The First Five

So what would it look like if we take the first five funds and put them together into a portfolio? That would give us:

20% Vanguard Wellesley

20% Dimensional Micro Cap

20% PIMCO High Income

20% American Funds New World

20% iShares Core S&P Midcap

PHK has only been around since 2004, so we can only get a 14 year backtest on the portfolio, but the results are interesting. This aggressive portfolio has returned 9.42% since 2004, which would have compounded $10,000 to $36,337. In 2008 the portfolio would have suffered a drawdown of 44.7%, comparable to a portfolio that is approximately 80% equity.

The portfolio has a tilt to growth stocks rather than value, which has been a benefit in the last five years. It has a 48% exposure to US stocks and 16% to foreign stocks. The rest of the portfolio is made up of bonds.

Vanguard Total Market ETF (VTI) returned 8.85% during the same period with a bigger drawdown than the portfolio I backtested above.

Every backtest is simply history! This portfolio is not a recommendation, just an example of how putting various investments together can result in something much better than any one of the components.