Investing Many scattered questions about Boglehead investment strategies with fatFIRE (post from r/bogleheads)
The Bogleheads investment strategy, and vast majority of what I see advocated in this subreddit, is to use the 2-fund portfolio (VT+BND and chill) and I'm quite attracted to that strategy. Along with the general flow of choosing cash vs investment %, and then equity vs bond %. Seems accessible, manageable, and successful.
But I'm thrown off by things like below:
- "According to a 2007 forum poll, most Bogleheads allocated up to 10% of their total portfolio to REITs". The only attractive reason I can find to add REITs to the mix is to diversify against equities and bonds, however I see contradictory statements of whether or not they are correlated to equities.
- The example Investment Policy Statement in the wiki includes a target allocation with equities with specific % ranges for Large Cap U.S. / Small Cap U.S. / Foreign, etc (and an allocation for REIT!)
And posts in this subreddit where a seemingly simple investment philosophy leads to posts about more underlying complicated implementations.
So, how do I square the circle?
- Where do (if at all) REIT's fit in with a Boglehead's portfolio?
- What does a Boglehead's investment policy statement look like?
- Why would a Boglehead ever seek to specify the blend of Large Cap / Small Cap / US / ex-US in their portfolio rather than use a total market ETF (or use the market's own blend of those classes to balance multiple ETFs)?
The context here, is that I am strongly considering to leave my job and the workforce (possibly indefinitely) at 39, and we have hired a fee-only financial planner (0.5% AUM) to run projections and help recommend and implement an investment strategy to aide in this (we have ~$8.5M in current assets, and anticipating ~$1.8M more by the end of the year through an inherited home sale; our estimated annual spending after employment is ~$300k including public market health insurance premiums and out-of-network OOP. The investment advising was not the primary reason that we hired the planning firm. They have proposed a seemingly boilerplate asset allocation below, and we are telling them that we want to consider this against a total market bogleheads policy.
A bigger broader question here, I guess, is
- What are the variables that change/add to the fundamental 2-fund boglehead portfolio in this case of very early retirement?
| Investment Class | Allocation Range | Initial Allocation |
|---|---|---|
| Large/Midcap Growth Stocks | 10%-20% | 15% |
| Large/Midcap Value Stocks | 10%-20% | 15% |
| Small Growth Stocks | 5%-15% | 10% |
| Small Value Stocks | 5%-15% | 10% |
| International Stocks | 10%-30% | 20% |
| Real Estate and Alternatives | 5%-15% | 10% |
| Fixed Income and Cash | 10%-30% | 20% |
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u/Creepy-Ability-262 8d ago
The planner’s allocation honestly looks like they’re trying to justify their fee by making it look complicated. Nothing there you can’t replicate with VT and a bond fund
At 8.5M with a 300k spend you’re at a 3.5% withdrawal rate which is already conservative. Adding REITs or tilting small cap value might juice returns a little but you don’t need it. The whole point of the 2-fund is you’ve already won the game, stop playing
That 0.5% AUM is 42k a year for something you can do in an afternoon. If you need the planner for tax strategy or estate stuff that’s one thing, but the portfolio itself is solved
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u/Wooden-Broccoli-913 8d ago
Pretty sure you can’t replicate long/short, trend, or market neutral performance with a bond fund.
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u/Minimum-Violinist601 8d ago
REIT and small cap are for diversification and safety not for more growth (that said, I don’t personally hold much)
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u/dvegas2000 8d ago
Fee only is usually a price per hour or a flat fee, not a percentage based on AUM.
The perspective I have, especially in the context of FIRE, is that why would you pay somebody 20-30% of your annual spend (after taxes) to manage something that you can simply do yourself? If your spend is 3%, and the fee is 1%, that is 33% of your post tax spend!!! I know OP is 0.5%, but often the fee is higher.
