An International Portfolio from The Escape Artist

The Escape Artist

Regular readers know the story.

This blog launched in 2011 at the suggestion of a business colleague of mine. I had shared with him letters and notes I had been writing to my daughter, mostly about money and investing.

One of my core beliefs is that, in this complex world we have created, money is perhaps our most powerful tool. Learn to master it and the world opens before you and the path becomes smooth. Ignore it and the way is littered with jagged stones, sharp thorns and dark, deep pits.

“This is pretty useful stuff,” he said. “You should create a blog and share it with your family and friends.”

While I knew, vaguely, what a blog was I had never actually looked at one before. I joke, but it is true, that the first blog post I ever read was the first blog post I ever wrote.

Not surprisingly, few of those family and friends bothered to give it more than a cursory glance. Turns out those interested in what has come to be called Financial Independence are as “rare as baptized rattlesnakes” to draw a phrase from what might well be my all time favorite novel:
What was surprising was that the blog began to attract a readership beyond my little circle. Over the years what began slowly started to expand rather dramatically, just like…

compound interest.

Then, even more surprisingly (at least to me) it began to develop an international readership. In the spring of 2012 I wrote this post asking readers…

Where in the World are You? 

Checking today, almost 25% of the page views here are coming from countries outside The United States.

As wonderful and satisfying to me as this is, it does present a bit of a dilemma. What I know about is investing in The United States and, while my critics might suggest otherwise, I try to write only about what I know. I haven’t a clue as to how to implement the strategies I present here outside the US.

Fortunately, this increasing international readership introduced me to people who do. Mrs. EconoWiser was one and at my request in 2014 she wrote for us here…

Investing in Vanguard for Europeans

This post was warmly received and the comment section has become a forum where readers from all over the world share their thoughts, approaches, ideas and success.

As we enter 2018, the time seems right to give my international readers some focused attention again.

You’ll note as you read today’s guest post, The Escape Artist and I are not entirely on the same page when it comes to fund choices. And that’s just fine. I don’t invest in Bitcoins or plan to embrace the Wasting Asset Retirement Model either, yet both are guest posts here.

But our basic philosophies are very much aligned. As for the differences, you can decide for yourself what best resonates with you.

With pleasure I present to you…

An International Portfolio from The Escape Artist


Thanks to Morgan Housel!

Investing can be made simple enough for anyone to manage their own investments. Here’s how.

Here’s a simple example portfolio using low cost Exchange Traded Funds (ETFs) from Vanguard.

Its no harder for anyone to buy or manage than it would be to open an online bank account.  Its so simple that a child could manage it themselves with minimal effort.

Why Vanguard? Because its owned by the customers. So Vanguard are the only fund management group who have no incentive to over-charge you.

Why ETFs? Because they are simple and offer the lowest ongoing fees. The ETFs are traded on the Stock Exchange and can be bought as easily as a regular share.  These ETFs pay out dividend income every quarter (e.g. Mar, Jun, Sep, Dec) which can either be used for living expenses or reinvested.

The ETFs used are:

VHYL = Vanguard All-World High Dividend Yield ETF

VEUR = Vanguard FTSE Developed Europe ETF (includes UK)

VUSA = Vanguard S&P 500 ETF

VFEM = Vanguard FTSE Emerging Markets ETF

This short video from Lars Krojer makes the point nicely about how simple investing can be made.  All you need is just a single all-world equity tracker fund.


But the reservation that I have about just chucking everything into something like the Vanguard All World ETF (VWRL) is that the US equity market looks expensive at the moment. And the USA makes up ~50% of VWRL.  US small caps and tech / social media stocks look particularly pricey. Maybe for good reasons, maybe not.

One issue with index investing is that if the index is over-priced at the time of purchase, then the long term investor is doomed to underperformance.  You can either ignore this and just keep on dripping money in each month, putting your investing on automatic pilot (this is often called $ / £ cost averaging).

Or you can choose to look for value. The Simplicity Portfolio seeks to overweight better value indexes and underweight over-priced indexes. I selected indexes that looked like they offered better value based on metrics like the Shiller PE, price: book value and dividend yield.

The Simplicity Portfolio currently underweights the USA on the basis that the CAPE on the S&P 500 is currently (Dec 2017) 32x, against a long run average of about 16x. So only 10% is directly allocated to the US stockmarket instead of a purely passive weighting based on market capitalisations of over 50%. For the same reason (valuation), there is no allocation to small cap equities.

With US valuations relatively high, particularly for many companies without long operating histories and track records of dividend payment (think Twitter, Facebook etc), I think its appropriate to tilt towards value as well as getting global exposure via VHYL which excludes non-dividend paying stocks. I also think its appropriate to have allocations to Europe (including the UK) and Emerging Markets, both of which trade on lower CAPEs than the US market.

