Well, my mom's to be more precise. She is 60 and definitely looking to retire in the next decade. Now, for my own personal portfolio, I have a heavy stock weighting because I am young. however as I've read multiple times one should increase bond exposure with the investor's age. Thus, I seek to construct a more conservative portfolio with low volatility for her.
However, I am concerned about stocks being overpriced at the moment (Shiller's PE ratio currently higher than pre 08 crash levels) so I want to hedge out exposure to stocks. However, with bonds I am concerned about interest rates rising in the near future, thus decreasing bond principal significantly before any benefit can be reaped from reinvesting the dividends. Thus, I am trying to hedge against both by adding an especially high (15%, maybe even up to 20%) stake in REITs. My logic is that REITs have been incredible performers, add uncorrelation to bonds/equities, with dividend yields exceeding bonds, and annual returns exceeding the stock market, even through the 08 housing crisis. Also, as the population grows in the next few decades, I can't see housing prices coming down significantly and reducing REIT principal. However, I'm not sure the logic above is sound, if anyone sees a flaw in this let me know. Here is my proposed portfolio using Vanguard ETFs:
30% VTI - total us stock
10% VXUS - total international stock
30% BND - total bond market
10% VCIT - intermediate term corporate bond
20% VNQ - REIT
Doing some conservative backtesting from 2000-2017 (so through the DOTCOM bubble and the great recession, and assuming that I invest at the worst possible time for the market), I found that this does pretty well (http://ift.tt/2r65w92). At this point I'd love to hear suggestions about changing the weightings, adding more etfs (like I should focus on small cap value etc) or specific equities. Thanks.
Submitted May 30, 2017 at 12:20AM by mikhael4440 http://ift.tt/2qB41fE
