Edition, by Richard A. A. Ferri

2) The Elements of Investing: Easy Lessons for Every Investor 10th Anniversary Edition, by Burton G. Malkiel (Author), Charles D. Ellis (Author)

Both of these were recommended by a professional investor friend of mine.

Second, I had about $9,000 to put into my IRA, so I decided on a mix of stock and bond mutual funds/ETFs. So far I've taken a $3,000 position in the Dodge and Cox Stock fund, and I'll likely get some Vanguard bond funds with the remaining capital. The bond allocation is a bit heavy given my age - but my total net worth is stock heavy, so weighting it more towards bonds should reduce the risk to my overall wealth.

These look like good picks.

I haven't read Rick Ferri's book but have listened to a couple of his podcast episodes and have read some of his posts on Bogleheads. He seems like a smart guy who offers thoughtful and solid advice. And I haven't read that particular Malkiel book, but have read A Random Walk Down Wall Street.

[srblanco7]

Also, you chose an actively managed fund with an ER of 0.51% which is 17 times more expensive than VTI which I suggested earlier.

What does that buy you? Dodge and Cox has underperformed VTI for 3 mo, 1 yr, 5 yr, and 10 yr. It has underperformed the S&P 500 for 3 mo, 1 yr, 5, 10, and 20 yr. So you're paying a fortune in fees for a fund that has very consistently lagged the indexes for at least the past 2 decades.

I'm curious why you chose that fund?

Stop trying to beat the market.

My 2 cents. I generally think Dodge & Cox is a good fund family (as far as actively managed fund families go) and (as a disclaimer) I own some of their funds in my brokerage account (accumulated the positions many years ago and have never sold because of the cap gains implications). They have a heavy focus on value investing. So if you were looking for a value tilt it may suit your needs.

IMHO, VTI may not be the appropriate benchmark for comparison - perhaps VVIAX. However, perhaps to your point, value has been underperforming growth (and blend) for the past few decades.

[disneysteve]

My 2 cents. I generally think Dodge & Cox is a good fund family (as far as actively managed fund families go) and (as a disclaimer) I own some of their funds in my brokerage account (accumulated the positions many years ago and have never sold because of the cap gains implications). They have a heavy focus on value investing. So if you were looking for a value tilt it may suit your needs.

IMHO, VTI may not be the appropriate benchmark for comparison - perhaps VVIAX. However, perhaps to your point, value has been underperforming growth (and blend) for the past few decades.

The company states their benchmarks for the fund are the S&P500 and the Russell 1000 Value Index. They have consistently trailed the S&P 500 for the past 20 years but to be fair, they have consistently beaten the Russell 1000. That still puts any investor in the fund behind the curve compared to buying an S&P 500 fund (or a total stock market index fund).

I just don't see the appeal of buying a medium to large company stock fund that always loses to the S&P 500. Just buy the index fund, save a bunch on expenses, and get better performance.

https://www.dodgeandcox.com/individual-investor/us/en/investing/our-funds/stock-fund.html

[srblanco7]

I just don't see the appeal of buying a medium to large company stock fund that always loses to the S&P 500. Just buy the index fund, save a bunch on expenses, and get better performance.

https://www.dodgeandcox.com/individu...tock-fund.html

I certainly understand and embrace a similar perspective. However, "always" is a long time.

Leaving a link to an article which looks at D&C Stock performance from 1965 (inception) to 2008.

https://www.mutualfundobserver.com/2012/11/a-look-back-at-dodge-cox-stock-fund-dodgx/

[james.hendrickson]

I have previously been a fan of bond funds but in recent years they've really done poorly. I've become much more a proponent of individual bonds so that I control the interest rates and maturities. There is no principal risk as long as you hold a bond until maturity (when dealing with government issues I mean, not corporates). We still hold bond funds but I stopped adding to them a couple of years ago in favor of individual issues.

Disneysteve, are you just buying them through treasurydirect, or through your broker? I don't suppose it matters for the performance of your overall portfolio - but I'd be curious to see how you've got it organized.

[disneysteve]

Disneysteve, are you just buying them through treasurydirect, or through your broker? I don't suppose it matters for the performance of your overall portfolio - but I'd be curious to see how you've got it organized.

I do it all in our Vanguard account. Everything I buy is on the secondary market, bonds and CDs. It’s very easy that way and everything is in one place. We’ve got $525,000 invested that way currently.

[james.hendrickson]

I do it all in our Vanguard account. Everything I buy is on the secondary market, bonds and CDs. It’s very easy that way and everything is in one place. We’ve got $525,000 invested that way currently.

Thanks Disneysteve, thats helpful!

[disneysteve]

Thanks Disneysteve, thats helpful!

Nothing wrong with buying through TreasuryDirect, of course, if all you want is Treasuries. I just like the greater flexibility of doing everything in one place, stocks, bonds, CDs, mutual funds, ETFs, money market - it's all together. When a holding matures, I can shop around and decide if the best deal at that moment is a CD, a Treasury bill, an agency bond, or something else. I never have to move money around between accounts.

[LivingAlmostLarge]

same i do charles schwab

[james.hendrickson]

Guys - following up on this:

I'm working through Richard Ferri's All About Asset Allocation.

So far, its a been a good read. I recommend it for anyone who wants to improve the improvement of their stock portfolio.

[myrdale]

Guys - following up on this:

I'm working through Richard Ferri's All About Asset Allocation.

So far, its a been a good read. I recommend it for anyone who wants to improve the improvement of their stock portfolio.

Thanks for the update. I'd looked up the amazon reviews and they seemed positive.

[disneysteve]

A financial podcast I listen to had a guest who basically said that during the accumulation phase of life, just put all of your money into VTI. Anything more complex than that is unnecessary and unlikely to improve the outcome.

[srblanco7]

A financial podcast I listen to had a guest who basically said that during the accumulation phase of life, just put all of your money into VTI. Anything more complex than that is unnecessary and unlikely to improve the outcome.

File this under the category of "if I knew then what I know now". This is the exact advice I'm giving my kids. Also educating them on the value of roth investments and time in the market.

[disneysteve]

File this under the category of "if I knew then what I know now". This is the exact advice I'm giving my kids. Also educating them on the value of roth investments and time in the market.

For sure. Our portfolio would be totally different if I knew then what I knew now. I’ve educated our daughter on this. She puts pretty much everything into a target fund.