As 2013 winds to a close, I am within a couple years of early retirement.  My balances are where I need them to be, and I’m finally listening to the conventional wisdom that I should dial back the risk a tad and embrace bonds.  Still feels like buying bonds is a guaranteed loser at this date, but commodities haven’t done very well for me in the last couple years either.  I had already moved out of oil-based commodities in the IRAs, as I have a fair amount of exposure to the energy industry in Master Limited Partnerships (MLP’s) in my non-IRA accounts.

 

Since I’m using Schwab as a brokerage, I am primarily pivoting to their ETFs.  These funds are low expense, and as a bonus they trade for free in the Schwab universe.

 

Here is what I’m considering:

 

	Category	FundName	Ticker	Percent	Expense Ratio
US Equities 50%	US Large Cap Growth Stocks	Schwab U.S. Large-Cap Growth ETF (SCHG)	SCHG	10.00%	0.07%
	US Large Cap Value Stocks	Schwab U.S. Large-Cap Value ETF (SCHV)	SCHV	10.00%	0.07%
	US Small Cap Growth	SPDR S&P 600 Small Cap Growth ETF	SLYG	10.00%	0.28%
	US Small Cap Value	SPDR S&P 600 Small Cap Value ETF	SLYV	10.00%	0.30%
	ETF - REIT	Vanguard REIT	VNQ	10.00%	0.10%
Bonds 15%	Short Term Treasuries	Schwab Short-Term U.S. Treasury ETF	SCHO	6.00%	0.08%
	Intermediate Term Treasuries	Schwab Intermediate-Term U.S. Trsy ETF	SCHR	5.00%	0.10%
	TIPS	Schwab U.S. TIPS ETF	SCHP	4.00%	0.07%
International Equities 35%	Intl Equity	Schwab International Equity ETF	SCHF	7.00%	0.09%
	Intl Large Cap Value	SPDR S&P International Dividend	DWX	7.00%	0.45%
	ETF - Int'l Small Cap	WisdomTree International SmallCap Div	DLS	14.00%	0.58%
	Intl Diversified Emerging Markets	Schwab Emerging Markets Equity ETF	SCHE	7.00%	0.15%
				100.00%	0.22%

 

The result is very low expense with decent diversification and mostly free trades.  I hung on to the Vanguard REIT in lieu of Schwab’s SCHH, as the Vanguard just seems to perform much better, at least on a trailing basis. 

 

Similarly, the Wisdom Tree International Small Cap Dividend Fund (DLS), while roughly twice the expense ratio of the roughly equivalent Schwab offering (SCHC) seems to earn that expense with markedly better performance.  Since it’s the largest slice of the portfolio, I didn’t want a laggard.