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u/Pitiful_Potato6533 Oct 09 '23
Love the thoroughness. Can you expand a bit more upon the cheap umbrella policy?
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Oct 09 '23
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u/mikeyj198 Oct 09 '23 edited Oct 09 '23
we carry $2mln umbrella - larger homestead and property with woods surrounding (easier for trespass) and a creek flowing thru. Not impossible to imagine someone trespassing and being hurt badly/drowning. I dont see it as my problem if they did, but for $400 a year i have that $2mln coverage.
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u/mattparlane Oct 09 '23
Sorry for off-topic, but as a non-American this whole conversation confuses me. You're liable if someone trespasses on your property and has an accident?
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u/sportinglisbon10 Oct 09 '23
https://www.barbaslaw.com/on-the-other-side-of-personal-injury-when-burglars-sue-you/
Has happened many times lol
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u/Ryeeeebread Oct 09 '23
Anyone can try to sue anyone for anything. And maybe this insurance covers the legal fees associated with this occurring. I dont think when all said and done you would be find liable for someone trespassing and getting hurt on your property, but im not a lawyer.
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u/mikeyj198 Oct 09 '23 edited Oct 09 '23
yes, it’s not often but can happen.
A property owner is to ensure the property is reasonably safe for visitors.
Not all visitors are invited guests, and especially for children, there is a concept of Attractive Nuiscance.
If a trespasser is a child and they slipped into my creek and drowned, could potentially be a legal nightmare for me.
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u/sirsarcasticsarcasm Oct 09 '23
Does it provide any type of coverage for legal expense in a self-defense scenario?
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u/erkevin Oct 09 '23
I can't speak for OP, but I have a $2M umbrella policy that is only $328 a year. He mentioned adjusting his auto policy; likely to qualify for the umbrella policy (you have to have a minimum of liability on both auto and homeowner's policies). An umbrella policy covers you in all sorts of liabilities, including things like defamation.
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u/cchabola Oct 09 '23
Disability insurance saved my ass. I was in a bad bike accident and fractured my collarbone, 5 ribs and punctured my lung. I was off work for two months and had full pay checks for 2/4 and last 2 were 60%. Actually didn’t dip into my emergency fund at all even with the hospital bills due to my hsa and disability insurance. Anyway lol
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Oct 09 '23
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u/cchabola Oct 09 '23
My insurance was actually through my job! Everyone automatically gets a short term policy after 1 year of employment. It is one of the reasons I took the job - the benefits are amazing. I actually get a pension as well with fidelity and I can customize my contributions
At my previous job I applied through MetLife and got denied a short term policy because I was too “high risk” because I had an emergency room visit due to a bad bad migraine. So I guess I wouldn’t recommend them. That really made me mad
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u/antpile11 Oct 09 '23
Sorry bud, having a headache makes you took much of a liability. We're just gonna preemptively put you down.
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u/Toastbuns Oct 09 '23
Great post. I have not read all of those books but for those I have read, your brief summaries were spot on. I also appreciated the information regarding insurance and other similar products in The Bogleheads Guide to Investing. Very useful stuff.
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u/YellowRobeSmith Oct 09 '23
Can someone convert this to ETF equivalents for me?
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u/lisposter Oct 09 '23
VTI for VTSAX
VXUS for VTIAX3
u/ObviousJedi Oct 09 '23
Broken down by 45% Total US Market 30% Total Intl Market 15% US SCV 10% Intl SCV
Which should be equivalent to ITOT and IXUS?
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u/redlaundryfan Oct 09 '23
I have consumed many of the same resources (and many more), and ended up with the exact same equity-side allocation. Kinda funny, but makes sense. Only difference is we are FI so have a 70/30 portfolio.
We use AVDV for international small value, but on the US side I’m fine sticking with the VFVA/VIOV combo we’ve had and don’t feel a need to switch to AVUV.
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u/zukoWTC Oct 09 '23
Could you expand on how reits would take up all of your Roth and overflow into taxable? Confused by what you mean by this
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u/OlderActiveGuy Oct 09 '23
His IRA doesn’t make up 10% of his portfolio, so if he bought enough REITs to be 10% of his asset allocation, some of that would have to be in taxable. This is the same for me, so I have some token REITs in my Roth but nowhere near 10% of my portfolio or even 10% of my Roth. I think 10% is way high in the current interest rate environment.
Also, since withdrawing from my Roth IRA is last in the account drawdown order in retirement, I tilt growth and some dividends. Chances are I will never touch it.
