Statement Shock: Building the Perfect Portfolio
The loss-riddled third-quarter fund statement in your mailbox is undoubtedly ugly, but it didn't have to be this bad.
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The average U.S. stock fund is down about 22% over the past 12 months -- more than double the S&P 500's worst calendar-year loss over the past 20 years. Even worse, tech and tech-laden growth funds, which captured most of the record $309 billion sunk into funds in 2000, are down a gut-wrenching 65% and 36%, respectively. Meanwhile, bond funds and tech-light value funds have had a much smoother road. The upshot: The idea that the money you invest in stock funds should be spread among funds with distinct styles and portfolios seemed winded when everyone had tech fever, but it has proven its mettle over the past year. As part of today's special report, Statement Shock, let's look at a couple of model stock-fund portfolios we designed at the start of this year. One is a low-maintenance option with just two funds, while the other is a bit more complex -- for self-described fund junkies. Both would've made the past year less painful, by spreading your dough broadly across the market. The idea behind the low-maintenance portfolio is that not everyone out there has the time or desire to obsess over their portfolios. People know they need to invest their money to meet daunting long-term goals like a comfortable retirement, but many liken time spent with their calculators to time spent in the dentist's chair. With these folks in mind, I've roughed out a portfolio for investors with at least a 10-year time horizon. With just two no-load funds, the (VTSMX)Vanguard Total Stock Market Index fund and the (TWEBX)Tweedy Browne Global Value fund, this same portfolio gives you broad, cheap access to a vast array of stocks without requiring more than a low-tech rebalancing at year-end to make sure your allocation is on target.
| The Low-Maintenance Portfolio | |||
| Fund | Percentage of Portfolio | Style | |
| (VTSMX)Vanguard Total Stock Market Index | 80% | Core U.S. Stock | |
| (TWEBX)Tweedy, Browne Global Value | 20 | Foreign Stock | |
| Take the Low Road | |||
| Risk | |||
| Low-Maintenance Portfolio | S&P 500 | ||
| Worst Year | -21.1% | -24.5% | |
| 5-Year Beta | 0.89 | 1 | |
| Source: Morningstar. Data through Sept. 1. | |||
| Modeling Good-looking numbers for your portfolio |
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| Fund | Percentage of Portfolio | Style | |
| (VTSMX)Vanguard Total Stock Market Index | 35% | Core U.S. Stock | |
| (TWEBX)Tweedy, Browne Global Value | 15 | Foreign | |
| (GABGX)Gabelli Growth | 10 | Large-Cap Growth | |
| (RPMGX)T. Rowe Price Mid-Cap Growth | 5 | Mid-Cap Growth | |
| (LMVTX)Legg Mason Value Trust | 10 | Large-Cap Value | |
| (OAKMX)Oakmark | 5 | Mid-Cap Value | |
| (MGSEX)Managers Special Equity | 10 | Small-Cap | |
| (FSFSX)Invesco Financial Services | 10 | Sector | |
| (FSPHX)Fidelity Select Health Care | |||
| (TVFQX)Firsthand Technology Value | |||
| Source: Detox. | |||
| Perfect Game | |||
| Risk | |||
| Perfect Portfolio | S&P 500 | ||
| Worst Year | -20.3% | -24.5% | |
| 5-Year Beta | 0.94 | 1 | |
| Source: Morningstar. Data through Sept. 1. | |||
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