Ben Stein is one of my favorite financial writers. I don’t always agree with his political views, but I usually find him to be grounded in reality in money matters. Also, he’s a pretty funny guy when he wants to be.
Here is what he suggests for a typical working American’s portfolio distribution, from a recent article in Forbes magazine:
* 20% of your total portfolio in cash or CDs to take care of emergencies, like the loss of a job.
* 80% in a mix of index funds and exchange-traded funds.
That 80% should be invested as follows:
* 25% in an S&P 500 index fund like Vanguard’s VFINX.
* 25% in a total stock market index fund like Vanguard’s VTSMX.
* 25% in the iShares ETF EFA, an international large cap fund.
* 15% in the iShares ETF EEM, which tracks an emerging markets index.
* 5% in the iShares ETF ICF, a fund that tracks real estate investment trusts.
* 5% in the the ETF XLE, which follows the energy sector.
Ben Stein doesn’t take any time horizon into account when recommending this allocation, but he does voice his opinion against bonds. What do you think of his portfolio suggestion? Does the allocation of the 80% equity portion provide better risk-adjusted return than just investing straight into VTSMX? Ben Stein is a proponent of timing the market through the use of sector ETFs, which I know from reading his book, Yes, You Can Time the Market. Some say you shouldn’t try to time the market it all, it just introduces unnecessary risk.
Updated February 10, 2011 and originally published June 16, 2007. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.