This portfolio has nothing to do with chasing past performance. According to standard finance theory (including making a bunch of assumptions about rational investors, zero transaction costs etc.), the global market portfolio is the theoretically optimal portfolio to hold. The idea is that if markets are efficient then you can’t predict which asset classes will outperform, so you should just hold some of everything.
This portfolio doesn’t require any rebalancing. It’s the global market portfolio (or it was as of 2015). If you have 18% in US stocks because they represent 18% of the global market portfolio, and then US stocks go up to 20%, your holdings also go up to 20% so you don’t have to do anything. Although it might still take some work to manage if you’re adding more money to the portfolio on a monthly basis (or whatever) because you need to deploy your new investment in the correct proportions.
Realistically you can get pretty close to the global market portfolio by buying global stocks + global bonds and not worry about the smaller positions. You can do a 2-fund portfolio with 50% VT, 50% BNDW.
1973 to 2013 isn’t arbitrary. 1973 was the chosen start year because that’s the earliest date at which we have good data on global equity returns.
This portfolio has nothing to do with chasing past performance. According to standard finance theory (including making a bunch of assumptions about rational investors, zero transaction costs etc.), the global market portfolio is the theoretically optimal portfolio to hold. The idea is that if markets are efficient then you can’t predict which asset classes will outperform, so you should just hold some of everything.
This portfolio doesn’t require any rebalancing. It’s the global market portfolio (or it was as of 2015). If you have 18% in US stocks because they represent 18% of the global market portfolio, and then US stocks go up to 20%, your holdings also go up to 20% so you don’t have to do anything. Although it might still take some work to manage if you’re adding more money to the portfolio on a monthly basis (or whatever) because you need to deploy your new investment in the correct proportions.
Realistically you can get pretty close to the global market portfolio by buying global stocks + global bonds and not worry about the smaller positions. You can do a 2-fund portfolio with 50% VT, 50% BNDW.
1973 to 2013 isn’t arbitrary. 1973 was the chosen start year because that’s the earliest date at which we have good data on global equity returns.