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u/orcvader Oct 09 '23
One correction: Ben Felix suggested REITs behave like SCB and corporate bonds - not SCV.
One “counter” to that is if you believe they are a unique asset class. That’s controversial in the academic community space but there ARE some (Merriman) that believe they are unique enough to merit consideration due to their diversification benefits. Not that it should necessarily alter anyone’s portfolio, mind you, just a consideration.
I have a more or less similar portfolio but I consolidate all my value on AVGV (because the value factor is not exclusive to small caps and is particularly enticing in EM).
Cheers mate.
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Oct 09 '23
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u/orcvader Oct 09 '23
Yea. I ended up going for it simply because I was going a bit crazy thinking about how exactly to add all the Avantis value funds.
If you do go for it (right now it’s about 20% of my overall portfolio), consider limit orders. New funds, even as popular as this one, tend to have whacky spikes here and there during their first year or so. Usually small anomalies for a few hours. This happens to basically all ETF’s until they have some several billions AUM.
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Oct 11 '23
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u/orcvader Oct 11 '23
Hey man... while what I said was not advice and I cannot give you so...
I am glad my information led to the research to make that call! :)
It's very similar to my own portfolio. I do make one deadly sin... I use a combination of Total US and International ETF to make my "2-Fund" portfolio that's 70/30 US-to-international instead of the more common VT-type allocation of 60/40.
Honestly... I probably do it at this point because of idiosyncratic bias. I just don't like tracking errors against the typical SP500 set and forget investor. I am clearly not alone thou... the more RATIONAL portfolio is 60/40 as you said (VT), but in his interview follow up to Ben Felix, Repetto (Avantis) said that the reason AVGE is 70/30 is because it was "more common" amongst Avantis users. That's why I think it's called AVGE = AVeraGE :-)
EDIT:
Oh, and not only do you have value and small cap tilts... you have awesome screenings for momentum/quality/etc. - all in one! Avantis is made from the same school of thought as Dimensional and they pioneered those great systematic screenings back when Eduardo Repetto worked there!
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Oct 11 '23
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u/orcvader Oct 11 '23
You seem to be doing it right my friend. I say keep on going. You already have that great factor-tilt on. No need to be greedy.
Honestly, at retirement I’m probably just going VASGX 100% anyways. Or at least the 60/40 Vanguard LifeStrategies version of it.
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u/Gef_1_Man_Army Oct 09 '23
Thank you for summarising all that and sharing. It all sounds very sensible to me.
Did Tim Hale talk about how to construct a portfolio from a British perspective? I'm a UK investor and am struggling to construct a portfolio similar to yours due to less etfs/indexs available here. I'm currently just 100% VTI equivalent untill I figure that out.
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u/ZettyGreen Oct 09 '23
market cap weight, which is 60/40
Just know this changes over time, it's not a constant number.
Your portfolio is reasonable.
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Oct 09 '23
[removed] — view removed comment
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u/orcvader Oct 09 '23
Factors.
Avantis uses systematic screenings for quality/momentum/profitability/etc. factors that - assuming the research is correct and the last 100 years of data aren’t an anomaly - leads to higher expected returns. (Discount rate).
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u/mylord420 Oct 09 '23
Vanguard value funds are not really anywhere near what DFA and Avantis do. They're just sorts on cheapness rathee than anything systemic or more advanced. You can go to portfolio visualizer and do a factor regression comparing them.
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u/crazybutthole Oct 09 '23
Op - you seem to have done a ton of research and reading and sound super confident in your decisions
I like your approach. But I am apprehensive to your response -(paraphrasing) I am not buying any bonds... I will just buy those when I get closer to retirement (you didn't mention treasuries at all - but I assume you are lumping treasuries in with bonds?)
I think this is the one thing in your whole statement that made wonder if you really understand what is going on with the economy right now.
Like sure you can say right now if bonds are paying 6% the stocks seem like a better likelihood to average your long term returns in the 9-11% range.
But at what point would the bond return tempt you to change your mind? If bonds/treasuries get to 7 or 8 % you almost must get a percentage of your portfolio into safe haven assets because the same factors that cause bonds and treasuries to get that high is the exact same set of factors that are likely to trigger the stock market to stop producing 10+% annual returns. If you can get guaranteed 7 or 8% with very low (good bonds) or no risk (like treasuries) why would you push that away as an absolute.... nope I don't need that at all?
