Proof that strategic is not that passive is found in the wide variety of strategic portfolios listed here. Within the passive investing community there is vigorous debate about what assets should be included in a portfolio. For instance, some believe that commodities are an essential part of a diversified portfolio while others point out that commodities provide little in the way of long term real returns and can therefore be ignored. We tend to come down in favor of including them – they do tend to be negatively correlated to stocks, offer some diversification benefits and are a good hedge against a weak dollar – but also acknowledge that the benefits gained are fairly small. Another debate centers around the benefits of including foreign stocks in the portfolio. None other than John Bogle, the founder of Vanguard and the father of the index fund, has said that he would never own anything but US stocks. There are plenty of other very smart people who have the exact opposite opinion.

At Alhambra, we have had these same debates and are no closer to resolving them than anyone else. As with most things in life, there are advantages and disadvantages to including or excluding certain asset classes. We would just point out that there is no way to know the “correct” allocation in advance. For instance, excluding foreign stocks from your portfolio during the period from 2002 to 2007 when the US dollar was falling consistently meant missing out on significant returns for an extended period of time as foreign stocks outperformed the US by a wide margin. The same is true of commodities which performed very well during that period. But taking that 5 year period as evidence that those assets should always be included in one’s portfolio would have seemed a big mistake over the subsequent 5 years. US stocks have outperformed since then and commodities have generally performed poorly.

And so, we have researched the many passive portfolio approaches and listed them here. We have segregated them based on various criteria. Which one should you use? Frankly, we’re not sure it makes a lot of difference. As long as the portfolio has a variety of assets with different return profiles, they all should perform well over the long term (10 years or more). Which one will perform the best over the next five years? Here’s something very few advisors will ever tell you: we don’t know.

So, if you are well informed on the passive debate and you know your risk tolerance, you can choose one of these based on those beliefs. Or if you aren’t and/or you don’t, we’ll assist you in choosing one that conforms to, as best we can determine, your beliefs, preferences and tolerance for risk. Either way, just give us a call (305-233-3772 or 786-249-3773) or use the contact form or email us (info@alhambrapartners.com) to discuss fees, account setup and generally how to get started working with Alhambra. We prefer Fidelity, Schwab or TD Ameritrade as custodians but we can work with whatever broker/custodian you prefer.

Strategic Portfolios

Aggressive Growth 10 – An aggressive global allocation with a 10% allocation to bonds.

Aggressive Growth 20 – An aggressive global allocation with a 20% allocation to bonds.

Growth 30 – Globally diversified portfolio of 9 asset classes. 30% bond allocation.

Moderate Growth 40 – Globally diversified portfolio of 10 asset classes. 40% bond allocation.

Stable Return 60 – Globally diversified portfolio of 9 asset classes. 60% bond allocation.

Two Step – The simplest of portfolios consisting of just US stocks and bonds in equal amounts.

Triple Play – US and International stocks + bonds in equal portions.

Global Market Portfolio – Own the entire universe of investments in one portfolio.

Four Square – US and International total stock, US TIPS and Int’l Government bonds.

Five Dimension – Builds on the Four Square by adding REITs to the mix.

Sixth Sense – Global, 6 asset classes. Includes an allocation to a Natural Resource ETF.

Value 7 – Globally diversified, inflation protection, natural resources and bonds in 7 ETFs.

Global Strategic 9 – Globally diversified portfolio of 9 asset classes. Can be adjusted to fit any risk tolerance.

Balanced 50 – Globally diversified portfolio of 9 asset classes. 50% bond allocation makes it a moderately conservative choice.

Capital Preservation 70 – As the name says, this portfolio is about capital preservation. Globally diversified, growth is a secondary consideration.

Capital Preservation 80 – Even more conservative than the 70 version.

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