Here are the allocations in The Simplicity Portfolio:

So the Simplicity Portfolio reflects current valuations. Valuation is not a reliable predictor of short term returns. In other words, shares or indexes that start cheap can, in the short term, get cheaper.  And expensive assets can get more expensive.  But, over the long term, lower starting valuations usually lead to higher future returns. That’s why value investing has historically provided a performance advantage.

I’ve been investing for over 20 years now and, during that time, there have always been asset classes that are popular (and relatively over-priced) and others that are unpopular (and relatively under-priced). Imagine an American High School.  The popular assets are a bit like the quarterbacks and cheerleaders (popular now but doomed to future under-achievement) and the unpopular assets are a bit like the geeks (that go on to start tech companies and get rich).

Turning to asset allocation, the 75% equity exposure equates to the highest level suggested by Ben Graham in The Intelligent Investor (which Warren Buffett describes as the best book on investing ever written). With interest rates low, the opportunity cost of holding bonds or cash is high. So The Simplicity Portfolio currently maximises equity exposure subject to the 75% constraint proposed by Graham.

As Warren Buffett reminds us, the long term investor has more to fear from inflation than from equity volatility.  The real value of cash is constantly being eaten away by inflation…its disappearing before your eyes like an ice sculpture at a party.

Price volatility is not the same thing as real risk.  Price volatility is just numbers on a screen bobbing up and down.  Real risk is something big, bad and permanent happening to your assets…which is something quite different.

Equally, many people will say having 25% in cash / short term government bonds (called gilts in the UK) represents an unacceptable drag on performance with yields so low. If you are in the wealth-building phase and can ignore equity volatility, then feel free to take your equity allocation up towards 100%.

Jim Collins, the elder statesman of US financial independence bloggers, offers a neat rule of thumb to choose an asset allocation. Jim suggests that people working towards financial independence have 100% of their portfolio in shares (plus an emergency fund of cash). Later, once you’ve quit working, you include a 25% bond / cash allocation to act as a portfolio stabiliser.

100% in equities may sound like an aggressive asset allocation but remember this is for people that are still working and saving.  So, if the stockmarket crashes, they should be pleased (not scared) because they will be benefiting from £ / $ cost averaging and getting more units for their money each month.

The Simplicity Portfolio excludes gold and other commodities because I prefer to focus on wealth generating assets that pay an income and compound in value over the long term.  It also excludes assets that have limited upside but are not really safe (eg corporate bonds, P2P lending etc).

The portfolio has low costs.  Note the expense ratio of just 0.15% per year. This compares to typical total fees of 2.0% – 2.5% per year typical for customers of a financial adviser / wealth manager with active funds. Why give all your portfolio income away to advisers and fund managers for nothing?  The simplicity portfolio costs less than 10% of these (arguably inferior and riskier) alternatives.

stealing candyAs I showed here, minimising fees is incredibly important due to the effects of compounding. Many people can easily save a million pounds over the course of a lifetime by reducing fund management fees. If you have an easier way to make or save an extra million pounds, then I’m all ears.

This is a low turnover portfolio for long term investing but all portfolios may need some change from year to year to rebalance and reallocate away from overpriced markets and towards better value alternatives. Low churn is good but complete neglect may not be. So its worth checking your asset allocation at least once a year and rebalancing if appropriate.

I’ve seen a lot of investors portfolios over the years (including many with the “benefit” of a wealth manager or financial adviser) and most of them are a mess. Most are full of historical baggage, pointless complexity and incur ridiculous fees for no good reason. The Simplicity Portfolio is simpler, lower cost and easier to run (without sacrificing expected returns) than 99% of what’s out there. Welcome to the 1%.

So that’s UK based investors sorted out. But what about international readers? Well, in the countries that provide most international readers, I’ve looked to see whether its possible to replicate The Simplicity Portfolio using the local Vanguard product range.

And, for the most part it is! The Vanguard ETF product range is available right across Western Europe. So the same ETFs that I used to construct the Simplicity Portfolio are available from Vanguard in Ireland, Germany, Finland, Switzerland, Italy, Netherlands, Belgium, Sweden, Denmark, Norway, France, Spain etc etc

Its a bit more complicated in the USA, Canada, Australia etc where the Vanguard product ranges are a bit different. But for each of those countries I had a look at the local Vanguard website and had a go at seeing how closely I could replicate The Simplicity Portfolio using only Vanguard ETFs. And here are the results:

This is provided for information and is not regulated investment advice. These are model portfolios and have not been tailored for any individual, including me. My portfolio is different, not least because it contains a large slice of actively selected shares. So think about your risk tolerance and asset allocation preferences when constructing your own portfolio.

