Bernstein's No Brainer and Smart Money Portfolios Reviewed

10/08/2010 Share 0 comments

• 25% in Vanguard 500 Index VFINX                                     (IVW)
• 25% in Vanguard Small Cap NAESX or VTMSX                 (VB)
• 25% in Vanguard Total International VGTSX or VTMGX     (EFA, VEA)
• 25% in Vanguard Total Bond VBMFX or VBISX                  (BND)

• Heavily weighted towards domestic equities
• Similar to a three asset SIB with domestic, international and fixed income 
  
• It would be better to have some REIT or emerging markets exposure
• We will compare the no brainer portfolio to a three and four asset SIB

full chart

The Bernstein no-brainer tracks very closely with the four asset SIB. It’s interesting to note that the three asset Bernstein tracks closer to the four asset SIB than expected. So as a lazy portfolio, it performs satisfactorily. Year to date, however, the four asset SIB has better performance. 

• 40% Vanguard Short Term Investment Grade VFSTX                (SCJ, SHY)
• 15% Vanguard Total Stock Market VTSMX                                  (VTI)
• 10% Vanguard Small Cap Value VISVX                                          (VBR)
• 10% Vanguard Value Index VIVAX                                                (VTV)
• 5% Vanguard Emerging Markets Stock VEIEX                              (VWO)
• 5% Vanguard European Stock VEURX                                           (VEU)
• 5% Vanguard Pacific Stock VPACX                                                (VPL)
• 5% Vanguard REIT Index VGSIX                                                      (RWX, VNQ)
• 5% Vanguard Small Cap Value NAESX or VTMSX                        (VB) 

• 40% in US equities
• 10% in international equities
• 5% in emerging market equities
• 5% in REIT
• 40% in fixed income

 

Although the smart money portfolio has five asset classes, international, emerging markets and real estate are so under-weighted that they act as if they are a single class so, again, it’s more like a three asset class portfolio. The five asset SIB with strategic asset allocation has similar behavioral properties but clearly delivers better results based on superior diversification.

They are remarkably close to each other full comparison

• Tactical Asset Allocation reduces downside risk and that wins in the current uncertain environment
• Both Bernstein portfolios perform satisfactorily for a lazy portfolio – it is surprising that the no-brainer performs so well against it’s more diversified smart-money cousin
• ETF’s can readily be used to implement these portfolios with good performance

labels:investment,

Symbols:BND,BWX,CIU,CSJ,DBC,DVY,EFA,EFG,EFV,EMB,GLD,HYG,IEF,IEI,IJJ,IJK,LQD,MBB,QQQQ,RWX,SCZ,SHY,TIP,VB,VBK,VBR,VEA,VNQ,VO,VTI,VTV,VUG,VWO,WIP,Portfolio-Building,with,ETFs,Closed-End,Funds,Commodity,ETFs,Currency,ETFs,Developed,Market,ETFs,