I'm curious if you have seen the "Gone Fishin'" Portfolio and what your take is on the suggested asset allocation. I have decided that Vanguard is the best place for my retirement fund, due to its low cost philosophy. I'm just not sure what strategy to follow. I followed the Dave Ramsey plan to get out of debt, and took a look at his investment strategy, 25% in 4 funds: • Growth and Income Funds • Growth Funds • International Funds • Aggressive Growth Funds I then came across the "gone Fishin'" Portfolio and found it interesting, but am unsure of it's real world advantages. The Gone Fishin' strategy suggest an asset allocation as follows: Vanguard Total Stock Market Index (VTSMX) – 15% Vanguard Small-Cap Index (NAESX) – 15% Vanguard European Stock Index (VEURX) – 10% Vanguard Pacific Stock Index (VPACX) – 10% Vanguard Emerging Markets Index (VEIEX) – 10% Vanguard Short-term Bond Index (VFSTX) – 10% Vanguard High-Yield Corporates Fund (VWEHX) – 10% Vanguard Inflation-Protected Securities Fund (VIPSX) – 10% Vanguard REIT Index (VGSIX) – 5% Vanguard Precious Metals Fund (VGPMX) – 5% I have also been considering the simple Vanguard target retirement fund. I'm young, and I've got about 35 years until retirement, so what is your take? how would you allocate your money? Which strategy do you follow, if any.
I haven't seen Gone Fishin' portfolio before, but what you listed looks quite reasonable. The most important thing by far is that it's rock-bottom cost (thanks to Vanguard) and very well diversified. It is quite aggressive, with only 20% of the portfolio is truly "safe" holdings of Vanguard Short-term Bond Index (VFSTX) and Vanguard Inflation-Protected Securities Fund (VIPSX). This means expected returns from it are high compared to safer options. But it also means that you must have very even temperament to not panic when the next crisis hits -- and it will hit sooner or later, such is the nature of the beast -- and you see your portfolio value rapidly decline in value by 20% or 30% or even 40% or more! When that time comes you must be prepared to ride it out and not sell after the plunge. Ideally, you would even add to your investments, but at the very least you would at least hold on to them. If you are able to do that, have a good emergency cash stash (say, 12 months of expenses), and, ideally, have in-demand job skills then there's absolutely nothing wrong with holding such a portfolio.
I could nitpick about some components of this portfolio (e.g. I think 15% in small cap -- in addition to the small cap holdings of VTSMX -- is far too much relative to other equities), but ultimately it'd be like arguing about who will win the Super Bowl in 2020. The key characteristics of this portfolio are solid: low cost and diversification. Its aggressive allocation may well be right for you, with 35 years to go to retirement and, hopefully, the right mental make-up and financial situation to ride out the inevitable swings in the markets. You may also want to read http://www.longtermreturns.com/2012/03/vanguard-lifestrategy-funds.html to learn about a simple one-fund approach to accomplish essentially the same thing as Gone Fishin' and other multi-fund passive portfolios strive for. VASGX LifeStrategy fund would be expected to deliver more or less identical returns to Gone Fishin', for example.
By the way, while Dave Ramsey gives solid common sense advice on getting out of debt you would do well to never listen to him for investing advice once you actually are out of debt. Some of his points are good (don't own individual stocks), but overall it's a pretty terrible advice with nonsensical division of "growth", "growth and income" and "aggressive growth" all the while saying to not own any bonds or even mentioning costs, which are probably the most important thing when it comes to investing. The Gone Fishin' portfolio or any number of other low-cost passive index portfolios is a far superior approach.