Mebane Faber GAA Global Asset Allocation Portfolio
0.52%June 04 | MyPlanIQ portfolio symbol P_79030

Portfolio Overview

1. Background and Philosophy

The Mebane Faber GAA (Global Asset Allocation) Portfolio was created by Mebane Faber, a well-known investor, author, and co-founder of Cambria Investment Management. Faber is a proponent of systematic investing, trend-following strategies, and global diversification. His philosophy emphasizes reducing volatility and improving risk-adjusted returns by spreading investments across multiple asset classes, including equities, bonds, real estate, and commodities.

This lazy portfolio is designed to be simple, low-maintenance, and globally diversified, making it suitable for long-term investors, including those in retirement. The portfolio's structure is inspired by the Permanent Portfolio and Ray Dalio's All Weather Portfolio, but with a focus on ETFs for ease of implementation.

2. Asset Allocation Analysis

The portfolio is divided into the following allocations:

• U.S. Stocks (18.00%): VV (Vanguard Large-Cap ETF)
• International Developed Stocks (13.50%): VEA (Vanguard FTSE Developed Markets ETF)
• Emerging Market Stocks (4.50%): EEM (iShares MSCI Emerging Markets ETF)
• Real Estate (4.50%): VNQ (Vanguard Real Estate ETF)
• U.S. Investment-Grade Bonds (19.80%): LQD (iShares iBoxx $ Investment Grade Corporate Bond ETF)
• International Bonds (14.40%): BNDX (Vanguard Total International Bond ETF)
• Long-Term U.S. Treasuries (13.50%): TLT (iShares 20+ Year Treasury Bond ETF)
• TIPS (1.80%): TIP (iShares TIPS Bond ETF)
• Gold (5.00%): GLD (SPDR Gold Trust)
• Commodities (5.00%): GSG (iShares S&P GSCI Commodity-Indexed Trust)

Diversification and Risk Level

The portfolio is highly diversified across asset classes, geographies, and risk factors. It balances growth (stocks) with stability (bonds, gold, and commodities), aiming to perform well in various market conditions. The inclusion of long-term Treasuries (TLT) and gold (GLD) provides a hedge against market downturns and inflation.

Pros and Cons

Pros:

• Global diversification reduces reliance on any single market.
• Low correlation between assets (e.g., stocks vs. bonds vs. gold) smooths returns.
• Simple and passive, requiring minimal rebalancing (typically annually).

Cons:

• Lower expected returns compared to 100% equity portfolios due to heavy bond exposure.
• Commodities (GSG) and gold (GLD) can be volatile and underperform for long periods.
• Limited small-cap and value exposure, which may reduce long-term growth potential.

3. Practical Application for Retirement Accounts

For 401(k) Accounts:

Since 401(k) plans often have limited fund options, investors should approximate the portfolio as follows:

1. Match ETFs to available funds: Look for index funds with similar exposures. For example:
   • VV → S&P 500 or large-cap U.S. stock fund.
   • VEA → International developed market fund.
   • BNDX → International bond fund (if unavailable, use more LQD or TLT).
2. For missing asset classes: Allocate to broader categories:
   • No EEM? Use a general international stock fund.
   • No VNQ? Increase U.S. or international stock allocation.
3. Commodities (GSG/Gold (GLD)): These are rarely available in 401(k)s. Allocate the 10% to stocks or bonds instead.

For IRA Accounts:

IRAs offer more flexibility. Investors can directly purchase the ETFs listed above or use equivalent mutual funds (e.g., Vanguard mutual fund versions of the ETFs). Rebalance annually to maintain target allocations.

Key Takeaway: The Mebane Faber GAA Portfolio is a conservative, globally diversified option for retirement investors. While it may lag in bull markets, its balanced structure aims to protect capital during downturns.

Asset Allocation

Historical Performance

Calculators

Rolling Returns

Maximum Drawdown

Mebane Faber GAA Global Asset Allocation Portfolio Maximum Drawdown