BiggerPockets Money Podcast - Scott Builds Four Portfolios with Four Different Strategies ($40k Experiment)

Episode Date: December 30, 2025

In this episode of the BiggerPockets Money Podcast with Mindy Jensen and Scott Trench, Scott builds four different investment portfolios using real money, each account starting with $10,000 and employing different strategies. Scott invests in an index fund, a 60/40 stock-bond portfolio, a risk parity portfolio, and a unique actively managed thesis. Follow along as they discuss the rationale, mechanics, and expected outcomes of these investments.  NOTE: This episode is for educational and entertainment purposes only and is NOT professional investment advice. Brokerage services provided by Open to the Public Investing Inc, member FINRA & SIPC. Investing involves risk. Experience of this investor may not be representative of other customers. Past performance does not guarantee future results, and investment values may rise or fall. At Public earn an uncapped 1% bonus when you transfer your portfolio with: www.Public.com/BPM  Subscribe to the FREE 31 Day Challenge Starting on January 1st: www.biggerpocketsmoney.com/31days  Subscribe to our Weekly Newsletter: www.biggerpocketsmoney.com Want to be a guest on the show? Apply here: https://biggerpocketsmoney.com/contact/ Get 50% Off Your First Year of Monarch by using code ‘Pockets’: https://www.monarchmoney.com/ Connect with Scott and Mindy: Scott: https://www.instagram.com/scott_trench/ Mindy: https://www.instagram.com/_mindyatbp/ Follow BiggerPockets Money on Social: Facebook: https://www.facebook.com/groups/BPMoney Instagram: https://www.instagram.com/biggerpocketsmoney/ Learn more about your ad choices. Visit megaphone.fm/adchoices

What if you could see exactly how different investment strategies perform side by side in real time with real money? That's exactly what we're doing in today's episode. Scott is going to build four separate investment accounts with completely different allocations in real time. Same starting amount, same timeline, but four distinct portfolios that could produce dramatically different results. We'll track these portfolios over time and see which approach comes out ahead. Will the aggressive strategy win? Will the conservative play prove smarter? Or will something in the middle strike the perfect balance?

This is a great episode to follow along on YouTube if you want to see Scott share his screen to walk us through this step by step. Of course, you can also still follow along on audio too. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen. And with me as always is my experimental co-host, Scott Trench. Thanks, Minnie. I'm excited to go public with my investments decisions today here on the show. So I'm excited about this.

I have set up four different brokerage accounts using public.com, who is a partner with BiggerPockets Money Now. We're so excited to be sponsored by public.com. And these four accounts are going to answer four questions. How do I invest in an index fund mechanically? How do I invest in a 60-40 stock bond fund? How do I build our risk parity portfolio? And specifically, I want to compare the results of a risk parity portfolio.

We already did this on a previous episode with Frank Vasquez and Mindy. I want to see how mine does invests. now, starting with $10,000 compared to Mindy's, who got started in July and how the timing difference is worth there. And then last, I'm going to talk about a thesis for an actively managed ish portfolio that kind of explores the idea of, I don't really like the stock market right now. It's too expensive. The price to earnings ratios, price to sale ratios, they're too high. What is an alternative that I can put my money into? So I'm not just sitting in cash and waiting for the market to collapse, but I am putting it into higher yielding or different.

asset classes and when the time comes my intention is to flip it back to the S&P 500 or a boring old-fashioned index fund when certain ratios are hit. So that's what we're going to explore those four theses and I think it'll be fun to watch the long research, well-researched, well-publicized, best practices in investing just absolutely crush my actively managed portfolio here over the next couple of years. Let's do a quick disclaimer here. I am not a professional investor and not getting paid to promote any of these stocks. Bigger Pockets Money is sponsored by the brokerage firm Public.com, and we do have a special promotional offer for Bigger Pockets Money listeners, but none of the stocks that we're going to talk about today. I'm not paid to