One final word.  If you are struggling to start, by all means keep it simple with a single all world ETF (or a LifeStrategy Fund in the UK). Or if you are in the US, you could just follow Jim Collins guidance and stick with VTSAX. Remember, there is no single right answer in investing.  So don’t sweat the small stuff obsessing about micro differences between different Vanguard products.

The most important thing is to get started.

Further reading from The Escape Artist:

  1. What if you know nothing about investing?
  2. Financial coaching


Meet the Frugalwoods

My pal, Mrs. Frugalwoods, is publishing her new book this March. She was kind enough to let me read an advance copy and this is my take:

“A remarkable and inspirational journey, not of deprivation, but of joy, contentment, spirituality and, of course, financial independence. Along the way you’ll be inspired, and you just might see a new path for yourself.”—JL Collins, author of The Simple Path to Wealth

If you are interested in ordering an advance copy, check out her post:

Announcing My Book, “Meet The Frugalwoods: Achieving Financial Independence Through Simple Living”


Subscribe to JL’s Newsletter

Important Resources

  • Talent Stacker is a resource that I learned about through my work with Jonathan and Brad at ChooseFI, and first heard about Salesforce as a career option in an episode where they featured Bradley Rice on the Podcast. In that episode, Bradley shared how he reached FI quickly thanks to his huge paychecks and discipline in keeping his expenses low. Jonathan teamed up with Bradley to build Talent Stacker, and they have helped more than 1,000 students from all walks of life complete the program and land jobs like clockwork, earning double or even triple their old salaries using a Salesforce certification to break into a no-code tech career.
  • Credit Cards are like chain saws. Incredibly useful. Incredibly dangerous. Resolve to pay in full each month and never carry a balance. Do that and they can be great tools. Here are some of the very best for travel hacking, cash back and small business rewards.
  • Empower is a free tool to manage and evaluate your investments. With great visuals you can track your net worth, asset allocation, and portfolio performance, including costs. At a glance you'll see what's working and what you might want to change. Here's my full review.
  • Betterment is my recommendation for hands-off investors who prefer a DIFM (Do It For Me) approach. It is also a great tool for reaching short-term savings goals. Here is my Betterment Review
  • NewRetirement offers cool tools to help guide you in answering the question: Do I have enough money to retire? And getting started is free. Sign up and you will be offered two paths into their retirement planner. I was also on their podcast and you can check that out here:Video version, Podcast version.
  • Tuft & Needle (T&N) helps me sleep at night. They are a very cool company with a great product. Here’s my review of what we are currently sleeping on: Our Walnut Frame and Mint Mattress.


  1. Jason@WinningPersonalFinance says

    Nice post. It’s interesting for a US-based person like myself to understand a bit of the thought process for somebody living and investing elsewhere.

    I’m still not sure why somebody early in their wealth building phase would want to invest 25% in cash. I’m way more scared of the potential opportunity cost than I am of cash beating stocks.

  2. Slow Dad says

    Thanks for interesting thought exercise, the Escape Artist does a good job outlining his thought process.

    Any allocation model will be subjective. This one by design provides a relatively small exposure to the US, and a smaller exposure to the (often non-dividend paying) US tech sector.

    Over the past couple of decades that market segment has generated a lot of capital growth (think where the likes of Apple, Amazon and Google were 5/10/15/20 years ago compared to where they are today). Whether that sector is likely to continue driving growth and innovation is again subjective, but worth consciously considering.

    Finally another consideration for international investors is which currency their ETFs are denominated in. Vanguard offers many of the same funds in $ / £ / € denominated flavours. The choice of currency can have a marked impact on investment returns, as any UK based investor currently riding the Brexit rollercoaster can attest.

    • The Escape Artist says

      Yes, Brexit was also a reminder to us Brits that unexpected things can happen in your country and (by extension) in your home economy and your investments. So I think its important to be internationally diversified for reasons of risk management…especially for investors based in smaller countries. This same principle applies to US based investors as well….even if the size of the US market means US investors already have some overseas diversification via American multinationals.

  3. Dexter says

    Great post, as always.

    Escape Artist: I find it interesting (and informative) that the US portion of the proposed baskets hovers around 10%. For someone living in the US, most allocation models posited by the internets suggest somewhere between 30 to 40%, at least my faulty memory thinks so. But for someone living elsewhere, that does not seem to hold. Is this a case of investors outside the US investing in what they understand best, or a nod to the idea that the US market is overvalued? Or maybe just the realization that the United States markets aint’ the only game in town? Much food for thought for me, as I have generally pushed most of my allocation toward the US markets–but am always open to better ideas.

