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A balanced strategy is best. I use the advice in A Random Walk Down Wall Street, which is a mix of real estate (VGSLX), bonds (VBTLX), and stocks, with the stoc

A balanced strategy is best. I use the advice in A Random Walk Down Wall Street, which is a mix of real estate (VGSLX), bonds (VBTLX), and stocks, with the stocks split 50/50 between US (VTSAX) and international (VTIAX and VEMAX). I was prepared to take a bath after seeing the news this past week, but I’m actually up a bit—VTSAX is down, but the others are all up.

Salgat 2y ago
The gains from VTSAX over the past 5 years are so high that it would have to permanently drop by 50% to match international indexes like VTIAX.
- jdlshore 2y ago
  The point of passive investing and a balanced strategy is that you can’t predict what will happen. So, yes, the past five years were good for VTSAX. But if you’re investing today, then it’s the next five years that matter, not the past five years, and nobody can predict what will happen. (Well, to be more accurate, some fund managers will predict correctly, but you can’t predict which ones. Just like you know ~50 out of 100 coins will land heads, but you can’t predict which ones, not even if you choose the one that landed heads in the last 6 throws.)
  - Salgat 2y ago
    I'd still stay with VTSAX if you're investing long term given the 8% expected long term returns.
atombender 2y ago
Note that a market-cap-weighted total market index fund like VTSAX will have a fair amount of real estate (currently about 4%). This means that if you combine VTSAX and VGSLX, you end up overweighting real estate. If you also own a home, you're further overweighting that asset class. Such a strategy might make sense if you think real estate will outperform non-real-estate stocks in the long run (which, if you believe the Boglehead school of passive index investing, you shouldn't), or if you think the real estate market is not correlated with the stock market (which isn't the case), of course. Ben Felix has a good video about it [1]. A 50/50 split between US and international means you're overweighting international. By market cap, the US is about 60% of the world and ex-US is 40%. (Around 1990 ago it was 30% US, 70% ex-US.) If you want a "passive" approach, the solution is to buy VTWAX (Vanguard Total World Stock Index Fund Admiral Shares), or its ETF version, VT. [1] https://youtu.be/IzK5x3LlsUU?si=DK6AfUi_8GvroO-R https://youtu.be/IzK5x3LlsUU?si=DK6AfUi_8GvroO-R
- jdlshore 2y ago
  Great points, thank you. I’ll check out that video.

Salgat 2y ago

The gains from VTSAX over the past 5 years are so high that it would have to permanently drop by 50% to match international indexes like VTIAX.

jdlshore 2y ago
The point of passive investing and a balanced strategy is that you can’t predict what will happen. So, yes, the past five years were good for VTSAX. But if you’re investing today, then it’s the next five years that matter, not the past five years, and nobody can predict what will happen. (Well, to be more accurate, some fund managers will predict correctly, but you can’t predict which ones. Just like you know ~50 out of 100 coins will land heads, but you can’t predict which ones, not even if you choose the one that landed heads in the last 6 throws.)
- Salgat 2y ago
  I'd still stay with VTSAX if you're investing long term given the 8% expected long term returns.

atombender 2y ago

Note that a market-cap-weighted total market index fund like VTSAX will have a fair amount of real estate (currently about 4%). This means that if you combine VTSAX and VGSLX, you end up overweighting real estate. If you also own a home, you're further overweighting that asset class. Such a strategy might make sense if you think real estate will outperform non-real-estate stocks in the long run (which, if you believe the Boglehead school of passive index investing, you shouldn't), or if you think the real estate market is not correlated with the stock market (which isn't the case), of course. Ben Felix has a good video about it [1]. A 50/50 split between US and international means you're overweighting international. By market cap, the US is about 60% of the world and ex-US is 40%. (Around 1990 ago it was 30% US, 70% ex-US.) If you want a "passive" approach, the solution is to buy VTWAX (Vanguard Total World Stock Index Fund Admiral Shares), or its ETF version, VT. [1] https://youtu.be/IzK5x3LlsUU?si=DK6AfUi_8GvroO-R https://youtu.be/IzK5x3LlsUU?si=DK6AfUi_8GvroO-R

jdlshore 2y ago
Great points, thank you. I’ll check out that video.