After reading AssetClasses we can then start to think about Asset Allocations, i.e. of these AssetClasses what should we own, how much, and should we change our allocation over time?

The easiest answer, if you don't want to think about this stuff is a "Target Date/Retirement Index Fund". Fidelity and others offer them, and they are the easiest sane answer, just pick the farthest date out that you might retire and buy that fund(It's totally fine to retire before the date on the fund). If you don't want to know anything else about investing, you can safely ignore the rest of this page.

Your people probably talk about some common portfolios/Asset Allocations, let's talk about some of the more common ones:

Five Factor / Factor investing.

Academics( have been trying to explain how the public stock markets work. Their goal is to explain 100% of the public stock markets. In the 1970's academic literature was able to account for roughly 2/3rds of public market returns. In the 1990's 2 guys(Fama and French, Nobel prize winners) figured out a 3 factor model in 1992 that theoretically explains almost 90% of the market.

Today, in the 5 factor model papers, they are able to explain 95% of the public market's returns. This sounds AMAZING. If we KNOW empirically that we can reliably make 95% of the market with effective no work and no risk, who wouldn't take the deal?

Since the 5 factor model, academics have gone crazy for factors and are publishing new factors every other day trying to finish it off and explain the remaining 5%. So far none of these other "factors" have been even remotely provable. The 5 factor model so far has held up to scrutiny and it's likely mostly true.

Unfortunately reality makes this not the utopia of investing we might think it is, this method of investing is guaranteed to be a very bumpy, emotional ride, you absolutely must prepare to lose to the market for many decades. The academic theory is you will eventually be rewarded.

Implementing the 5 factor model for a DIY investor isn't the easiest, these days you can go through a financial advisor that has access to the DFA funds or use something like the Avantis funds. Paul Merriman is a fan andfollowing his advice is a decent way to not get to off-track.

So I believe the 5 factor model is mostly true. I also believe that for most investors it's probably a questionable way to invest, but I support it, if you think you have the ability to invest in it for the rest of your life.

All Weather Portfolio / Turtle Investing.

Ray Dalio is famous for this method of investing, the idea is you own things that do well for any given economic condition, so you always have something doing well, so no matter what happens, you should be OK.

Often not talked about, but because you in theory own something that will always do well, you also will own things that will do poorly, which means some of your assets will ALWAYS underperform or lose money, it is by design. Since it is hard to know what will work out well in the next decades, we own everything and accept the lumps when they happen.

I call this Turtle Investing and has a lot to do with Start Date Sensitivity. This method of investing says, I don't want 30% returns on occasion if it means I have to eat 50% cuts on occasion, I'd rather just plod along like a turtle with strong stable growth overall. Economic academic literature doesn't spend much if any time researching this that I'm aware of.

If this idea appeals to you:

My personally created "Turtle Portfolio", modelled after the Pinwheel Portfolio


15% VTI (Total Stock Market)
15% VXUS (International Stocks)
--- Alternatively just hold 30% of VT, if you don't want to hold them separately
10% IJS (Small Cap Value)
10% VWO (Emerging Markets)
15% BND (Intermediate Bonds)
5% VNQ (Real Estate-REIT)
10% VPU (Utilities)
10% SGOL (Gold) IAU is the common choice, but SGOL is cheaper(.17ER vs .22).
10% cash (hold in your checking/savings/MMF)

Fidelity Version:

15% FZROX/FSKAX (Total Stock Market)
15% FZILX/FTIHX (International Stocks)
10% IJS (Small Cap Value)
10% FPADX (Emerging Markets)
15% FXNAX (Intermediate Bonds)
5% FSRNX (Real Estate-REIT)
10% VPU (Utilities)
10% SGOL (Gold) IAU is the common choice, but SGOL is cheaper(.17ER vs .22).
10% cash (hold in your checking/savings/MMF)

While accumulation phase, re-balance with new $$'s.

60/40 AA "bogleheads" portfolio

This is the "classic" 2 or 3 fund total market and bond holding fund. The idea here is you own the Total Market(though people disagree if "total" means US only or not, hence the 2/3 fund debate) and some bonds. With bond prices guaranteed to be terrible for the 2020's, owning bonds right now isn't the smartest choice, but it's definitely safe enough. See the bogleheads wiki page about it.

For the 2020's while accumulating, I'm more of a 100/0 bogleheads portfolio type, I.e. skip the bonds, and just own the total stock market, until we know what interest rates(and there for bonds) are going to do. If you already own bonds, there is probably little reason to sell them.


It's important to note that none of these portfolios will get you rich tomorrow, at best, they will increase your wealth 20-50 years from now. I.e. these are all long-term buy and hold strategies. If you want to get rich tomorrow, you MUST concentrate your investing AND you must be correct in your investment. The absolute best way to do this is to invest in yourself. I.e. Education, schooling, exercise and health, better paying jobs, etc. If you are finished investing in yourself for now and want to make a concentrated investment, then follow the old adage: put all your eggs in one basket and WATCH THAT BASKET.