    JLC: I continue to extract great value form your wonderful blog, and will at some point have you autograph my dog eared copy of your book. Many thanks!

    • The Escape Artist says

      Hi Dexter…the idea behind the underweighting is valuation. All else equal, higher starting valuations mean lower future returns. So I’m trying to “tilt” this portfolio towards cheaper markets. If the US market got cheaper relative to international markets, I would allocate more towards the US. The disadvantage with my value based approach is that its a bit more complicated than Jim’s “just buy VTSAX” approach. The US has many of the best companies…I just wish they were a bit cheaper!

      • Dexter says

        Thank you for the response to my comment. I would agree that U.S. companies do seem a tad overvalued at this point, so your case for shopping for better bargains is a good one, I think. I have been going back and forth over moving more future monies to the Euro and Developing markets (currently sitting at 18%), I should bump that ratio up a bit going forward, as I would like to be more in the range of 25%.

  4. Accidental FIRE says

    Thanks Escape Artist, nice thorough post. Like the commenter above I also think the 25% cash is perhaps too high but could of course depend on life circumstance and age.

    Great perspective and well written!

    • The Escape Artist says

      Yes, it should depend on the investor’s life circumstances. If you are young(ish), working and on the path to FI, a 100% equity allocation is certainly the simplest (and probably the quickest) way to get there…as long as you keep adding and $ cost averaging through the inevitable crashes along the way! Thank you for the comment

  5. vorlic says

    Mr and Mrs currently have both their latest ISAs with Moneyfarm. Portfolios of index funds, e.g. VWRL, set it up and let it run. They charge no fees for portfolios under £10k.

    We took a new customer offer in April 2017 – £500 bonus after the first year of contributions to at least £5k. Like any sensible follower of Mr Collins I keep reminding them to keep their pencils sharp vis-à-vis the UK school of Mr Jack Bogle, but the timing of their offer betrays perhaps some advance warning of the arrival of The Greatest Passive Tanker on Blighty’s fine shores…!

  6. FIRECracker says

    “As I showed here, minimising fees is incredibly important due to the effects of compounding.”

    So true. Canada has some of the highest management fees in the world, so we can attest to that.

    Great post, Escape Artist! I heard you on ChooseFI and really enjoyed your episode.

  7. Financial Imagineer says

    International diversification is extremely crucial indeed. Thanks for this great contribution for that matter. Being from Switzerland myself, it’s not just about avoiding the home bias but also having the opportunity to participate from economic growth potential happening outside your awareness zone (e.g. China, India). Another big topic is the currency fluctuation which you have outlined wonderfully with the Brexit case. Some stocks or investments have a natural hedge (due to great diversification) but sometimes currency hedging can be taken into consideration as well. Just look at how GBPCHF dropped from 12.20 (at 1970 – Bretton Woods) to 1.22 (just around Brexit decision) – that’s a drop of 90% of relative nominal currency value over the active lifetime of an investor. Great and very important topic!

    • The Escape Artist says

      Greetings to you in Switzerland!

      Wow…your example of the change in the GBP : CHF rate is a nice illustration of the benefits of a globally diversified portfolio…even if it does beg some questions about British Monetary Policy 1970 – present 😉

      My personal preference is the natural hedge that we get from owning a global portfolio. Yes there will be currency swings but these tend to offset each other and “wash out” over the long term and between different currency pairs. I’m not a fan of currency hedged funds that use FX derivatives to hedge because that comes with added expense and “blow up” risk

  8. Kyith says

    Hi Escape Artist, thanks for the good post. I was wondering if you have advice for the folks that are not in developed countries.

    The examples you presented seems to be in Europe and if its developing Europe, you could possibly go to one of these exchanges.

    However, if you are a more middle income household in Indonesia, Singapore or Malaysia, how would this be implemented?

    Lastly, was wondering if anyone ask you regarding the consideration of Dividend Withholding Taxes and inheritance taxes.

    • jlcollinsnh says

      If anyone knows a good source, I would be very interested in a guest post on how to implement The Simple Path in these parts of the world.

    • The Escape Artist says

      I think this portfolio can be bought by someone anywhere in the world…as long as they have a stockbroker / platform / bank that allows you to buy ETFs / shares that are listed on major international exchanges (eg LSE, NYSE).

      The ETFs that form the UK/European version of the Simplicity Portfolio are all listed on the London Stock Exchange (plus the Euronext, Swiss, and German exchanges). I also know that readers of my blog in Poland and Singapore have bought this sort of portfolio.

      But everyone needs to check their own tax situation. I’m not saying this approach will be tax efficient in all countries!

