In the preceding post, I updated the material in my ebook that showed how to use four mutual funds to approximate a fund including all traded risky stocks and bonds in the world. I also suggested that it might be easier to approximate such a “world bond stock fund” (WBS) with two traded instruments. This post shows how this can be done.
Vanguard offers a number of exchange traded fund (ETFs) which invest in various types of bonds and stocks. The two of interest for our purposes are:
The Vanguard Total World Bond ETF (ticker symbol: BNDW).
- Invests in both foreign and U.S. stocks.
- Seeks to track the performance of the FTSE Global All Cap
Index, which covers both well-established and still-developing
- Has high potential for growth, but also high risk; share
value may swing up and down more than U.S. or international stock
- Only appropriate for long-term goals.
- Seeks to track the performance of the Bloomberg Barclays
Global Aggregate Float Adjusted Composite Index.
- Broad, diversified exposure to the global investment-grade
- Unique ETF of ETFs structure.
- Intermediate-duration portfolio, with exposure to short-,
intermediate-, and long-term maturities.
- Provides current income with high credit quality.
If the region shown is not Global , click the nearby arrows until it appears.
There is little reason to make frequent changes in holdings of the two funds. The majority of the changes in their relative values will result from changes in the prices of assets already held rather than new issues, redemptions, dividends, interest payments and the like. It should suffice to check the relative values of your holdings against those shown in the AAAP calculator every month or so, changing your portfolio holdings only when the differences are substantial.