REIT and Commodities In Simple Six Fund Portfolio Shows Up Aronson's Lazy Portfolio

The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.

We continue to examine luminary portfolios to see what we can learn and use to further our investment portfolios.

Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds.

Fund	Weight	Ticker	ETF
US Equities	40%	VFINX, VEXMX, VISGX, VTSMX, VISXX	VTI, TMW, VBK, VBR
International Equity	20%	VPACX, VEURX	VEA
Emerging Markets	10%	VEIEX	EEM
US Bonds	30%	VIPSX, VUSTX, VWEHX	TIP, LQD, HYG

This is a well diversified four asset class portfolio with an aggressive profile. The US equities are broadly diversified. Asia Pacific is put above Europe for developed markets. There is a diversified set of fixed income with VWEHX and VUSTX being relatively high risk. The long term treasury bond has proved to be a good diversifier in recent history -- today all bonds are under pressure so this may be less true.

The US component is possibly over-weighted and emerging markets could be increased or, even better, some real estate assets could be added.

This portfolio was last reviewed at the end of the year and we now re-examine performance over the last three months as we see markets changing and inflation becoming more of a present reality.

This lazy portfolio will be compared with six asset class SIB to examine the returns of four and six asset class portfolios

Portfolio Performance Comparison

Portfolio/Fund Name	1Yr AR	1Yr Sharpe	3Yr AR	3Yr Sharpe	5Yr AR	5Yr Sharpe
Aronson Original	6%	74%	2%	14%	3%	16%
Six Core Asset ETF Benchmark Tactical Asset Allocation Moderate	10%	71%	9%	73%	13%	91%
Six Core Asset ETF Benchmark Strategic Asset Allocation Moderate	13%	103%	3%	20%	7%	35%

full comparison

The Aronson portfolio has four asset classes missing out on REIT and commodities. The performance over the last five years has not been exceptional with the Simple SIB able to beat it across the board.

Over the last three months, REIT and commodities have been in favor and having neither has had an impact on the Aronson returns.

Takeaways

The Aronson lazy portfolio has moderate returns that can be beaten
Having broader diversification pays off as market conditions change
ETFs can readily be used to implement these portfolios with good performance
A 10% spread over five years means that it's worth looking at alternatives

Disclosure:

MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.