  9. Wiljum says

    Great post, but don’t forget that VHYL also has US exposure. Total US equity exposure of this portfolio is actually close to 20%.

    • The Escape Artist says

      Yes, you are absolutely right. VHYL provides exposure to US companies with higher than average dividend yields. That’s something I’m very comfortable with as it avoids the “frothier” parts of the US market and tends to favour more established and cash generative companies. And the overall US allocation of 20% is still way below the 50+% you’d get with market cap weightings.

  10. Millionaire Immigrant says


    Wisdom like yours cannot be confined to the country limits, especially in the age of the internet. I think many countries are still waiting for their Jack Bogle. I may start planning on becoming one after I achieve the FIRE status. 🙂

  11. Bob says

    Great article Escape Artist! I don’t see any ETF’s listed with much exposure to Asia and I can’t help but thinking that Asia will be combing back stronger than other areas mainly because Japan is still not close to surpassing the 1989 high mark the Nikkei set and also the Heng Seng index just now surpassed it’s 2007 high. I think there is a lot of room for growth in those locations and am looking for a little more exposure in that area.
    Your thoughts?

    • The Escape Artist says

      Hi Bob. There will be some exposure to Japan and rest of Asia via VHYL which is a global fund.

      When I researched & wrote this article, Japan didn’t look particularly cheap on the CAPE / Shiller PE metric. So I didn’t actively tilt towards it.

      You’re right that Japan is now a lot cheaper than it was in 1989 but remember that the 1989 high mark was the peak of a GIGANTIC bubble where Japanese stocks traded on >80x earnings. From that point, Japanese stocks delivered lousy returns for many years.

      Moral of the story = valuation matters…especially at times of stock market extremes.

  12. Done by Forty says

    I like the tilts that he’s suggesting. We use Bernstein’s Simpleton’s portfolio (sometimes called the No Brainer Portfolio), which tilts small, but not for value. Still, it aims for simplicity: we hold only four funds, each at 25%.

    I should acknowledge that our equity exposure is 67% US and only 33% International, which does seem weird. But we try to avoid the temptation to tinker with the AA. Set & forget.

    Oh, and Jim: you mentioned you might be down to let us do a giveaway of your book on the site, but I am not smart enough to figure out where to email you. Might you reach out to me if you’re still down? I’m at donebyforty at gmail dot com.

  13. Kamil says

    My international portfolio consists of only four letters: VWRL. I know that people are writing things like “US equity market looks expensive at the moment”, but many of the companies listed on NYSE and included in VWRL are global companies, so in my mind there are much more “global oriented” than “US oriented” and my passive approach pushes me toward not trying to guess which of them are expensive and which are not.

  14. Khoa says

    Hi Jim, been following your blog for about a year now and recommend it to all my family and friends.

    Sorry this is off subject but I couldn’t find anything on what people do for health insurance once they retire early. Or if you have any suggestions.

  15. Matt Becker says

    Hi Khoa. Jim asked me to step in here and try to help. For some quick background, I’m a CFP® and I run Mom and Dad Money. And while health insurance isn’t my strongest area of expertise, there are a few options that come to mind.

    First, if you have a spouse who is still working, you may be able to get on his or her health insurance plan.

    Second, for now anyways you can go through We’ll have to see whether that changes under this administration, but that’s how I’ve gotten health insurance for my family for the past several years, given that both my wife and I are self-employed.

    Third, you can use an independent health insurance agent to help you figure out which insurers are operating in your area, what plans they offer, and how they compare to each other.

    Fourth, you may be able to qualify for programs like Medicare, Medicaid, and CHIP.

    Finally, here’s something that might help when it comes to choosing between the options available to you: How I Choose Health Insurance for My Family.

  16. JB says

    Really nice post and topic.

    I’m so grateful for you both continuing to post, brings a lot of value to new people like me. Thank-you.

  17. Mr P says

    Swiss domiciled amateur investor here. Swiss-American tax treaty solves two big problems in investing directly in USA: 1. it drops the withholding tax from 30% to 15%. 2. it raises the estate tax threshhold from $60’000 to $5’000’000. This is why I just hold VT (All World). I also plan to swich to 50% VTI (USA) + 50% VXUS (All World exUSA).

  18. Gino says

    Hi Jim,

    I have been 100% VTSAX since the mid 90’s and when 2008 happened we had no “dry powder” to invest during the decline.

    I felt like I was at a disadvantage by not having money in bonds to buy the corrections. Or is my line of thinking flawed.

    Would you say that unless my asset allocation changes to include a percentage of bonds, my desire for “dry powder” to buy the downturns amounts to market timing and is a moot point for the following reason:

    – I am attempting to sell VTSAX in anticipation of a downturn. That essentially requires me to know when to sell and when to get back in.

