Portfolio IQ: All Equity Including DFA and Vanguard ETFs

Carla Adams describes herself as a “fairly risk-averse person” and admits her aggressive all-equity personal investing strategy is mostly attributable to her experience as a financial advisor.

The founder of Ametrine Wealth in Lake Orion, Mich., Adams caters to a full range of clients in her advisory practice and said most of them are not ready to mimic her personal portfolio.

Adams, 40, is part of a double-income household that includes two young girls. Being about 25 years from retirement, she believes equities are the surest path to the best risk-adjusted long-term portfolio performance.

“I’m comfortable with the market volatility that comes with an all-equity portfolio,” she said, but confessed that watching her life savings cut in half during the 2008 financial crisis was a test to her resolve.

“Over the long term, markets continue to go up and I want to grow my investments as much as I can,” she said. “But in 2008 when I had about $40,000 and saw it drop to about $20,000, that was a little scary.”

All Stocks for the Long Term: iShares, DFA, and Vanguard ETFs

Her portfolio is relatively diversified across the global equity markets that includes a 50% allocation to the Vanguard Total Stock Market ETF (VTI),

22% in the Dimensional International Core Equity Market ETF (DFAI), 12% in the Dimensional Emerging Core Equity Market ETF (DFAE), 10% in the Dimensional US Small Cap Value ETF (DFSV) and 6% in the iShares Global REIT ETF (REET).

The lack of fixed-income exposure, which is often described as a ballast to tamp down volatility, isn’t something for which Adams will apologize.

“I’m not opposed to fixed income because I know it’s an appropriate way to lower volatility, but there’s also a risk-return tradeoff when it comes to fixed income,” she said. “Equities, on average, gain about 10% a year and the more bonds in your portfolio, the lower the total return.”

Adams said she will often share her personal investing strategy with clients as a way to help add context and perspective for investors who aren’t sure about their personal risk tolerances.

“If I have clients thinking they want an all-equity portfolio, I make sure they understand the risks and rewards of doing that,” she said.

Adams said just two of her clients are currently sitting in 100% equity portfolios and that her younger clients are most interested in tilting their portfolios toward stocks over bonds.

Adams, who entered the financial planning industry in 2008, said her personal portfolio has always been all equities. And, at this point, she doesn’t have any plans to adjust away from stocks.

“I don’t plan to change in the next 10 years, but if I had to project now, maybe when I’m in my mid-to-late 50s I’ll start adding some fixed income,” she said. “In general, a portfolio of 60% stocks and 40% bonds is probably too conservative for a 40-year-old.”