promote any of them. I'm not endorsing them. I'm simply using them for illustrative purposes for four portfolios that we're going to compare performance against over the next couple of years. These could all go to zero. They could all perform very badly. My active thesis could be preposterous. wrong and bad. This is an experimental and educational and entertainment purposes only video on the subject. I love it, Scott. Let's jump in. Scott, how much are you putting in each one of these accounts? $10,000. So this is a $40,000 overall investment portfolio across these four portfolios that we're going to be building today. I have preceded each one of these accounts with $10,000. It took a couple of days to settle into the account. And public will match any

rollovers, for example, when I rolled over my account from Schwab to Public, they matched at about 1%. And that matches uncapped, which is awesome. So a good time to roll over to Public if you were thinking about it. Public is, of course, a sponsor of Bigger Pockets Money, and we are very grateful for their support. All right. So let's, should we build this first portfolio? Okay, Scott, you've got four portfolios to build. Let's go with the super basic one, the 100% VOO. Walk us through the mechanics of making this purchase on public.com. Sure. So first, with any brokerage account, you got to set up the account, answer some questions, and transfer money from your bank account into the brokerage account. Many brokerage accounts today allow you to instantly trade as soon as you initiate the deposit.

Others will need you a couple of days to wait for the funds to settle. I set up all these accounts last week, so I shouldn't have any issues with allocating these funds. The first portfolio is as simple as any portfolio we're going to construct. This is a broad-based Vanguard low-fee index fund. We're going to buy the S&P 500. The ticker for this is going to be V-OO. And we're going to just buy that fund right now. It'll take a few moments, and it'll be astonishingly easy for folks.

A lot of folks build this up to be a big moment, their first investment. And it is a big moment, but the mechanics are quite simple once you get used to it. So we're going to go up to the top here and we're going to type in V-O-O-O. There it is. and we are going to purchase $10,000 in a buy order here. This is a pretty large index, $823 billion in assets under management. It's heavily traded, so I don't have to do any type of limit orders or anything like that. I'm just going to do a market order here in the middle of the day,

and I'm going to transact, and it's going to execute almost instantly for this type of trade here. So that's $10,000. Boom, we are done. Now, if I go back to my brokerage account, Look at that. It's already gone up $1.84.00. About 0.0.0.2%. It's not got it. And I'm up $1 here. So that's it. I now am the proud owner of the United States economy, the S&P 500, the 500, the 500, the 500 that make up the S&P 500 here. It looks like you just lost a dollar too, Scott.

Nope, now I'm down $1.00. So that's it. That's it. That's the first account, right? This is when people say they invest in the stock market or index funds, that's all they're doing, right? is buying this or a similar type of ETF that owns all of the stocks in an index. It's a weighted average index so it'll own more of a company like Apple and less of a company like Best Buy, for example, which is a smaller company than Apple.

And so it owns that the entire way down the chain. Okay, Scott, now let's do the 4% rule 6040 stock bond portfolio that Bill Bankin set up his whole portfolio theory against. Now we have another $10,000. What are we buying in this one, Scott? We're going to start off by making the core of this a stock market allocation, right? So in this particular case, just to confuse everybody, I'm going to use a slightly different index fund. This is the equivalent to VTSAX, the one that is talked about, for example, at length by J.L. Collins in his book,

The Simple Path to Wealth. The difference between VTSAX or its ETF equivalent VTI is going to be that you're going to own not just the 500 largest companies in the economy. You're going to own all of them. In practice, what that means, because this is a weighted average market capitalized index fund, what this means is that I'm still going to own all the companies' S&P 500, and they're going to make up most of my portfolio. I'm just going to get a little more exposure to smaller companies in addition to that portfolio. So we're going to type in the ETF for this, which is the ticker, which is VTI,

that is equivalent to the mutual fund VTSAX, it's the ETF version of that, that you can buy through an account like public, for example. I don't have to be on Vanguard's portal to buy this. And I'm going to go ahead and transact VTI here for $6,000, right? We're going to take 60% of our portfolio and put it into stocks here, and we're going to purchase, we're going to review that order. And again, this is an enormous fund, heavily liquid.

I'm not going to bother with placing a limit order or anything like that. I'm just going to go ahead and transact. Hold on before you submit, contribute $10. to support this PFOF free trade. I am not going to do that. So I'm going to uncheck that box, and I'm going to submit my order here. All right. So that is done, and I should be the proud owner of the entire U.S. stock market right now in my portfolio.

