Ben Stein, one of the popular columnists on Yahoo! Finance, suggests a model portfolio in his latest column that takes advantage of the falling U.S. dollar. Note that the portfolio is targeted at American investors.
Developed International Equities (EFA): 15%-25%
Emerging Markets (EEM or ADRE): 10%
Total US Market (VTI): 30%
Small-Cap value (IWN): 10%
Real Estate (ICF): 10%
Cash: 15%
I am a bit surprised that he did not mention bonds at all, especially in a low-return environment in which bonds might be less correlated with equities.
Bookmark: del.icio.us Digg StumbleUpon
6 responses so far ↓
1 Phil S // Jan 9, 2007 at 10:24 am
With countries like Venezuela and Thailand setting the trend of confiscating and nationalizing assets and resources, the prospects of emerging market economies are looking really ugly. The value of foreign investments are going to ZERO. That said, if it helps bring their populations out of the desperate poverty that they are commonly in, then we all win in the long run. But I certainly wouldn’t put my investment dollars into those countries!
2 Canadian Capitalist // Jan 9, 2007 at 10:43 am
EEM is very diversified and include nations like Taiwan, South Korea, South Africa etc. While I think that EEM has gotten a bit ahead of itself and is very volatile, a 5-10% allocation seems reasonable.
3 Alastair // Jan 9, 2007 at 6:22 pm
I’m half-way through The Four Pillars of Investing by William Bernstein, and he points out that you need to be careful (at least in the states) with certain asset classes such as Value, Real Estate and, to a lesser degree, Emerging Markets, if held outside a tax-sheltered account (i.e. RRSP). The distribution generated by these classes end up eating into your returns.
I’m curious to find a book that has the Canadian perspective on creating open and RRSP portfolios. Have you read anything on this topic?
4 Dave // Jan 9, 2007 at 8:52 pm
I have seen the words “bonds” and “cash” used interchangeably before. Perhaps he is lumping bonds in with cash.
5 Phil S // Jan 10, 2007 at 10:43 am
Alastair. It sounds to me like you’re not looking for as much of a book about investing as you are a book about the impact of taxation on your portfolio. In that particular case, I would suggest the Tax Freedom Zone, by Tim Cestnick. He offers plenty of good ideas for ensuring that you maximize your after-tax returns, but he doesn’t offer any investing advice, he’s a tax accountant by trade.
6 Canadian Capitalist // Jan 11, 2007 at 12:36 pm
Alastair: I’d second Phil and suggest that you read some books on taxation. Typically, you are looking for funds with minimum churn and capital gains distributions for taxable portfolios and many traditional index ETFs will fit the bill. You are correct in pointing out that some indices are very tax efficient and others are not. I did a post once comparing the Russell small cap index with the S&P 600 small cap index. You can do a search for it.
Leave a Comment