A Collection of Investment Portfolios: How Some Money Savvy Bloggers Are Investing

Do you know how your friendly personal finance bloggers are investing?

The Money Question of the Week has landed here, which is a weekly Q & A that some finance bloggers have come up with to try and share their answers on questions that have been posed by readers. This week we’re discussing investment and asset allocation as I found that many people were curious about how others were investing their funds. I, for one, am in the process of reviewing our portfolio and in the light of strong recent market activity, I’m about to do some rebalancing. So the timing is right for the question to be presented to these money bloggers: What are your investing strategies and how have you decided to allocate your money? What does your portfolio look like?

Before I begin, I would like to reiterate our standard disclaimer that we do NOT intend to present this to you as particular financial recommendations for your situation. These are strictly portfolios that we’ve arrived at based on our own risk profile, stage in life and financial goals and which we are publishing for illustrative and educational purposes only.

This is Part One of this series. Let’s check out the first three portfolios!

Finance Bloggers and Their Investment Portfolios

The Smart Money Portfolio

Money Smart Life tells us about himself here. He describes himself as a “29 year old software engineer living in the Midwest with a wonderful wife and new baby boy.”

His portfolio has an allocation that is:

54% in Large US Stocks
13% in Small US Stocks
13% in Large International Stocks
11% in High Quality Bonds
5% in Junk Bonds
4% in Real Estate

and with these details:

29% – Vanguard 500 Index (VFINX) — Large Blend
14% – American Century Equity Income (TWEIX) — Large Value
13% – Vanguard Small-Cap Index (NAESX) — Small Blend
11% – American Century Ultra (TWCUX) — Large Growth
11% – Vanguard Total Bond Market Index (VBMFX) — High Quality Bonds
6% – American Century Intl Growth (TWIEX) — Foreign Large Growth
5% – Vanguard High-Yield Corporate Fund (VWEHX) — Junk Bonds
4% – Oakmark International (OAKIX) — Foreign Large Value
4% – Vanguard REIT Index (VGSIX) — Real Estate
3% – Dodge & Cox International (DODFX) — Foreign Large Value

It looks like solid growth to me and perfect for his profile!

The Lazy Man’s Portfolio

Lazy Man and Money is *surprise surprise*(!) a 31 year old software engineer as well. He’s originally from Boston but recently moved to Silicon Valley, so yes, we’re practically neighbors. Here’s what he had to say…

In building a portfoilio allocation, I’m keeping the following in mind:

1. Keep expenses low. Some expense ratios are over 1%, which is a high price to pay if your balanced portfolio returns 8-12% a year.
2. I’m relatively young (31), so I want a large percentage to be in stocks. I’m going to skip bonds because I’m a bit of a risk-taker.
3. I want to be diversified. I had bought individual stocks in the past, but it seemed to be closer to gambling than investing for me. If I had enough money to spread around amongst many individual stocks, then perhaps I would do that. For this exercise though, it doesn’t make sense for me.
4. Most of these are ETFs, so one must be careful about commissions. I tend to buy into one each year with my Roth IRA, so my commission is limited. If I weren’t investing in an IRA, I would consider Zecco and it’s free trading.

And my new portfolio if I could design it today would be:

Domestic Stock (30%)

• Vanguarge Total Stock Market Index ETF (VTI) – 20%
• iShares Russell 2000 Index (IWM) or Vanguard Small Cap Index ETF (VB) – 5%
• SPDRs (SPY) – 5%
• The last two seek to just overweight the small and large caps some. Sorry mid-caps.

International Stock (25%)

• iShares MSCI EAFE Index Fund (EFA) – 10%
• Vanguard Emerging Markets ETF (VWO) – 10%
• PowerShares China (PGJ) – 5%

Sectors (25%)

• Sector Bets: I typically screen for some under performing sectors. I love technology so that’s a must for me. I like health care as an aging baby boomer play. I’ll grab a financial one as well – what’s a better place to put your money than with people who know money?

Real Estate (10%)

• Vanguard REIT Index (VNX) – 10%

Commodities (10%)

• Oil – There are a couple of oil ETFs out there. I would consider them as a hedge against energy prices.

