FundAdvice Ultimate Buy and Hold Portfolio is a long running portfolio that is tracked on MarketWatch.com’slazy portfolios, maintained by Paul Farrel. The portfolio was proposed by Paul Merriman, who has been an advocate on asset allocation and some actively managed strategies. 

The portfolio consists of the following index funds:

Vanguard Int-Tm Trs;Inv 20%
Vanguard Sh-Tm Trs;Inv 12%
Vanguard Intl Val;Inv 12%
Vanguard Dev Mkts;Inv 12%
Vanguard Infl-Prot;Inv 8%
Vanguard Sm-Cp Idx;Inv 6%
Vanguard SC Val I;Inv 6%
Vanguard Value Idx;Inv 6%
Vanguard 500 Index;Inv 6%
Vanguard EM St Id;Inv 6%
Vanguard REIT Idx;Inv 6%

Notably, the portfolio is very diversified in equity asset classes. However, corporate bonds are missing.

We use the above funds to construct this plan: i.e. the above funds are used as candidate funds. Model portfolios are then generated using MyPlanIQ’s asset allocations strategies.  For the purpose of comparison, model portfolios in this plan should be compared with Fund Advice Ultimate Buy and Hold Lazy Portfolio that is rebalanced annually.

The  plan consists of 11 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

 

Asset Class Ticker Name
DIVERSIFIED EMERGING MKTS VEIEX Vanguard Emerging Mkts Stock Idx
LARGE BLEND VFINX Vanguard 500 Index Investor
Intermediate Government VFITX Vanguard Interm-Term Treasury
SHORT GOVERNMENT VFISX Vanguard Short-Term Treasury
Inflation-Protected Bond VIPSX Vanguard Inflation-Protected Secs
Foreign Large Value VTRIX Vanguard International Value
Foreign Large Blend VDMIX Vanguard Developed Markets Index
SMALL BLEND NAESX Vanguard Small Cap Index
SMALL VALUE VISVX Vanguard Small Cap Value Index
LARGE VALUE VIVAX Vanguard Value Index
REAL ESTATE VGSIX Vanguard REIT Index

 

Asset Class Number of funds
Balanced Fund 0
REITs 1
Fixed Income 3
Commodity 0
Foreign Equity 2
Emerging Market Equity 1
US Equity 4
Total 11

As of Nov 4, 2013, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan’s available investment funds are . It has the following detailed ratings:

Diversification — Rated as average (51%)
Fund Quality — Rated as average (61%)
Portfolio Building — Rated as average (41%)
Overall Rating: average (50%)

The funds are diversified enough to construct model portfolios using MyPlanIQ  asset allocation strategies: strategic and tactical asset allocation strategies (SAA and TAA).

Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.

Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA. 

The following compares the model portfolios: 

Portfolio Performance Comparison (as of 11/6/2013)

Ticker/Portfolio Name YTD
Return**
1Yr AR 3Yr AR 5Yr AR 5Yr Sharpe 10Yr AR 10Yr Sharpe
FundAdvice Ultimate Buy and Hold Lazy Portfolio Strategic Asset Allocation – Equal Weight Moderate 5.9% 8.2% 5.0% 11.9% 0.75 8.2% 0.51
FundAdvice Ultimate Buy and Hold Lazy Portfolio Strategic Asset Allocation – Optimal Moderate 8.2% 10.5% 6.3% 11.9% 0.78 7.8% 0.5
FundAdvice Ultimate Buy and Hold Lazy Portfolio Tactical Asset Allocation Moderate 10.1% 11.7% 5.9% 9.5% 0.97 10.4% 0.98
Fund Advice Ultimate Buy and Hold Lazy Portfolio 8.9% 10.2% 5.9% 10.6% 0.75 7.4% 0.5
VBINX (Vanguard Balanced Index Inv) 14.7% 15.7% 10.8% 12.2% 0.92 7.0% 0.49

**YTD: Year to Date

See detailed year by year comparison >>

 

From the above, the tactical portfolio has performed the best in the last 10 years. It lagged behind strategic portfolios and the original portfolios in the last 3 and 5 years as the stocks have done well since the 2008-2009 financial crisis. However, year to date, the tactical has caught up with the rest and now out performing the rest. It is interesting to see how these portfolios will play out in the coming years. 

Disclosure:

MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.