Bill Bernstein No Brainer Portfolio
0.25%June 04 | MyPlanIQ portfolio symbol P_79083

Portfolio Overview

1. Background and Philosophy

The Bill Bernstein No Brainer Portfolio is a simple yet effective investment strategy proposed by Dr. William J. Bernstein, a renowned neurologist-turned-financial theorist and author of several influential investment books, including The Intelligent Asset Allocator and The Four Pillars of Investing. Bernstein advocates for a passive, low-cost, and diversified investment approach, emphasizing the importance of asset allocation and risk management. His "No Brainer" portfolio is designed for investors who seek a straightforward, hands-off strategy that balances growth and stability while minimizing complexity.

Bernstein's philosophy centers on the idea that most investors should avoid market timing and stock picking, instead relying on broad diversification across asset classes to reduce risk and achieve long-term returns. The No Brainer Portfolio reflects this by equally weighting four core asset classes, ensuring exposure to different market segments without overcomplicating the allocation.

2. Asset Allocation, Diversification, and Risk

The No Brainer Portfolio allocates 25% each to the following ETFs:

• VEA (Vanguard FTSE Developed Markets ETF) -- Provides exposure to international developed markets outside the U.S.
• VB (Vanguard Small-Cap ETF) -- Covers U.S. small-cap stocks, offering higher growth potential but with increased volatility.
• BND (Vanguard Total Bond Market ETF) -- Invests in U.S. investment-grade bonds, providing stability and income.
• VOO (Vanguard S&P 500 ETF) -- Tracks U.S. large-cap stocks, representing the core of the equity market.

Diversification: The portfolio is well-diversified across geographies (U.S. and international), market capitalizations (large-cap and small-cap), and asset classes (stocks and bonds). This reduces concentration risk and smooths out returns over time.

Risk Level: The portfolio is moderately aggressive due to its 75% equity allocation (25% international, 25% U.S. small-cap, 25% U.S. large-cap) and 25% bonds. It is suitable for investors with a medium to long-term horizon who can tolerate market fluctuations.

Pros:

• Simple and easy to manage with only four holdings.
• Broad diversification reduces reliance on any single asset class.
• Low-cost ETFs minimize expenses.
• Balances growth (equities) with stability (bonds).

Cons:

• No exposure to emerging markets or alternative assets (e.g., REITs, commodities).
• Higher volatility than a more conservative bond-heavy portfolio.
• Small-cap stocks may underperform in certain market conditions.

3. Application for Retirement Accounts (401(k) and IRA)

The No Brainer Portfolio can be easily adapted for retirement accounts like 401(k)s and IRAs. Since many 401(k) plans have limited investment options, investors should look for the closest equivalents to the portfolio's ETFs:

• VEA (International Developed Markets) → Look for a low-cost international stock index fund (e.g., Fidelity International Index Fund, Schwab International Equity ETF).
• VB (U.S. Small-Cap) → Use a small-cap index fund (e.g., Vanguard Small-Cap Index Fund, Fidelity Small Cap Index Fund).
• BND (U.S. Bonds) → Choose a total bond market fund (e.g., Vanguard Total Bond Market Index Fund, Fidelity U.S. Bond Index Fund).
• VOO (U.S. Large-Cap) → Opt for an S&P 500 index fund (common in most 401(k) plans).

If a 401(k) lacks exact matches: Investors can approximate the allocation by using broader asset class funds. For example:

• If no international developed market fund is available, allocate that portion to a global stock fund.
• If no small-cap fund exists, increase the allocation to U.S. large-cap or mid-cap funds.
• If bond options are limited, use an intermediate-term bond fund as a substitute.

Rule of Thumb: 

• For stock funds, prioritize index funds, especially low-cost index funds
• For bond funds, prioritize core bond funds or high-quality actively managed total return bond funds  (if available).

For IRA accounts, investors have more flexibility and can directly replicate the No Brainer Portfolio using the specified ETFs or their mutual fund equivalents (e.g., Vanguard mutual funds for each ETF).

Asset Allocation

Historical Performance

Calculators

Rolling Returns

Maximum Drawdown

Bill Bernstein No Brainer Portfolio Maximum Drawdown