The Generation X Portfolio

Generation X Finance is a retirement plan specialist but worked in the past as a financial planner and adviser. Just like me, he was born somewhere between the late 60s and early 80s. In his own words….

I have attached images that do most of the talking, and I just went with overall portfolio holdings not individual funds or stocks. Between my 401k, IRA’s and brokerage accounts, I wasn’t about to get into that detailed of an analysis but anyway to answer the question…

My current investment picture looks like this:

My target allocation I’m trying to maintain is anywhere from a 60/40 mix of stocks/bonds to a 70/30 mix.

The first thing everyone will notice is the relatively high allocation in bonds. Why on earth would anyone my age have nearly 35% of their portfolio in bonds? Well looks can be deceiving. Take a look at the breakdown of the types of bonds in the portfolio:

From this you can see that virtually all of the bond holdings (99%) are in low quality bonds. So, these aren’t your conservative bonds that your grandparents hold that churn out 4%. These are bonds in Ford, GM, Cablevision and other “junk” type companies that are yielding 8-12%. So it may seem like a 60/40 portfolio is relatively low-risk that is not the case. The risk is just shifted from market risk from equities to credit risk in bonds.

From that same picture you can see that the equities are weighted towards large-cap value companies which is quite typical of a portfolio today.

The next thing to consider is the actual type of stocks within this broad mix relative to the S&P 500:

As you can see my equity holdings do not correlate with the S&P at all, but that is to be expected because I only have a small amount invested in an index. Again, I’m quite heavy in high yield stocks and speculative growth while significantly underweight in classic growth and cyclical companies. In addition to the stock type it is a good idea to look at what sectors the stocks are in:

Again it is no surprise that relative to the S&P there is very little in common. I have a significant portion of my holdings in media and utility companies. No real significance behind it other than the fact that since I’m not relying on one or two index funds the stock types won’t match very closely.

Finally, moving to international holdings this is where I do need some improvement:

Again by looking at the overall asset allocation I only have about 5% in foreign stocks. And of my foreign stocks I’m primarily in Europe with very little exposure to Asia. My goal is to slowly increase my international holdings to closer to 15-18% of my overall portfolio and to focus more on Asian companies.

The real reason I have so little in foreign stocks is that when I switched jobs I lost a decent international fund and the new employer only had one international fund to pick from and it wasn’t the best. So I cut my holdings way back until I could find a suitable alternative in one of my other accounts. Since no part of my portfolio is screaming to be sold I am just moving back into international slowly with a few iShare ETFs.

How the Portfolio Has Performed

Just looking at the overall allocation numbers you would probably expect this to underperform the broad markets. Well just to give you an idea of what it has done, for 2006 the total return was just under 20% at 19.8% and for 2005 it returned around 4.3%. So last year it beat the S&P and in 2005 it was virtually identical.

I have only had this general allocation since about March of 2005 so I can only directly compare against benchmarks during that time. But given the level of risk and volatility of this portfolio and the recent returns I am very happy with the results.

Of course this is a constantly changing process but I plan on keeping the core asset allocation in check for at least the next five to ten years. The only thing that will change are the holdings inside the rough 60/40 or 70/30 mix. The real hedge for downside protection will be migrating from junk bonds to higher quality bonds in the event the market looks to be headed down for a long period of time.

Well ain’t that good stuff? This concludes part one of this week’s Money Question. You can now check out the next three portfolios over in Part Two. I find that these allocations grant me some perspective on what real, financially inclined people are doing and how they’re planning for their future.

• Stock trades: Free stock trades from Zecco, Cheap stock trades from TradeKing, Stock news and Investment info at INO TV Free, No cost Trend Analysis for stocks
• Earn top returns: FNBO Direct [1.90%], HSBC Direct [1.65%], WTDirect [1.76%], E*Trade Bank [0.95%], ING Direct [.25% to 1.65%]
• Cash bonus: Discover More [$50], American Express [$25], Lending Club [$25]

If you enjoyed this post, you can get free regular updates through our RSS Feed, or you can have our latest posts delivered to your email inbox by supplying your address here. Your address will only be used for this purpose, and you can unsubscribe anytime. Share This: Save to del.icio.us Digg This! Stumble It! Submit to Reddit Email This

Categorized under: Investment