You need to enable JavaScript to view charts.
Going Public - Portfolio Toolbox
Portfolio Toolbox
Highway 24

Going Public

There is a lot of financial information available on the Internet and it can be overwhelming to a new investor where to start. I built this website as an attempt to provide easy to understand tools and content on investing. I realize that there is a large population of people who just don't care about the details and simply want to invest in the stock market. For those folks, the best option is a low-cost total market index fund like VTI. If you want to add some safety to your portfolio, add some U.S. Treasuries and rebalance frequently.

In 2019, I joined the Facebook group Friends of Vanguard. This group provides a forum to talk about The Vanguard Group founded by John C. Bogle and the markets. In this group, I learned the importantance of de-risking your portfolio by investing in U.S. Treasuries. I allocated 8% of my portfolio to U.S. Treasuries in 2019 and when COVID-19 turned into a world-wide pandemic in March 2020, it lessened the impact of the downturn and provided me with a rebalancing opportunity to buy more stocks before the rebound in April. I am very grateful to have received this recommendation just in time to make good use of it.

I first learned about Vanguard in 1997, although I didn't start investing with them until 2004. And while I think Vanguard provides the individual retail investor with investment products to give them the best chance of success, I am always on the lookout for something better. I haven't found it. Vanguard is not privately held, it is not publicly held. Vanguard is owned by the investors themselves and has grown to be one of the world's largest investment companies with over $6.2 trillion in global assets under management as of January 31, 2020. Some other companies have a handful of products that are competitive with Vanguard, but I'm sticking with Vanguard because they helped me get to where I am faster than any other investment company would have. If you are looking for an investment company for the long run, I highly recommend Vanguard. If you are looking for a company that supports lots of trading activity, you might want to look elsewhere.

For the investor who wants to get into a broader discussion of the markets, there is a very good online forum called Bogleheads, named after Vanguard's founder.

Exchange Traded Funds

The first Exchange Traded Fund (ETF) hit the market in 1993. This ETF allowed investors to invest in the S&P 500 indirectly. While you cannot invest in an index directly, mutual funds and ETFs are the closest investment vehicles that allow you to replicate the performance of a stock market index. ETFs are priced and traded continuously throughout the day, unlike mutual funds that only trade at the closing net asset value (NAV) once a day. Because of their construction, ETFs can provide a slight reduction of expenses over mutual funds. ETFs are traded just like stocks, which means there are bid / ask spreads and you can set limit orders on trades.

In 2020, I finally took the plunge and converted my mutual funds into ETFs. The main driver for this was I wanted to invest in EDV (Vanguard Extended Duration Treasury ETF). It has taken a little while to get used to ETFs on my brokerage platform. I can no longer trade directly from one ETF to another like I could with mutual funds. I have to sell ETF and money goes into settlement fund. I can then purchase the new ETF or mutual fund from the settlement fund. I am unable to perform automatic transactions, although my main reason for using automatic transactions was to bypass 30-day trading restrictions after selling a mutual fund. ETFs do not have 30-day trading restrictions. I use market orders for most of my trades right now, though occassionally I'll open a stop limit trade to buy an ETF if it gets to a low enough price. If you have a good strategy for placing ETF trades, I'd like to hear about it.

The Holy Grail™ of investing is to find a portfolio that can stand the test of time. While the "best" portfolio is subjective, and different based on one's risk tolerance, I think the best portfolio for me is the one that provides the highest returns over a long time period with the lowest drawdown. Currently, the winner is: 60% MGK / 40% EDV with rebalancing performed when portfolio deviates from 60/40 by 1%.

For a permanent portfolio allocation, 60% VTI / 40% EDV is a better choice, however Vanguard Mega Cap Growth (MGK) has been outperforming the Total Stock Market (VTI) since about 2012. It is unlikely that large cap growth will always outperform over the long term because of reversion to the mean. Eventually large cap value will make a comeback, and this may be due to growth stocks being reclassified as value stocks. Here is a comparison of VTI vs. MGK.