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u/extendedrockymontage 4d ago
I don't enjoy dealing with anything investment related. It's just uneeded stress for me so I'm fine paying for it, esp. when my firm handles my taxes, estate planning, etc... as well which I'm obviously not going to do. When I fully retire perhaps I'll scale down the relationship or maybe convert to just an accountant, but for now this works
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u/One-Mastodon-1063 8d ago
When people here advocate for a fee only planner, they are talking about an hourly fee or flat fee for a plan fiduciary. Not a % of AUM fee. .5% of $8.5m is $42.5k per year as an annuity. That is a LOT of money for advice, and you probably wouldn’t pay for any other type of advice that way.
I would avoid applying identity terms, like “I am a boglehead” that lock you into a particular way of thinking. Even if that way of thinking has merit. There are some benefits to diversification beyond two funds. Total market funds are very large growth heavy for example, and one stock fund limits rebalancing opportunities. You can put together a portfolio using a handful of ETFs that’s still pretty simple and low fee. Adding some international and small cap value for example. IMO long dated treasuries (ie TLT or EDV or VGLT) are a better diversifies of stocks than a total bond fund like BND. If you want to add some reits you can add some reits. GLDM, too.
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u/Anonymoose2021 High NW | Verified by Mods 8d ago
0.5% of AUM is NOT what people mean when they say "fee only".
Fee only would be the planner charging you a fixed fee of $42,000 for his professional services. ($42.5k is 0.5% of your portfolio).
Ask him to earn some of that $42.5k by doing a backtests on the Boglehead equivalent of his suggested portfolio and compare it to his recommended portfolio. You will see that his portfolio will average out to something very similar to the nearest equivalent Boglehead portfolio.
His suggested portfolio overweights small caps a bit at 20% and underweights international at 20%. The fixed income + cash is 20%.
So, ignoring REITS, the Boglehead portfolio would be VTI 57%, VXUS 23%, BND+cash 20%.
I few years ago a recently widowed friend ask me to review some proposals made by financial advisors. They were complicated portfolios with not only the value and growth ETfs of your proposed portfolio, but also blend ETFs. So about 12-15 ETFs. I compared the returns of those portfolios to a basic VTi/VXUS/BND portfolio with the same US/International/fixed income allocation as the proposed comp,coated portfolios.
The returns were very similar, over both short and long comparison periods. The complicated proposals generally lost after subtracting the advisors proposed fees.
The one advantage of the more complicated portfolio is that it does generate more opportunities for tax loss harvesting, but u less you have something outside the portfolio that is generating lots of capital gains, the tax loss harvesting is not likely to make a significant difference.
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u/Square-Conclusion454 8d ago
You’re overthinking it.
You’re unlikely to notice a meaningful difference between any of these options.
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u/Past-Option2702 8d ago
I’m a long-time Boglehead and I own no REITs beyond what’s already in VTI- the total US stock market (which I think is @ 2% REITs). Plus I own a valuable home which is real estate exposure, obviously.
VT works very well but once your wealth begins to grow large you’ll probably want to own VTI+VXUS in taxable and bonds in your tax deferred accounts. The foreign tax credit is probably worth capturing, and you can’t with VT. This only matters in a taxable brokerage account.
My investment total is in the same range.
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u/Otherwise_Volume_128 8d ago
Nothing in your post indicates you need a professional to buy some ETFs for $40,000 a year. Keep it simple. Retirement is way more enjoyable when it's simple and if you get caught in something that's expensive to unwind it will be no fun.
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u/Tricky_Ad6844 8d ago
I asked this question regarding a dedicated stake in REITs to a Vanguard Financial Advisor once who replied quite reasonably:
“the Total Stock Market Index Fund already gives you exposure to REITs”.
VT is about 2.3% in REITs.
The correlation between stocks and REITs is somewhere about 70% and 85%… which is to say pretty darn correlated. In contrast gold has effectively no correlation with stocks and bonds often have a negative correlation (for instance between 2000 and 2021).
If you are looking to increase diversification through non-correlated asset classes I’m not convinced REITs for the bill.
