Marotta’s 2018 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 are in or near retirement, we recommend professional management. For that reason, our calculators do not make recommendations beyond age 70.

This year, we are offering four different gone fishing portfolios based on which custodian hosts your accounts.

The four portfolios are:

Our standard gone-fishing portfolio can be used at any custodian. The custodian specific portfolios try to use securities which have no transaction fee at the particular custodian.

If you are just getting started with investing and have not yet selected a custodian, we recommend Vanguard.

2017 Returns

Each year, we use the Age 40 Asset Allocation (85.4% stocks and 14.6% bonds) for performance comparison. During 2017, these gone-fishing portfolios had a return of:

  • 16.65% for the Marotta’s 2017 Gone-Fishing Portfolio
  • 17.18% for the Marotta’s 2017 Vanguard Gone-Fishing Portfolio
  • 14.83% for the Marotta’s 2017 Schwab Gone-Fishing Portfolio
  • 18.67% for the Marotta’s 2017 TD Ameritrade Gone-Fishing Portfolio

By comparison, the all-stock S&P 500 had a return of 21.83% and the more appropriate 15% Stability / 85% Appreciation benchmark had a return of 21.05%.

Asset allocation means you always have something to complain about. The worst performing asset category was energy. The 2017 return of Vanguard Energy ETF (VDE) was -2.5%. After that was Schwab U.S. Aggregate Bond ETF (SCHZ) with 3.5% and Vanguard REIT ETF (VNQ) with 4.91%.

On the other end of the spectrum, Vanguard Emerging Markets ETF (VWO) was up 31.48%, iShares Singapore ETF (EWS) was up 34.81%, and iShares Hong Kong ETF (EWH) was up 36.50%.

The Marotta’s 2017 Vanguard Gone-Fishing Portfolio did slightly better partly because its energy fund performed better. In contrast to VDE which was down -2.50%, the Vanguard Energy Inv/Adm mutual fund (VGENX/VGELX) was up 3.17%.

The Marotta’s 2017 TD Ameritrade Gone-Fishing Portfolio did even better because TD Ameritrade did not have any no-transaction-fee option to invest in energy so that portfolio did not include an allocation to energy.

In 2016 an allocation to energy helped portfolios perform better than their benchmarks. In 2017, it did not help. Such is the way of asset allocation.

There are three significant changes to the gone fishing portfolios this year. In each case I have followed the advice of my father and made “half a mistake” moving only a portion of the asset allocation.

Tilting U.S. Stocks More Toward Small and Mid Cap Value

In all the portfolio we have reduced the allocation to large cap stocks and increased the allocation to Mid Cap Value and Small Cap Value. Normally a static asset allocation should tilt toward small and value, but the past few years valuation of relative forward P/E ratios has suggested that large and growth would out perform value. At the beginning of 2018, that is no longer true. Relative forward P/E suggests tilting small and value may once again out perform value and growth.

Reduction in Resource Stocks

In all the portfolios we have slightly reduced the allocations to Resource Stocks (energy and real estate). These categories both look less attractive at the beginning of 2018. We have also decided on a lower top-level allocation to Resource Stocks after lowering the materials stocks allocation. The reduction in Resource stocks causes the allocations to U.S. stocks and foreign stocks to increase.

The Closing of QAUS

During the summer of 2017 one of the ETFs we used for Australia investing, SPDR MSCI Australia StrategicFactorsETF (QAUS), closed. In our Gone-Fishing Portfolio, we replaced this fund with iShares MSCI Australia ETF (EWA). In our Schwab No Transaction Fee Gone-Fishing Portfolio, we simply eliminated QAUS and increased the allocations to SPDR MSCI Canada StrategicFactors ETF (QCAN), SPDR MSCI United Kingdom StrategicFactors ETF (QGBR), and SPDR MSCI Germany StrategicFactors ETF (QDEU).

Stay the Course

Despite rumors of an impending market meltdown, nothing in stock valuations suggests that 2018 will be more risky than any other year.

We have a saying, “It is always a good time to have a balanced portfolio.Jumping in and out of the markets, on average, produces a lower return. There are people who got out of the markets in September before the 2016 Presidential Elections and are still out of the markets today. They have missed a great year for investing and still don’t know when to get back in. On December 5, 1996, Federal Reserve Board chairman Alan Greenspan used the term “irrational exuberance” to describe the market’s rise. Those who heeded his warning missed the next fours years and one quarter of rising markets.

It is easy to get out of the markets when they look risky. They always look risky. But it is difficult to know when to get back in.

We believe that it is always better to be in the markets than trying to time the markets.

Photo by Leo Rivas 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.