And that's right. I have, I just lost another dollar. It looks like a dollar and a half. And I own $5,999 and $39.39 of equities. And I still have $4,000 in cash here. So the second component of this is going to be bonds, right? What is the purpose of bonds here? Their insurance.

and they're going to damp in the volatility of my portfolio. So for this, one of the largest and most liquid bond funds in the world is going to be the Vanguard Total Bond Market Fund, B&D, is going to be the ticker, and I'm going to spend $4,000 purchasing this fund. Again, this is an enormous fund. It's highly liquid, and it's a first tool that one could use in exploring a very simple 60-40 stock bond portfolio. So the second portfolio here is going to be 60% stocks, 40%.

bonds and we are done. That's how fast it can be to set up a portfolio here. So I've got my VTI and B&D positions here and my portfolio balance is just a little less than $10,000 here. So you, I think, won right away when you bought your portfolio on the show, Mindy a while back. I don't remember if I won right away, but I have been winning ever since. I think it has dipped down below the initial $10,000 that I put in there, but it has stayed above almost the entire. time. Ooh, 32 cents. Woo-hoo. Scott's rich. Well, now I'm up 32 cents. There you go. And now a quick word from our show sponsors. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments,

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Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck. At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Liener Stronger for Fitness, the Anxious Generation for parenting perspective and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible

in one app. If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash B-P. money. Welcome back to the show. All right, Scott, you said we have four portfolios that we want to do. We've done two. What's the next one? The third one is going to be our risk parity portfolio. While I'm pulling this up, why don't you pull up your risk parity portfolio you constructed it in June? This will be the exact same portfolio that you constructed. I'm just going to build it at a different time. And I think that that will show interesting changes. The returns of my portfolio will be very interesting

based on when I build it versus yours. You bought yours at a relative low point in the stock market back in June, I believe, and I'll be buying it at a much higher valuation here in December. Yes, I believe I actually bought it in July, but either way, I have withdrawn $42 a month ever since I created the portfolio. So I started with $10,000. I withdrew $42 because that is 5% divided by 12, so every month I will be withdrawing.

And my portfolio is currently $10,997.79. I started with $10,000. I am up almost $1,000. And that is withdrawing July, August, September, and October. I forgot to do November. So it's only December 2nd when we're recording this. I will go out and withdraw that and still have well more than I started with. And I'm still was drawing.

I think this is a really fun experiment. Absolutely. My account originally started off with 42% stocks, 26% bonds, 16% gold, 10% managed futures, and 6% international stocks. And I have a variety of amounts in my accounts. It's not quite that same amount each time because I have to sell dollar amounts, not percentages of my accounts. So it's just when I go into sell, I look in and see what's a little bit higher than what I wanted it to be, and then I'll sell that. Well, I'm going to recreate that same account here today. Do you want to read that off so I can have them up

here on the screen? Yes. So I had VUG Vanguard index funds, the Vanguard Growth ETF, formerly known as Vandex Index TR Vipers. Yep. So the first component here is going to be the stocks, and we're going to put 42% of the portfolio into stocks. We're going to split those between growth and value stocks. And the reason we're going to do that is because from a higher withdrawal standpoint, This allows us to manage withdrawals and rebalancing on our own a little better than buying a single ETF that contains the entire stock market, for example, for the purposes of this portfolio, which is a withdrawal portfolio. We are not going to withdraw from any of these portfolios.

We may rebalance the portfolios, as we talk about here once a year, but we're going to let these ride in my case. Mindy is, of course, withdrawing from her portfolio. So this first one is going to be the Vanguard growth ETF. We're going to buy 21% of our position, which is just a story. $2,100. It's going to go into this, and we're going to purchase that. And again, this is a large, highly liquid fund. All the funds we're going to be doing today are going to be of that sort. And so that transacted immediately. And we are the proud owner of VUG right now. Look at that. I've already lost 30 cents. Next up is AVUV, which is Adventist U.S. small cap value ETF. And that's

another 21%. This is a great fund for folks that are looking to get exposure to small cap value stocks. So this fund has various screeners that kind of factor out microcaps or biotechs that have, you know, that don't have very much revenue or kind of more speculative plays for profitable, boring businesses. If you're a fan of like Cody Sanchez or Alex Formosy, you know, and you want to buy like these boring businesses that are doing, you know, that have been around for a while or are in these categories that are not that exciting, but are relatively lower priced, for example, relative to earnings or revenue than, you know, large S&P 500s, that's what this is generally screening for here.

