A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

by Burton G. Malkiel

You should sell from the portion of your portfolio that has become overweighted relative to your target asset mix.

Even if you don’t need to tap the portfolio for spending income, I would recommend rebalancing your portfolio annually so as to keep the risk level of the portfolio consistent with your tolerance for risk.

In taxable accounts, you are already paying income taxes on the dividends, interest, and realized capital gains that your investments produce. Thus, you certainly should spend these moneys next (or even first if you have not yet reached the age of seventy and a half when withdrawals are required).

For all investors, however, I recommend that the core of the investment portfolio—especially the retirement portion—be invested in index funds or ETFs.

Taxes are a crucially important financial consideration because the earlier realization of capital gains will substantially reduce net returns. Index funds do not trade from security to security and, thus, tend to avoid capital gains taxes.

Thus, I believe that if an investor is to buy only one U.S. index fund, the best general U.S. index to emulate is one of the broader indexes such as the Russell 3000, the Wilshire Total Market Index, the CRSP Index, or the MSCI U.S. Broad Market Index—not the S&P 500.

This is what I will get with VTI

favor investing in an index that contains a much broader representation of U.S. companies, including large numbers of the small dynamic companies that are likely to be in early stages of their growth cycles.

VTI :)

Total Stock Market Portfolio.

Total stock market index funds have consistently provided higher returns than the average equity mutual-fund manager.

Those willing to accept somewhat more risk in the hope of greater reward could increase the proportion of equities.

ETFs may be used in lieu of mutual funds.

ETFs are an excellent vehicle for the investment of lump sums that are to be allocated to index funds.

Vanguard Total Stock Market VTI 0.04%

The problem is that it takes a lot of work to do it yourself, and consistent winners are very rare.

With few exceptions, I sell before the end of each calendar year any stocks on which I have a loss. The reason for this timing is that losses are deductible (up to certain amounts) for tax purposes, or can offset gains you may already have taken.

The two variables that do the best job in predicting future performance are expense ratios and turnover.

While tax-loss harvesting only defers your taxes, the tax savings generated can be reinvested and compounded over time. As a result, you are almost always better off paying taxes later rather than sooner.

Schwab Intelligent Portfolios.

At least the core of every investment portfolio ought to be indexed.

Those timeless lessons involve broad diversification, annual rebalancing, using index funds, and staying the course.

VXUS

May pair this with VTI down the road if I need to rebalance to increase my exposure to international equities relative to my US %