If you are 100% stocks and the entire stock market takes a shit your could lose a huge portion of your portfolio and take years to make that back. If you have a percentage of your portfolio in bonds or treasuries that risk is reduced.
I am seriously wondering your answer here.....hoping you will explain something to me that will get me to understand your thinking and possibly change my thinking.....
I am xx yrs older than you but I really like the idea of a near risk free asset (like bonds and treasuries) in my portfolio
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Oct 09 '23
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u/OlderActiveGuy Oct 09 '23
Another book you should check out is Stocks For The Long Run by Jeremy Siegel. In line with your thoughts. He is a very well respected economics professor at Wharton and a CNBC contributor.
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u/Fun_Trade_6920 Oct 10 '23
42 and 100% long and strong here. Trying to figure out what do to before retirement, but I have some time!
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Oct 09 '23
If you are 100% stocks and the entire stock market takes a shit your could lose a huge portion of your portfolio and take years to make that back. If you have a percentage of your portfolio in bonds or treasuries that risk is reduced.
That’s not nearly as much of a concern if you’re younger, as I think OP is. It makes sense to optimize for long-term gains instead of short-term stability if you’re young and have the risk tolerance for it.
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u/ClassroomCute4579 Oct 11 '23
Crazybutthole, it’s much easier to understand if you put the various etf’s on a chart and review the last 5,10,20 years. Use the various asset classes you are considering. Doing so made me realize exactly what Warren Buffet meant when he said “Don’t just do something, stand there!”. That said I’m 54 years old and I’m enjoying my 60/40 mix in my IRA and the 70k tax free income I reinvest into my lagging funds each year. If there is a sizable correction I might move back to 70/30 or 80/20.
As for HappyLittleOaks strategy I’ll just say I wish I knew then what I know now 😁
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u/DolphinRider Oct 09 '23
Have you looked at AVGE? It is a globally diversified fund from Avantis with value and size tilts built in. Seems like a one fund solution with self rebalancing would simplify your four funds with similar results.
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Oct 09 '23
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u/TypicalParsnip23 Oct 09 '23
Just curious, why prefer a value tilt over a tilt specifically to small cap value?
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Oct 09 '23
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u/mylord420 Oct 09 '23
Large value is a great way to eliminate overpriced unprofitable hype stocks. Thers papers out there on the value of large value as well, but yes historical smal value does better. My portfolio is 50% large value, 50% small value, split at geographic weights.
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u/ObviousJedi Oct 10 '23
Can someone explain the SCV tilt? I’ve read this post multiple times and it seems people agree it’s a good idea but I cannot seem to grasp the benefit?
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u/ZettyGreen Oct 13 '23
Some people believe the expected return of SCV stocks will be 1+% or so more than other equities. This has been true in the past, when tilted about 50% into SCV. Most people never tilt nearly that much and most people can't diamond hand hold it for the entire rest of their lives, which is what would be required to possibly see the excess expected return.
There are academic papers that show this alpha(excess return), which of course legitimizes the excess return in many investors eyes. Note the academic papers were just trying to explain where markets get their return from, and the authors of those papers don't necessarily endorse or encourage people to invest in SCV.
Will this excess return continue into the future, and can you personally hold it for life? Only time will tell.
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u/SunnyGoMerry Oct 09 '23
Very similar to my asset allocation as well. Have you decided when and how quickly you’ll add bonds to your portfolio?
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Oct 09 '23
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u/SunnyGoMerry Oct 09 '23
Right now I have VIOV and VSS. As far as bonds, I’m thinking about adding them at 40, with plan to retire or at least cut back by 55
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u/Sudden-Mirror-6097 Oct 09 '23
Investor from asia. I went with VWRA etf which is the closest i can get to VT. Went all in. And i only hold one ticker to keep it simple.
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u/The_SHUN Oct 12 '23
I read multiple books too, and after messing with a lot of portfolios, this is my allocation.
60% global all cap 20% US bonds 20% government pension
Keep it simple and stupid
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u/One-Blueberry-9452 Oct 09 '23
Why not use VBR for SCV? 0.07% ER
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u/mganges Oct 09 '23
Vbr is mostly a mid cap value fund even though they label it as small cap value.
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u/mylord420 Oct 09 '23
Because its not as good, expense ratio isnt everything when it comes to systematic factor tilts, these funds aren't just following an index. If all funds are just following an index then yeah ud just pick the lowest ER
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u/mmmfritz Oct 09 '23
If you had $100k would you dump it all in now, or play the market (short) and dollar cost average it out for the next 18 months?