It's a very popular fund to get exposure to that asset class. I'm actually going to use this in my thesis a little bit here, and we'll talk about that in a minute. So that's AVUV. Let's talk about bonds next. Oh, now I'm up to $11,000. This is really exciting. All right, my bonds, I have VGIT, Vanguard, Scottsdale, FDS, Intermediate Term Treasury Bonds. So this is just, we're buying two sets of bonds here, intermediate and long-term bonds.

And all of this was discussed on the episode we did with Frank Vasquez here. So we're just simply repeating that portfolio. But we're separating our bond exposure of 26% of this portfolio into two funds, intermediate and long term. And so this is the intermediate tranche. This will be $1,300 here or 13% of the portfolio. And we'll transact that. And again, very highly liquid, highly traded fund here.

So we don't have to do market limit orders or anything like that. So next we'll do VGLT, which is the long term version of that for another $1,300 bucks. The order, submit order. Okay. What's next? Next up is 16% gold. I only did one option here. I did GLDM, which is the world gold minis.

This is just a way to get exposure to gold without having to own physical gold. We're going to do that in this portfolio here. Gold has a really good volatility dampening effect on a portfolio. If you're looking to have a, you know, for diversification or uncorrelated assets, it's a great way to get that. And that's one of the primary goals of a risk parity portfolio is to have a large amount of exposure to uncorrelated assets. assets so that you can maintain a safer withdrawal rate. This portfolio should, over a long period of time, underperform a stock market or other portfolio over a very long periods of time. However, it will have much less volatility allowing for a higher withdrawal rate on the portfolio.

That you dampen the effective sequence of return risk. Now, Scott, ask me what is my best performing holding in this account? Gold. It's gold. It's actually at 17.5%. And that's the thing that I keep selling to fund my withdrawals. And it still goes up. And I don't like gold. I don't want to own gold. It is a testament to my affinity for Frank Vasquez that I even put it in here in the first place. But it just keeps going up. All right. Managed Futures is next. Scott, we are going to do 10% of our account. And I chose DBMF, which is Litman Gregory managed futures. Managed Futures are an interesting one because the primary point of managed futures is, again, lack of correlation with other asset classes. It bets on trends continuing in various directions. So in years where other parts

of the portfolio may perform very poorly, managed futures can provide different or better performance in those years. And again, that just allows for a higher safe withdrawal rate when you apply it in the context of a larger portfolio. So that's what we're going to do here. We are going to put in 10%. So let's do that. I love how easy they'd make this. It really is a amazingly easy. All right. So we've got most of our portfolio allocated. I'm down eight cents to exactly even. Now, dollar 50 has the market changes in real time here. Let's do international exposure as our last bit here. So we're going to do the same thing we did for stock portfolio exposure. We're just going to have both U.S. stock-based exposure and international stock-based

exposure. So for that, for the growth portion of this, we're going to use a fund called IDMO, which is going to give us access to that growth portion of the international portfolio. We're going to put 300 bucks into that. And then for the value component of this, we're going to use AV-D-V, and that's going to be at 300 bucks. And that's the Avantis International Small Cap Value ETF. Yep. It's the international version of AV-U-V, which we talked about earlier, buying these boring, low value stocks from the international markets here. Okay. And that is our portfolio here. We've got our stocks, our bonds, our gold, our managed futures, and our international stocks. And we're just going to let this thing ride and see how it does over the course of the next year. We'll check in periodically