    Is it possible to have “dry powder” being 100% VTSAX without market timing. Or, am I dwelling on an issue that in the long run doesn’t really add value but could potentially back fire.

    Thanks for your help and all the good you do through you blog and book!


    • Mr P says

      If you would like to have funds available in case of a crash, in order to be able to buy more when it’s cheap, you will need to sell some of that VTSAX in advance. If you do so, you will have to constantly keep the portion of your wealth in cash or bonds. Otherwise you will have to be able to time the market and know when to sell and then buy again. If you keep a constant portion of your portfolio in an asset like bonds or cash, you will reduce your volatility, but also reduce the expected return. After all, this cash will not be invested in stocks for all these years.

      I’m also tempted to withdraw some funds from the market, afraid of the looming crash. If you look at some most popular indicators, everything looks like a repeat of 2000 or 2008. Everybody keeps repeating that especially the US market is expensive. So far I stay invested.

  19. Gino says

    And this is the conundrum of having cash on the sidelines. When do you jump back in?

    It’s the classic selling low and buying high.

    This is why it can not be overstated enough to seriously tune out the market! And stay invested period!

    Set your AA and never look back unless your circumstances such as the need to take risk change. Tune out the the financial talk shows and all the noise.

    Simply watching the market climb higher can be problematic because most people began to think that they can sell at the peak and get back in at the bottom.

    Had I never paid ANY attention to the markets, I would have never tinkered with keeping cash reserves. Aside from my emergency fund.

    Ignoring the market would’ve benefited me tremendously!

    Bogle even suggests not peeking at your statements. And to peek decades from now and you’ll be pleasantly surprised

    That pearl of wisdom is so true! And it bears repeating!

    I moved the money I had parked in cash into VTSAX last night.

    The last time I did this many years ago the market tanked shortly thereafter and it took me around 5 years to get to the break even period.

    But I NEVER sold and the market climbed even higher.

    If am repeating what I did many years ago, as long as I never sell this newly deployed money will eventually grow.

    As Jim says, the markets steadily climb upwards over time despite all the bad news and horrific events that occur from time to time.

    And once I again I’ve proven to myself twice that I can’t predicy what the market will do. NOBODY can.

    It’s so frustrating.

    • jlcollinsnh says


      You and Mr. P above both make excellent points.

      No one can try to time the market. It is a fool’s errand.

      But it doesn’t have to be frustrating or even risky staying the course.

      As you know from my Stock Series and book, I divide our investing lives into periods of Wealth Building and Wealth Preservation.

      During WB you have a flow of earned income and you are saving/investing a large percentage of this. You welcome market declines as the opportunities they are to acquire shares at bargain prices.

      The WP stage is when your earned income flow stops and your portfolio supports you. By adding bonds to the mix at this point you provide the “dry powder” to acquire shares at bargain prices during a decline when you rebalance. This smooths the ride.

      Of course, bonds are a drag on performance and so some chose to still hold 100% stocks in the WP stage. This is fine if you have the stomach for it and if your portfolio is large enough to withstand a plunge without effecting your lifestyle. Without the stomach and the portfolio size, this is a very stressful path.

      • Mr P says

        Hi Jim

        I just wanted you to know that it was your Stock Series that inspired me to go 100% in VT and you gave me the courage and motivation to start. Thank you a lot for that. Every now and then I come across some opinions on investing (bias towards emerging markets, value, small caps) and I always fall back to what you wrote, because it seems the most logical and carefree.

        Regarding bonds, as I am a Swiss resident, I am earning in CHF, so my situation is a bit different. Buying any bonds denominated in anything else than the Swiss Franc exposes me to currency exchange risk, thus increasing volatility. Moreover, the CHF famously has very low inflation. Currently CHF bonds yield negative interest! So in the end, for “dry powder” I will use cash.

        Mr P

        • jlcollinsnh says

          Thanks for the very kind words, Mr. P…

          …glad to hear the approach here keeps resonating with you. In my view, it is not only logical and carefree, it is over time the most powerful approach.

          I’ve been reading about negative interest rate bonds in Europe. Amazing!

          Cash is definitely the way to go in those circumstances.

  20. Gino says


    I was armed with knowledge from many good books off the Boglehead recommended reading list including your book Simple Path to Wealth and I read the Stock Series, which are both in my opinion gems. And a must read for any investor, especially the ones just starting out.

    And yet I still managed to stray from my asset allocation that I should have stuck with! It worked so well for the first 17 years! 100% VTSAX.

    Unfortunately, I allowed my behavior/emotions to intervene with a great plan!

