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I was thinking about setting up a vanguard portfolio which will run against my funds,if anything it will bring down cost and might be a nice challenge,any comments would be appreciated
I think it will be matching apples to oranges. I see no way you can correlate funds. Yes, it will most likely bring down different costs, but you already know that.
You should look at the Bogleheads Wiki and in particular the Lazy Portfolios suggestions. There is a lot of support for the idea that a low-cost, balanced portfolio is as good or better than other alternatives.
I personally hold mostly actively managed funds, but I do it out of interest, and not because I think I can beat the index. In fact when I am asked about investing, I typically only suggest index funds. You can make a lot of mistakes with active management. With index funds, you just need proper asset allocation to avoid mistakes.
Hi Blufoxx. What if you just set up a test portfolio or two in M* and watch it for a while. It would be a good benchmark for comparing what your actual portfolio is doing. I do similar benchmarking just by watching my returns compared to the TRP target date funds.
Looking at the lazy portfolios as claimui suggested is also an easy way to compare how your current investing style is doing. My goal with comparing to benchmarks is to have equal or better results with lower volatility (standard dev).
1) Setup an asset allocation and stick to it. Spend not much time other than occasional portfolio balancing. This is the passive approach. 2) Setup and index fund portfolio and actively manage the allocations yourself knowing that each component of the portfolio will stay true to the asset class.
If you are not #1 or #2, you setup an actively managed portfolio but you can certainly do worse then #1. In fact, a lot of people do actually do worse but they are not benchmarking or not benchmarking properly. So, they are not aware that they are behind and not knowing they are happy.
If you are not going to spend a lot of time, read and research you should adopt #1.
Comments
I think it will be matching apples to oranges. I see no way you can correlate funds. Yes, it will most likely bring down different costs, but you already know that.
Mona
Another good benchmark is the Permanent Portfolio which has proven remarkably resilient over the years: http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/
I personally hold mostly actively managed funds, but I do it out of interest, and not because I think I can beat the index. In fact when I am asked about investing, I typically only suggest index funds. You can make a lot of mistakes with active management. With index funds, you just need proper asset allocation to avoid mistakes.
Looking at the lazy portfolios as claimui suggested is also an easy way to compare how your current investing style is doing. My goal with comparing to benchmarks is to have equal or better results with lower volatility (standard dev).
1) Setup an asset allocation and stick to it. Spend not much time other than occasional portfolio balancing. This is the passive approach.
2) Setup and index fund portfolio and actively manage the allocations yourself knowing that each component of the portfolio will stay true to the asset class.
If you are not #1 or #2, you setup an actively managed portfolio but you can certainly do worse then #1. In fact, a lot of people do actually do worse but they are not benchmarking or not benchmarking properly. So, they are not aware that they are behind and not knowing they are happy.
If you are not going to spend a lot of time, read and research you should adopt #1.