once a quarter to see how the portfolio is performing. We might even provide a few more updates in the next couple of months if there's some interesting stuff going on. But otherwise, those are the three portfolios that we've discussed. Okay, Scott, we've done three portfolios. Now it's time for you to do your fourth. Scott tries to time the market portfolio. Tell me what you're thinking. Perfect. So I have prepared a thesis. I am an amateur investor, so this is going to be a good time to get feedback from the audience here. This is not a please invest in this portfolio. This is a thesis for feedback. And basically what I'm trying to explore with this fourth portfolio is I, along with, I think a lot of other bigger pockets money listeners and maybe people in the fire

community in general, want to invest primarily in the S&P 500, in the U.S. stock market, and the largest companies or a total market index fund. However, the current reality of stock market valuations is giving me pause. I feel very uncomfortable with the ratios from the stock market right now and can't justify having a larger or very meaningful exposure to those companies given how crazy in some cases the valuations are in the context of history. So let's look up a couple of these multiples here for context. One of my favorite places to go and look at this stuff is this website called Multiple. And you can go and look at some stuff here and you can see, hey, the Schiller price to earnings ratio, which is a inflation-adjusted look back at earnings over the last 10 years.

So it normalizes for spikes like COVID or those kinds of things, is at close to its all-time high here today at December 2nd, 2025. So it has been higher, but that was in 1999 before the famous dot-com bubble burst. It took about 50. 15 years, 13 years for the stock market to recover from that point. Another thing to look at is the price to sales ratio. So revenue, you can always, there's things about, hey, companies should be more profitable than ever at this point, you know, margins are higher. It's aggregated in tech.

But sales is a lot harder to gamify for companies. So the stock market has never, the S&P 500 has never traded above a 3.4 price to sales ratio. There are other ways to kind of look at this price. to book value is at close to all-time highs or at all-time highs. There's a thing called the Buffett Indicator, which is the total capitalization of the stock market to US GDP, and that's at well over 200% here today in December 2025. And so all of these ratios are giving me a lot of pause in terms of, hey, do I really want to have a big portion of my portfolio in the S&P 500 at this point?

I would prefer to. That's my goal. if it weren't at these crazy ratios, I could probably have gone my entire life potentially staying in the S&P 500 and just following the best practice of passive index fund investing in low fee diversified broad-based index funds. So because of those dynamics, I'm wondering, is there another way to invest so I don't have to get exposure to the high valuations in those areas, but that I can rotate back into stocks if they ever get into a level that I am comfortable with, which it would be merely two standard deviations.

above historical averages, for example. First want to caveat this was saying there are a lot of reasons why long-term historical averages are not fair or useful. Today, for example, interest rates are much higher throughout most of the 20th century than they are today. With lower interest rates, you should expect a higher price earnings multiple for the market. A lot of the companies that are huge in the United States today, like Alphabet and META and Tesla, these companies have global reach and have global expansion plans.

And so their market capitalization should be higher in many cases. than in the past. And there is reason to believe that the Buffett indicator of total market capitalization relative to GDP may not be as useful anymore. But I'm still worried even with that, that these valuations are completely extreme. So I want to caveat that. So the question I'm asking is, is there a higher earning yield, lower volatility place to park capital, this $10,000, while I wait for the S&P's earnings to catch up or for the price of the S&P 500 to fall? can I invest in a portfolio that I can hold forever? So it's not a not necessarily a timing play.

There's a timing component to this or a set of rules that would trigger me back into my favorite investment, the S&P 500. But I could also, could I just sit here forever and still make sure that I have a very good shot at growing my capital and generating income that I can live off of? If the S&P 500 never is priced again at a level that I think is fair, right? this something in the 25 times price to earnings ratio, a Schiller PE ratio, for example. So my hypothesis for this is going to be 30% in bonds, 20% in reits in real estate, 30% in value stocks, the AVUV that we talked about, and 20% international value. So all this is is owning bonds, stocks, and a little bit of real estate while we wait for the large mega cap companies in the S&P 500 to become more fairly priced.

