13

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?

Improve this question

1 Answer 1

Reset to default
11

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.

Improve this answer
4
  • 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, 2010 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, 2010 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, 2013 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, 2013 at 20:08

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .