The model portfolio tracked in this blog is quite aggressive, seeking to hold 3-5 sector funds that give the portfolio the best chance for growth in coming months.  Although the holdings in the model portfolio are desirably not strongly correlated with one another, they lack the diversity of a traditional portfolio.  A monthly chart plotting movement of the model portfolio relative to the S&P 500 is therefore also typically provided, graphically illustrating efforts to keep the portfolio’s volatility reasonable relative to the S&P 500.

Although model portfolio volatility has been modest over the past several years given the increased performance realized, many investors have a longer time horizon for investment, and seek more diversified investments that can be held for longer periods (such as a year) between portfolio reviews.  A diversified portfolio (not including bonds, which may constitute up to 30% of such a portfolio for retirees or those wishing to further minimize volatility) is therefore provided here as a reference, such that it can be reviewed and compared against this blog’s more aggressive model portfolio.

The diversified portfolio (Feb 1, 2014) includes:

Ticker             Value             Shares
ARTJX          $100,000      3776.4          Artisan International Small Cap
DODGX        $300,000      1836.9         Dodge and Cox Stock
OAKIX          $200,000      7874.0         Oakmark International
PRSVX          $200,000      4133.9         T Rowe Price Small Cal Value
VASVX          $200,000      7352.9         Vanguard Select Value

Although the fund appears on its face that it may be biased toward international (30%) and value (40%) stocks, use of a portfolio analyzer tool such as Morningstar’s professional portfolio manager indicates the this combination of funds is 57% large cap, 24% mid-cap, and 18% small-cap, with 33% value, 36% core, and 32% growth stocks.  The diversified fund is 62% North American and 22% European, with only 2.25% in riskier Asia emerging markets and .5% in Latin America.  There is nearly no stock overlap between funds, with DODGX and VASVX both holding Capital One Financial (COF) at 1.6% total the only significant duplicate.

A diversified fund such as this is suitable for most passive investors with a long-term time horizon, and can be supplemented with a bond fund (such as PTTAX – Pimco Total Return) in an amount up to 25% or so for those wishing to further reduce volatility (note that increasing bonds beyond about 30% or so in such a portfolio has been shown to reduce portfolio returns without meaningful reduction in volatility).