Hi Bill, thanks for the wonderful book! Your research uses 5 stock asset classes (US large, small, mid, micro, and international) weighted equally. I was wondering how the historical SAFEMAX would change if an investor uses a total world stock fund such as Vanguard VT for their stock allocation instead? This fund tracks the FTSE Global All Cap Index, which has stocks of all sizes weights them by market cap. According to Morningstar it is 42.65% giant, 30.99% large, 18.39% mid, 5.24% small, 0.78% micro. The overall international exposure is 37.2%.

I realize it would be hard to give a precise answer, but would the safemax be somewhere between the “new” safemax and the older one that used s&p 500 only for stocks?

Thanks so much.  T.

 

Dear T.,

I looked up a bit more about the Vanguard VT ETF. It was founded in 2008, which means there is less than twenty years of data for its performance. That doesn’t fit in well with my research methods, which uses data going back to 1926.

Having said that, the fund’s performance over the last ten years has been strong (about 10.1% annually). That doesn’t match the performance of the S&P 500 index, but that’s not a fair comparison. The fund looks like a solid option for exposure to global stocks. I imagine its returns should suffice to generate the level of withdrawal rates I mention in my book.

Using only one fund for global stocks in your portfolio leaves plenty of room for other growth assets. You could compliment your holding in VT with funds investing in small cap stocks, emerging market stocks, international small value, precious metals, REITs, commodities, and perhaps even Bitcoin. The important thing is to have a well-diversified portfolio.

 

Best regards,

 

Bill Bengen