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In doing research on How to Select IRA Investments, I stumbled across the Gone Fishin' Portfolio. This link where I found out about the portfolio claims that it is based on the 1990 economics Nobel Prize. Is that a correct claim?

If you do know about the portfolio, do its claims appear to be true? If you don't, would you consider trying it?

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Yes, the "based on" claim appears to be true – but the Nobel laureate did not personally design that specific investment portfolio ;-)

It looks like the Gone Fishin' Portfolio is made up of a selection of low-fee stock and bond index funds, diversified by geography and market-capitalization, and regularly rebalanced. Excerpt from another article, dated 2003:

The Gone Fishin’ Portfolio [circa 2003]

Vanguard Total Stock Market Index (VTSMX) – 15%
Vanguard Small-Cap Index (NAESX) – 15%
Vanguard European Stock Index (VEURX) – 10%
Vanguard Pacific Stock Index (VPACX) – 10%
Vanguard Emerging Markets Index (VEIEX) – 10%
Vanguard Short-term Bond Index (VFSTX) – 10%
Vanguard High-Yield Corporates Fund (VWEHX) – 10%
Vanguard Inflation-Protected Securities Fund (VIPSX) – 10%
Vanguard REIT Index (VGSIX) – 5%
Vanguard Precious Metals Fund (VGPMX) – 5%

That does appear to me to be an example of a portfolio based on Modern Portfolio Theory (MPT), "which tries to maximize portfolio expected return for a given amount of portfolio risk" (per Wikipedia). MPT was introduced by Harry Markowitz, who did go on to share the 1990 Nobel Memorial Prize in Economic Sciences. (Note: That is the economics equivalent of the original Nobel Prize.)

You'll find more information at NobelPrize.org - The Prize in Economics 1990 - Press Release.

Finally, for what it's worth, it isn't rocket science to build a similar portfolio. While I don't want to knock the Gone Fishin' Portfolio (I like most of its parts), there are many similar portfolios out there based on the same concepts. For instance, I'm reminded of a similar (though simpler) portfolio called the Couch Potato Portfolio, made popular by MoneySense magazine up here in Canada.

p.s. This other question about asset allocation is related and informative.

  • that's the sense I was getting, I just wanted to make sure the fundamentals were sound. Ideally I'd like to learn the fundamentals and use them (rather than a specific set of Vanguard funds) – justkt Sep 15 '10 at 15:48
  • @justkt - the other question about asset allocation linked by Chris gives you exactly what you're looking for - a way to learn about the fundamentals of asset allocation. Look at the bottom of his post (I had the same question :-) ) – CrimsonX Sep 15 '10 at 19:09
  • I like this portfolio. However, I would like to caution naive investors about VGPMX. First, investing in this fund is not same as investing in gold. Second, this fund comprises of less than 50 mid-cap stocks cherry-picked by the manager, so you will be playing a very high-stakes game. Third, its actively managed and has a 33% turnover i.e., fund manager indulges in frequent buying and selling; the fund's composition changes quickly from year to year. Fourth, less than 60% of the fund is invested in gold mining companies; significant portion is in fertilizers. – morpheus Feb 20 '13 at 19:54
  • @morpheus I agree that investing in gold and other mining companies is not strictly the same as investing in gold. I prefer a small percentage position in an exchange-traded gold commodity, myself. Its characteristics as a less-correlated hedge are preferable to gold company equity. – Chris W. Rea Feb 20 '13 at 20:08

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