|Fidelity as custodian|
|Block||Asset Class||Fund Name||Ticker||Exp ratio||Min Invest|
|1||Domestic Total Market||Fidelity Spartan Total Market Index||FSTMX||0.09%||$10,000|
|2||TIPS||Fidelity Inflation Protected Securities (m)||FINPX||0.45%||$2,500|
|3||InternationalTotal Market||Fidelity Spartan Total International Market Index||FSIIX||0.10%||$10,000|
|4||InternationalBonds||American Century International Bond (m)||BEGBX||0.82%||$2,500|
|5||REITs||Vanguard REIT (etf)||VNQ||0.12%||$0|
|6||Energy||Vanguard Energy (etf)||VTE||0.26%||$0|
|7||Domestic Large Value||VanguardValue (etf)||VTV||0.11%||$0|
|8||Domestic Small Value||Vanguard Small Cap Value (etf)||VBR||0.12%||$0|
|9||Emerging Markets||Vanguard Emerging Markets (etf)||VWO||0.30%||$0|
|10||International Value||iShares MSCI EAFE Value (etf)||EFV||0.40%||$0|
|(m)indicates a managed fund|
Because Fido has limited index fund choices, more blocks will have to come from the ETF universe.It would also be possible to do nearly the entire portfolio with ETFs and still have some freedom of substitution. The only mutual fund is the Am Century International Bond fund which is expensive and managed. I’m hoping an ETF alterative will be launched this year.
|All ETF portfolio (all online brokers)||Source 4: Alternative ETFs|
|Fund Name||Ticker||Exp. Ratio||Fund Name||Ticker||Exp. Ratio|
|Vanguard Total Market Index||VTI||0.07%||Powershares RAFI 1000||PRF||0.60%|
|Vanguard REIT||VNQ||0.12%||iShares Cohen & Steers Realty||CLF||0.35%|
|Vanguard Energy||VDE||0.26%||Powershares FTSE RAFI Energy||PRFE||0.60%|
|Vanguard Value||VTV||0.11%||Powershares RAFI 1000||PRF||0.60%|
|Vanguard Small Cap Value||VBR||0.12%||Powershares RAFI 1500||PRFZ||0.60%|
|Vanguard Emerging Markets||VWO||0.30%||none||n/a||n/a|
|iShares MSCI EAFE Value||EFV||0.40%||WisdomtreeDIEFA||DWM||0.48%|
There are several differences between the Building Block portfolios and the AssetBuilder portfolios. First, AssetBuilder uses only academically researched and proven asset classes. It considers energy a sector, not an asset class.
AssetBuilder uses relatively short maturity fixed income funds from Dimensional Funds. This reduces volatility. Their funds include short term global funds which are much closer to what I’d like to do than American Century International Bond fund.
Finally, the Dimensional Funds are, I believe, the best vehicles to capture the additional returns from the Fama/French factors— value and small size—because they were specifically CREATED to capture those factors.
Here is a past performance comparison of the 10 Speed and Building Block 12 portfolios, along with mutual fund benchmarks. As you can see, BB12 trumps the 10 Speed and both trump the Morningstar category averages.
Will that lead continue in the future? I don’t know. What I think we can be certain of is that the immediate past was a period of above average returns and below average risk, as measured by standard deviation.
|Portfolio||Std. Dev.||1 year||3yrs||5yrs|
|Avg.World Allocation fund||8.54||16.50||13.34||12.24|
|Avg.Moderate Allocation fund||8.05||11.26||8.37||6.30|
|Source:Morningstar Principia, 12/31/06 data|