    And this is partly because when my portfolio crossed the one million mark in 2014, I began to watch things closely and this was a big mistake. I thought the market was getting too high so I raised cash for a significant downturn. I should have continued to ignore my portfolio and stick with my 100% VTSAX position.

    My wife and I have good jobs in the public sector with pensions that will adequately cover our expenses. I’m a policeman and she’s a teacher.

    With combined pensions of approximately 120K per year with 3% COLA’s every year, I could remain 100% VTSAX and know the growth will benefit my three kids. We don’t even anticipate on needing this money. And will most likely gift it to our kids.

    Our home is paid off, we have zero debt, we save on average 45% to 50% of our income after expenses, and have always maxed out our 403B, 457’s and Roth IRA’s. We front load all those accounts every year. We’ve been doing since we got married and never stopped. It has served us well.

    I conservatively figured that this mistake cost us around $400,000.oo in additional gains. I’m almost embarrassed to say it!

    I am rereading your book again because yesterday I pulled the trigger and put that idle money back in the market in one lump sum. And if next week it drops in half, I’ll do the same thing I did during 2008, nothing at all. I sat on my hands and bought more shares.

    Which is what I intended this money to be used for that I parked in bonds after selling some VTSAX in 2013. This was an expensive lesson that I do not want to repeat. Reading your book will reassure me that I did the right thing because as you have said and it is true, the market over time climbs higher. I just need to drill that into my head.

    Mr. Market did not do this to me, my emotions did this to me. I am an example of what you said when you described the market as an incredible wealth building machine. We are in our mid 40’s and have accumulated 1.6 million because of the market.

    I’m trying to get back on the road to recovery from my great mistake and I just wanted to say thank you for all the great work you have done. Thanks Jim!


    • jlcollinsnh says

      Hey Gino…

      Don’t beat yourself up. We’ve all done dumb things, me likely more than most.

      The good news is clearly you’ve taken valuable lessons from it.

      With your pensions and savings rate, you are in the ideal position to be 100% VTSAX and to take advantage of any downturns when they come.

      Personally, I am considering a return to 100% VTSAX myself. The blog income and book royalties have covered our expenses for the last 18 months and we haven’t had to draw on the portfolio. The problem is, I have no idea how long those revenue streams will last.

      First World problem, as they say. 🙂

      BTW — Given that you’ve been doing this for the last 17 years, clearly I wasn’t where you got the idea. I’m curious. How did you come by it?

      • Gino says

        Hi Jim,

        I use to listen to a radio show during the afternoons which aired on the weekends in Chicago called Money Talk. It’s still on.

        I still listen from time to time but not as much as I use to since I’m now working the day shift.

        The host, Bob Brinker, would refer to people with pensions as myself as having “phantom bonds” .

        He explained that even though we weren’t actually holding those incoming producing assets in our actual portfolio to consider them as part of our overall asset allocation and thereby set our asset allocation accordingly.

        With that information / suggestion in mind, I realized my wife and I could invest 100% VTSAX since our pensions would provide us with income in retirement.

        Our bond side of our asset allocation already contained our “phantom bonds” and was already overweighted. So 100% VTSAX it was.

        With that steady stream of income from our pensions we didn’t need to rely on our portfolio to cover our living expenses.

        To generate 120k per year like our annual pensions will provide, we would need around $4,000,000.00 in bonds at today’s rates to generate that kind of income.

        I didn’t realize back then our pensions would be so large but I did realize that they would most likely provide us the income that we needed in retirement and thereby put us in a good position to go 100% VTSAX.

        When I read your book and your blog, you confirmed what I had done.

        I realize I’m in a fortunate position to have a pension that will cover my expenses and allowed me to invest aggressively.

        And thereby have two huge assets that can provide me with more income than I need and the ability to help out my kids.


  21. Financial Orchid says

    Thankful to come across those letters to your daughter over 5 years ago when I was just starting out in the working world as my father passed on too early in my life to share such wisdom. Saving and low cost index fund on.

    I still reread those 10 advices every now and then. Now I’m at 30 at my full working potential and still drumming on but with enough f u money to ensure I have a 25 year old roof over my head.

    • jlcollinsnh says

      Thanks FO…

      …I very much appreciate hearing a bit of your story and how my writings have helped.

