I loved your post on the barbell strategy, I myself have made a similar move. My portfoliis largely invested into the following:
VUG (Market Risk, Growth)
VBR (Small Size, Value, Tends to Outperform during long recessions)
SPHY (About half the volatility of equities, and offers a much faster recovery time)
Overall my portfolio offer a reasonable risk and return, even during awful recessions and flat periods in the market:
After the FTSE100 went flat for decades, their small cap offered strong returns
After the Nikkei Collapse the Japanese small cap value index performed quite well and recovered in about five years, as did their high yield bond funds, though their greater market languished for decades
In the Great Depression Small Cap Value recovered faster, and the deflationary environment would have benefited anyone holding a diversified portfolio of high yield bonds that were receiving income from those that did not default.
Small cap value has a lower correlation with VUG than VXUS does, which is impressive.
As I get closer to retirement I may tone down the risk, and probably return, by moving to 1/3 in TIPS instead of high yield if my pension and social security does not provide sufficient support. If my pension and social security are large enough I might just bear the risk so that I can leave it to inheritors. It is nice to see someone else split their portfolio's equities between VUG and VBR.
Comments
I loved your post on the barbell strategy, I myself have made a similar move. My portfoliis largely invested into the following:
- VUG (Market Risk, Growth)
- VBR (Small Size, Value, Tends to Outperform during long recessions)
- SPHY (About half the volatility of equities, and offers a much faster recovery time)
Overall my portfolio offer a reasonable risk and return, even during awful recessions and flat periods in the market:- After the FTSE100 went flat for decades, their small cap offered strong returns
- After the Nikkei Collapse the Japanese small cap value index performed quite well and recovered in about five years, as did their high yield bond funds, though their greater market languished for decades
- In the Great Depression Small Cap Value recovered faster, and the deflationary environment would have benefited anyone holding a diversified portfolio of high yield bonds that were receiving income from those that did not default.
- Small cap value has a lower correlation with VUG than VXUS does, which is impressive.
As I get closer to retirement I may tone down the risk, and probably return, by moving to 1/3 in TIPS instead of high yield if my pension and social security does not provide sufficient support. If my pension and social security are large enough I might just bear the risk so that I can leave it to inheritors. It is nice to see someone else split their portfolio's equities between VUG and VBR.Post: A barbell strategy for stocks
Link to comment from January 7, 2025