An Overview of Marotta’s 2021 Gone-Fishing Portfolios

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A gone-fishing portfolio is a portfolio of just a few stocks which should weather the ups and downs of the market fairly well while only rebalancing twice a year. We recommend a gone-fishing portfolio for people who are just getting started with investing. For people with more invested assets or who are in or near retirement, we recommend professional management. For that reason, our calculators do not make recommendations beyond age 70.

Our standard gone-fishing portfolio can be used at any custodian. In the past, we have made several custodian-specific portfolios in order to take advantage of each custodian’s specific no-transaction-fee list. However late in 2019, several custodians switched to have no transaction fees for exchange-traded funds (ETFs). This eliminates the need for custodian-specific portfolios for Charles Schwab, TD Ameritrade, Fidelity, eTrade, and others. As a result, our standard portfolio is the best recommendation at most custodians for 2021.

For the custodians which still have a limited no-transaction-fee list, we still create custodian-specific portfolios to take advantage of those lower fees. As of the writing of this article, the only custodian-specific portfolio we have crafted for 2021 is Vanguard. However, if you’d like us to create one for your custodian, you can send us your request through our Contact page.

If you are just getting started with investing and have not yet selected a custodian, in the past we would normally recommend Vanguard because of their no-transaction-fees on Vanguard mutual funds and no account minimums. However, Charles Schwab now has no-transaction-fees for U.S. security trades and has also moved to allowing account opens with no minimum deposit. For these reasons, we would now recommend selecting Charles Schwab as your custodian and using our default Gone-Fishing Portfolio.

For those still interested in an all-mutual fund portfolio at Vanguard, we have updated the Marotta’s Vanguard Gone-Fishing Portfolio for 2021.

Here are all of our gone-fishing portfolios so-far for 2021:

Marotta’s 2021 Gone-Fishing Portfolio Calculator
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This gone-fishing portfolio is our default portfolio which can be used at any custodian.

Marotta’s 2021 Vanguard Gone-Fishing Portfolio Calculator
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We recommend this gone-fishing portfolio for accounts hosted at Vanguard.

Over the course of 2020, our Investment Committee revisited our asset classes, running efficient frontier analysis to determine if we still have the long-term historical returns to justify our investment decisions. This process helped us tilt more towards Healthcare and Technology while adding Consumer Staples and Biotechnology to U.S. Stock allocations. This also helped us to remove the Energy overweight from our Resource Stock allocation and tilt Foreign Stocks toward foreign Healthcare and away from Financials.

When updating our 2020 Gone-Fishing Portfolio, we integrated these findings.

Added U.S. Sector Allocations

In the 2021 Gone-Fishing Portfolio, we added allocations to Vangurd Information Technology Index ETF (VGT), Vanguard Health Care Index ETF (VHT), and Vanguard Consumer Staples Index ETF (VDC). To make room for these new allocations, we decreased allocations to the Large, Mid, and Small Cap style box funds.

In our research, we found that Consumer Staples, Healthcare, and Technology are the sectors that dominate the efficient allocations. Over most time periods, a blend of Technology and Healthcare represents the highest-return efficient portfolios while Consumer Staples, sometimes by itself, represents the lowest-risk efficient portfolios. In the middle, the portfolios with the best risk-adjusted return are often a blend of these three sectors.

In our 2021 portfolio, we elected to use 1 part Technology, 1 part Healthcare, and 0.75 parts Consumer Staples.

Removed Energy

This past year, our Investment Committee decided to eliminate our Energy overweight. While both our U.S. and foreign investments have energy allocations, this change removed Energy from our Resource Stock allocations.

To recreate this change in our Gone-Fishing portfolios, we removed Vanguard Energy ETF (VDE) from portfolio allocations. Before removing our Energy sector allocation, the Energy exposure of a 100% Stock portfolio was close to 5-6% of the portfolio. After this change, Energy represents closer to 2-3% of the portfolio.

With the removal of Energy, we also increased the allocation to Vanguard Real Estate ETF (VNQ) slightly.

In efficient frontier analysis, we found that a 10% allocation to Real Estate often found a place in most efficient portfolios, but the real estate market appears overvalued right now. Previously, our Gone-Fishing portfolios had closer to 4.8% of Appreciation in REITs. To tilt slightly away from REITs due to its valuation, we increased our REIT allocation to only 6% of Appreciation.

Changed Country-Specific Funds

When reviewing our Foreign allocations, we discovered that the sector of foreign Healthcare has outperformed in a risk-adjusted manner the other foreign sectors we were reviewing while Financials has underperformed. As a result of this finding, we tilted towards countries who had the most Healthcare allocations and away from countries who had the most Financials.

After our tilt, our top four country allocations are Switzerland, New Zealand, Denmark, and the United Kingdom. These are the countries we used in our 2021 Gone-Fishing Portfolio. As of writing this, their Healthcare percentages are 37.32%, 37.89%, 47.42%, and 11.13% respectively.

The countries which were removed were Hong Kong and Singapore because they both have high concentrations in Financials, Australia because while it has a moderate Healthcare allocation is also loaded with Financials, and Ireland because it has no Healthcare allocation and is very tiny.

Changed Small Cap Fund

Both Vanguard Small Cap Value ETF (VBR) and SPDR S&P 600 Small Cap Value ETF (SLYV) are on our Investment Committee buy list. Prior to our 2020 portfolio, we had been using VBR in our Gone-Fishing Portfolios to represent Small Cap. In 2020, we changed our Small Cap fund to SLYV because more of its holdings actually represent Small Cap.

Then, this past year when researching efficient frontiers, we found that Mid Cap makes it better on the frontier than other sectors. When you combine this finding with VBR’s smaller expense ratio (0.07% vs. 0.15%), we decided to change our Small Cap fund back to VBR in our 2021 portfolios.

Tilted Toward United States

In long-term historical efficient frontier analysis, Foreign Stocks has a smaller place in efficient portfolios than U.S. Stocks. While prior to this year, we had close to an even split between United States and Foreign stocks, in the 2021 Gone-Fishing Portfolio we tilted towards the United States. In a 100% Stock portfolio, this means that we now have a little over a third in the Foreign Stocks allocation.

Delayed Bond Allocations

Most advisors recommend a standard 60/40 portfolio of stocks and bonds without any customization for the client’s age, withdrawal rate, or goals. We think that this type of portfolio is too conservative for the average investor.

In previous years, we have used an age-appropriate safe withdrawal rate to set our Gone-Fishing Portfolio bond allocations. This meant that for the 2020 portfolio, an age 40 allocation would have been 85.4% Appreciation (stocks) and 14.6% Stability (bonds).

However, we feel that this might mean that some investors are remaining too conservative. For example, when you are age 40, you are normally 25 years or more away from retirement and still aggressively contributing to a portfolio. Unless you have an unstable job, lack emergency allocation, or other financial instability, you may not need any bonds as a 40-year-old.

This year, we decided to keep our recommended stock allocation at 100% stocks for investors less than 50 years old. Starting a bond allocation when you are 50 and are still 15 years from retiring at age 65 makes more sense than having a bond allocation for years and years before retirement.

If you want a bond allocation, then you can use your withdrawal rate to calculate how much Stability allocation you should have. In the calculator, you can then use the “Percentage in Stocks” field to override the calculator and pick the asset allocation you want.

Photo by Tyler Nix on Unsplash

Follow David John Marotta:

President, CFP®, AIF®, AAMS®

David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.

Follow Megan Russell:

Chief Operating Officer, CFP®, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 800 financial articles and is known for her expertise on tax planning.

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