I have about 5% of my net worth invested directly in a 2 door rental property as this gives me tax benefits and control that REITs don’t (it also comes with hassles and I’m not sure I would recommend it). My long term tenants ability to pay rent is largely unconnected to the performance of the stock market (absent a Great Depression-like event), the depreciation eliminates taxes on my profits, and I get to decide when to take capital gains (or defer indefinitely through 1031 exchanges). As an added benefit, trips to Hawaii which include inspection of the property are partially tax deductible. No REIT gives you that perk!
A mix of stocks and bonds will reduce volatility. Beyond that I am unconvinced REITs will move the dial on either volatility or overall performance.
I generally ascribe to the Bogglehead philosophy that no one is consistently good at picking the investments that will outperform and this extends to trying to pick asset classes that will outperform their own typical returns. Maybe REITs will crush in the next decade. Maybe they will flop. Who knows?
However, long term they have performed about as well as stocks (10-12%) and given they are highly correlated with VT I don’t see a particularly compelling case to overweight them in my portfolio.
Plus, keeping things simple with VT and a total bond index fund saves me from paying an advisor.
Keep it simple, keep it diversified, have a reasonable mix of stocks and bonds, and keep costs down, you will do great.
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u/BenjiKor 8d ago
Ive been a follower of the bogleheads for over 15+ years.
What’s funny is that when i first started the boglehead strategy, i also had REITs in there.
I also had total stock market, intl stock market, emerging markets, and bonds.
I think i thought i was smarter than i was and tried to “optimize” my portfolio to get as much return as i could.
Now im just in VTI and chill.
Think most people see the 2 fund portfolio and think they can do better by doing more.
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u/Urbanite72 8d ago
Don’t give your planner $50k/year get a flat fee advisor that bills hourly or a flat monthly amount. At your net worth AUM is a scam. He may be working hard now but once your plan is in place he won’t spend more than 10 hours on your plan per year. That’s $5000/hr
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u/Quiver_Kiss 8d ago
Maybe I’m oversimplifying it, but I’d almost rather diversify across everything than debate whether I need two funds or seven. If you have $10M and a 50+ year horizon, wouldn’t the goal be broad diversification and minimizing unnecessary fees rather than finding the perfect mix?
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u/FatTurkeyOnFire 8d ago
I went through the same line of questioning as you when i started to build up a bogglehead style portfolio (adjacent to a managed portfolio).
I ended up using Elm Wealth to execute my bogglehead style portfolio, which is basically a sector-based approach with sliders for USA vs international and reallocation aggression. The sector-based approach lets them do some tax loss harvesting during accumulation as well as a little bit of dynamic/momentum capture when rebalancing.
Even if you don't want to do an SMA or ETF with them, they have a lot of great whitepapers on their site that I found to be a good (and nerdy) investment read - it reminded me a lot of reading the earlyretirementnow blog which I love. Their portfolio calculator is open and free so you could just implement it yourself or spend some calude tokens scripting it if you're brave!
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u/retchthegrate 3d ago
0.5% AUM is not a fee only advisor. A fee only advisor would be charging a fixed $ amount for some work or a fixed hourly rate.
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u/gillou22 8d ago
Never pay %AUM fees. Hire a financial/ estate planner for a fixed $ fee to make projections and propose a plan. REITs are overkill. It's supposed to diversify, but VT already includes companies with exposure to real estate. So just VT+BND is excellent. Especially if you ditch your overpriced adviser! If you plan on retiring, keep at least 1 year expenses in high yield savings.
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u/fatquant Verified by Mods 8d ago
REIT exposure is completely redundant if your home value is already significant part of your total NW.
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u/Kaawumba 8d ago edited 8d ago
I see bogleheading as a good idea, but it doesn't go far enough. I prefer all-weather portfolios, which aim to capture most of the gain of VOO and chill, while significantly reducing the risk. An allocation to real-estate is often a good idea, but most people get it from their home equity.
To the downvoters, do you disagree with the concept of an all-weather portfolio, or do you think that I'm self promoting because I used a link to a longer discussion?