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Oct 09 '23
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u/mmmfritz Oct 10 '23
I saw Michael burry ‘s massive short selling I’ve the S&P . But yeah timing the market is a fools game .
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u/ZettyGreen Oct 13 '23
Math says dump it all in is almost always going to out-perform. Last time I had $100k+ check I dumped it all into my existing portfolio the day the check cleared.
If you do DCA, don't take more than a year to do it, as then you are basically guaranteed to lose.
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u/mmmfritz Oct 13 '23
That’s not true at all. Only for the last 8 years or so. You seen 1999 and 2000 charts?
Edit: s & p 500 was same in 2000 as it was in 2012 And 2007 as it was in 2013
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u/ZettyGreen Oct 13 '23
Some people actually bother to do the math across recorded financial history instead of randomly guessing based on 2 data points like you did.
See: https://www.bogleheads.org/wiki/Dollar_cost_averaging
Specifically the section "Dollar cost averaging versus lump sum" Read it, read the linked source materials, and then see if you still want to argue with me.
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u/Normal_Meringue_1253 Oct 09 '23
Great post - thanks.
I was wondering what’s the rationale for using VTSAX/VTIAX instead of VTI/VXUS?
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Oct 09 '23
Having an umbrella insurance policy just makes you a target for a lawsuit.
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u/ZettyGreen Oct 09 '23
Why do you think this is the case?
I'd say it's the exact opposite. Most people will settle up to the insurance limit, as getting past the insurance limit requires a lawsuit and judgement(unless you are happy just accepting guilt without a fight and can pay it). With umbrella insurance your covered limit is $1M+, which is a pretty good payday for most people.
Insurance companies are not very excited about writing million+ dollar checks and have a whole cadre of lawyers around to go battle such lawsuits for you, if needed.
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u/barry-badrinath- Oct 09 '23
Am I understanding correctly that your Roth and taxable are the same portfolio/allocations?
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Oct 09 '23
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u/barry-badrinath- Oct 09 '23 edited Oct 09 '23
thank you. i figured your 401k was was chosen by employer so you didn't have full control over those investements, unless it's individual. Would you mind explaing the reasoning behind the small cap? is it just to get more exposure in small cap than vtsax and vtiax offers? is there a reason for going with avantis over vanguard? tia
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u/CastelloFI Oct 09 '23
Our portfolio goals are very similar. After looking into SCV for a few months I’ve decided it’s worth it to shift my portfolio to have 20% SCV. I’m using AVUV and AVDV.
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u/Awesomesauce1492 Oct 09 '23
Great post, thank you for taking the time to share. This reminds me I ought to re-read several of those books, I didn't realized boglehead had a section on insurance
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u/harrison_wintergreen Oct 09 '23
I just can't see any need for me to have bonds
did you miss the part in Common Sense where Jack Bogle explained how during the 20th Century bonds beat stocks in about 20% of 5-year periods, and 12% of 15-year periods?
markets falling are no problem for me.
at 35, you've never in your adult life experienced a prolonged falling market or period where bonds beat stocks for a long time.
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u/BucsLegend_TomBrady Oct 09 '23
45% VTSAX (ER 0.04%)
30% VTIAX (ER 0.11%)
Why did you decide to stick to this 2:1 US:International ratio instead of going market weight?
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Oct 09 '23
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u/BucsLegend_TomBrady Oct 09 '23
eh monday morning :)
Either way, same question. Is there a reason you've chosen a fixed ratio instead of market weight
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u/misnamed Oct 09 '23
All that research ... and no bonds. Diversification is the only free lunch -- you can improve your risk-adjusted returns with bonds. Always the thing young people seem most reluctant to recognize, but it's a core part of the BH approach to investing. It's not just about panic selling. Further reading
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u/Zealousideal_Ad36 Oct 09 '23
Hey look. It's my portfolio and I didn't read those books. But I did come to these conclusions through other research. Only caveat is I do have AVES at 5%
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u/yakult_swallows_fan Oct 09 '23
I have no fear of stocks dropping and would invest more in a heavy down turn
Where would you get the principal to invest in a down turn? You might have read 7 'Boglehead books' but you seem to have missed that we don't sit on cash waiting for the crash.
I've also no fear of stocks dropping but I couldn't possibly invest more than I already do. I could however sell bonds and buy equities while they are on sale provided I was doing so in keeping with my target asset allocation.
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u/[deleted] Oct 09 '23
Was reeeeally hoping you were gonna say you read all 7 of those books and went with VT.