      You made my evening after a difficult day. 🙂

  22. Kenji says

    Hi JL,

    Just saw your Google talk which led me here. I look forward to reading this blog but please hire a web developer to fix the mobile formatting! The text content is narrow while the banner ad at the top makes the page wider. 🙂

  23. Michael CPO, From the Far Side of the Planet says

    I like the international angle but interest to hear how others invest based in South East Asia and China … would be good to hear from folks like …. myself who have a homebase overseas … I am F.I. but still do international school teaching … which is busy, but have 3 months of holiday to explore the world …. my friends and co-workers are from or have moved and worked … all over the world. Michael CPO, From the Far Side of the Planet 🙂

  24. onarina says

    Hi! Life has been rough over here in the Netherlands but I try to keep investing with what I can spare. Only… it appears that Vanguard is not longer available in Netherlands. I can’t seem to buy it anywhere anymore since February. What should I do?? I can’t find an alternative with the same risk vs reward distribution so it seems. Loving the simplicity portfolio. Currently I have 1/5th vanguard (can’t buy!) and rest I put in Netflix shares. Which worked remarkably well. But I want to go ETF. Any suggestions???

    • The Escape Artist says

      Hi Onarina

      1. ask customer services at your broker / platform provider about how you can buy Vanguard Europe ETFs
      2. you can always email Vanguard Europe customer services in London with questions
      3. you should also have the ability to invest into Vanguard funds in the USA but that’s getting a bit more complicated

  25. TonyLaM says

    Another great post – thanks as ever to JL and TheEscapeArtist here!

    I’m heeding lots of this advice and decided to venture over to the UK Vanguard site to kick things off.

    I stumbled at the first . . . 🙁

    . . . could you/someone/anyone/bueller? perhaps explain why the model portfolio suggested here would contain Vanguard FTSE All World High Div Yield (VHYL) rather than (what looks to me like) a similar fund – Vanguard FTSE Developed World Ex UK, at (crucially) half the cost (.29% versus .15%) ??

    All my little brain can suspect is that this is down to the ‘High Div’ part making the cost difference negligible, since the income generated is also around double. If that’s true, and given that this is all long term strategy, I can’t understand why (taxable) income would be preferred?

    Expect I’m comprehensively wrong though! – anyone??

    • The Escape Artist says

      Thanks Tony. VHYL is a higher dividend yield (dividends / price) fund. I see it as a way of tilting towards (cheaper) value stocks as well as boosting income. The hope is that better value leads to better returns but there are no guarantees. I’m working on the assumption that investors will use tax sheltered accounts wherever possible.

  26. J.P. says

    I can’t believe this post was posted on this site by the Jim.

    This post doesn’t remotely fit in with the extremely important fundamental theme of – keep it simple, don’t predict the future of the market and buy the whole market. Full stop.
    This post says, split it up into components (make it complicated), predict the future messing around with the components by under-weighting US, over-weighting high yield and emerging markets, as though the author knows something the market doesn’t.
    It is literally everything that this site has warned against.

    It also has nothing to do with international investors. If US investors believed that their components should be re-weighted and thought they somehow were arrogant enough to think they knew more than the market, they should also be under weighting US equities.

    I’ve refrained from swearing but honestly I don’t see how this piece being allowed to be posted on this site can’t be considered a sellout.

    • jlcollinsnh says

      I routinely seek out guest posts by successful people whose ideas differ from mine. Indeed, in my intro to this one I point out some of those differences.

      As for being a sellout, that would require my being paid for publishing this post. I wasn’t and, in fact, have never been paid for publishing any post.

      • J.P. says

        Payment doesn’t need to be monetary, but if you really aren’t getting any benefit for publishing this such as reciprocal publicity, then fair enough and I apologise for using the word sellout.

        A view can differ from yours yet still be in-line with the fundamental message you have helped thousands of people with. For instance, buying an all-world cap weighted fund fits in exactly with your other ideals. So does a discussion for international investors facing currency risk as they move into drawdown phase and whether to tilt towards home based equities or whether to go with hedging a global cap weighted index, but this article is a like bogleheads saying “yea sure dividend investing is a great idea” or Jack Bogle saying “yea sure active managers are fine just do you research and pick a good one”.

        I’m sure you can see why it bothers someone who reads your site pointing out that anyone who tells you they know what will perform better and worse in the future is full of crap, yet then go ahead and post someone saying precisely that.

        I suppose at the very least, your earlier work, along with some other great books and forums, has helped me actually realise the b.s. when I see it and not mindlessly go ahead and say “Another great article, well done”, or “Its great to see an international perspective, thanks!”.

        Anyway I’m beating a dead horse by now.

        • John says

          Actually you’re not because I thought the portfolio presented by the poster was convoluted and illogical!

          So high dividend paying stocks are always value stocks or just as likely dividend traps?

          He mentioned the Australian version with the code VHY.

          Yes high dividends but just as amazing capital losses! Surprise!

          Well, well, well.. what does this func hold?

          Drum roll… mostly bank stocks and a failing national telephone carrier. Ouch!

          Yours was a valid criticism

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