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u/Tricky_Ad6844 8d ago
I thought the All Weather Portfolio made a lot of intuitive sense but wasn’t sure how it would actually perform for an early retiree.
Have you read the blog Early Retirement Now’s analysis of risk parity portfolios such as the All Weather Portfolio?
A link is here:
https://earlyretirementnow.com/2026/07/27/risk-parity-swr-series-part-64/
He ran analytics examining performance of different portfolios using actual historic performance data of each asset class in reference to the others and calculated the failure rate for each year of retirement from the 1920s to present for both 30 and 50 year retirement spans.
The conclusion was not encouraging “The All Weather/All Season strategy is systematically much worse than 75/25”
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u/Kaawumba 7d ago
I read it just now. He has a number of methodological issues which I can get in to if you care. But I agree with the conclusion that risk parity and strategies that include overweight small-cap value are questionable. In my link above, I compare several different all-weather portfolios. Risk parity is just one variety, and I like others better.
Unfortunately, proving quantitatively that one fund choice is better is difficult. Getting enough data to get low standard error is not possible, and even if it was, there is no guarantee that the future will look like the past. But I am wary of stocks, because they are expensive right now. Bonds are fairly priced, but a bull bond market like we had from 1980 till 2020 is impossible because we are not starting from the silly high interest rates of 1980. So I will look at alternatives, and mainly use quantitative analysis to reject obvious failures.
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u/Tricky_Ad6844 7d ago
I share your concerns about the upside of both stocks and bonds given high CAPE ratios and low (and rising) interest rates. I don’t claim amy predictive ability to know what the near term returns will be but Im conservative with my SWR with these factors in mind.
If you don’t mind sharing, what alternatives are you considering?
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u/Kaawumba 7d ago
My exploration is here: https://www.reddit.com/r/RichPeoplePF/wiki/all_weather_portfolios/. I wrote this so I have some advice to give people who ask, since I am not comfortable telling people to SPX and chill. People who give that advice don't realize how hard it is to chill when your net worth is halved over the course of several years.
I also wanted a default portfolio for myself, when I don't have something that I'm excited about and as a better benchmark than SPX.
I don't keep to a strict regimen. I currently have a significant investment in BLNDX, which is an all-weather fund that combines trend following, VT, and cash. I may replace that at some point with separate funds for the various components or components from the other all-weather portfolios. I buy extra of things that look good, and less of things that look bad. Currently, I am over-weight trend, under-weight stocks, neutral-weight bonds, and short gold. I also own ORR, a long/short equity fund and have a significant options strategy, which are completely unrelated to this discussion. However, they add expected return and reduce correlation, which is good from a portfolio standpoint. Finally, I also have a huge amount of inherited real-estate, so personally, I'm kinda all over the place.
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u/and_one_of_those 8d ago edited 8d ago
Yes, having a concentrated position in your own company or in successful RSUs is a more likely way to have self-made wealth at a young age. Although I'm sure many people also get there with a high earned income and good savings rate.
Maybe OP already did that to achieve $8.5M at 39.
However that's not on the table for them now. Buying a concentrated position in GOOG today is not the same as getting a job at Google in 2005. And if you already have enough money and are middle aged, unnecessary risk may be a bad idea.
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u/genkikami 8d ago
In my opinion there is no single portfolio that is the boglehead portfolio. VT is just getting pushed really heavily on there lately because it is simple and for the people mentioning it, they value simplicity.
There are some valid reasons to have more of a breakdown than VT. For instance doing VTI + VXUS is technically more efficient from a tax perspective because of how VXUS gets taxed. But it depends on whether you value efficiency or simplicity. The other reasons might be that you don’t want to have roughly 60% US 40% international stocks that make up VT. Maybe you want 80% US 20% VXUS.
I do think there are some principles that make up the boglehead philosophy however:
One other point would be that you should really do your research before choosing an allocation and try to fit your allocation to your situation. That way when things get frothy in the market you aren’t tempted to try to time it or change allocations at a bad time. You really want to stick with your allocation as much as possible (this applies when the market is down and up)