I suggest novice investors stick with Index funds. But if you are interested in a portfolio to try to beat the Total Market Index, here is one that consists of 6 funds. We will use the Vanguard Total Stock Market Index (VTSMX) as the benchmark because The Short Road Portfolio contains large and small cap funds.
I constructed the portfolio so the Weighted Standard Deviation of the portfolio matched that of the Total Stock Market Index. It wouldnt be a fair comparison if the Standard Deviations didnt match, because a higher standard deviation indicates higher volatility, and with higher volatility, you would expect higher returns.
You will notice I included a high yield bond fund (SPHIX). For information on this fund, please see this post. The main purpose of including this fund was to bring down the standard deviation of the portfolio. We will keep track of a $100,000 investment in the Short Road Portfolio and $100,000 investment in The Vanguard Total Market Index (VTSMX) on a year to date and trailing 1 year basis. I am confident the Short Road Portfolio will outperform the Total Stock Market index in both categories.
|% of Portfolio||Investment||Standard Deviation||Weighted Standard Deviation||YTD Return||1 year Return|
|as of 7/7||YTD||1 Year|
|Short Road Portfolio Return||9.17%||4.59%|