So how am I doing so far, Mindy? What do you think so far? I think your thesis makes sense based on where you're coming from. However, this is not a portfolio that I am doing personally. So I hope that answers your question. There you go. Yeah. Well, anyways, I'll briefly talk about these. And if you're interested, if anyone is interested, you can read the thesis on bigger pockets

money. We'll see how this goes. But bonds are going to be my insurance. I'm holding those bonds in this portfolio, that 30%. And I'm going to take that. I'm going to take 25% of that or most of that. and rotate it back into stocks into VO specifically if it hits certain ratios in the future. If it never does, I'll just keep them in bonds and continue to earn this yield for the duration of this portfolio.

How frequently are you going to be checking in on the Schiller ratio? I'll set up an alert and if it triggers based on my rule, I'll move. So I probably will rarely check. But in the event that there's a crash or years go by and earnings increase enough, to create the rate type of the ratio of price to earnings back into a uh that the ban that I've set then I would it would trigger this move okay VNQ is a vanguard fund that owns reits there's actually argument about what the best reet fund is vanguard's VNQ actually has higher fees than a Schwab for example but I'm I'm comfortable with Vanguard is still very low fees and this would have

exposure across a variety of different real estate asset classes and geographies we've already talked about AV UV UV and AV DV. These are value stock funds, both U.S. and international, and they're trading at relatively low price to earnings ratios. When we talk about the stock market being very expensive, most of that expensive component, most of the high ratios of price to sales and price to earnings are coming from the magnificent seven or the 10 stocks that have the highest market cap. Those 10 stocks in the S&B 500 make up 38% of the market.

market capitalization of the S&P 500. So it's very, very highly concentrated. So this portfolio is moving away from that to other stocks that are, the stock market is not necessarily very expensive for these value plays here. In fact, it's actually trading below historical averages in a trailing 12 month or even forward price to earnings ratio in both of these funds. So what I'm doing here is this is not a permanent portfolio and it's also not short-term market timing, right?

So it is, there's a long-term component to market timing here. But this is a cash flow forward, a portfolio that is investing in higher yield, relatively speaking, than what you can get in the S&P 500. And this portfolio is going to trigger, again, to buy the S&P 500, our favorite old-fashioned index funds here at Bigger Pockets Money once certain rules are hit. So the first rule, there's two rules, very simple. If the Schiller price to earnings ratio is at or below 25, remember that chart I just showed you, that's at 40 right now, then I will move 25% of the portfolio into V-O-O or V-T-I.

And that 25% will move from bonds to that I will sell my BND portion, and I will move that into V-O-O. So that's phase one. Phase two is if the Schiller-P-E ratio falls below 20, or the Buffett indicator falls below 125%, that's the market capitalization of the S&P 500 to U.S. total GDP. or the SMP 500's price to sales ratio falls below 1.7, then I will move everything in the portfolio, recognizing capital games or whatever and triggering tax events,

and put it all back into my favorite long-term investment, which is VOO. I don't have a trigger for selling VOO if it goes up again in the future. I may revisit that in this portfolio, because there is a bit of active management to this. I may put the inverse rules here to a certain degree, but that is the only trigger that I have in the portfolio right now. So this portfolio could sit in these four funds, BND, VNQ, AV, and AVDV, forever.

Or in the immediate future, if there was a crash, I could sell a portion, the bond fund, or all of the portfolio, and move it into VOO based on these rules. What's your thoughts, Mindy? My thought is at the end, you said you don't have a plan to move it back into this market timing portfolio that I'm calling this. If the tape goes above again, the Buffett Indicator goes back up, the S&P sales, price the sales goes back up. I would encourage you to do that now because in the heat of the moment, you could act irrationally. Even you, Scott, could act irrationally. So during the calm, during the I'm not trying to make a decision right now phase, I would encourage you to think about what would happen, when does it hit that you make changes again? I think that's a great call. So I will bump that before I publish this. And what I'll probably do is I'll probably just invert these items here. So if the Schiller Cape gets above 25, I would then move, you know, that's significantly above the long-term historical average, although way down from where we're at currently, then I might move back into this portfolio where only 25% is in VOO and 75% is spread across the other items here. But again, the point of the point.

portfolio that I did here is what the heck is going on? This is like the stock market is so far out of its historical range by almost every valuation metric that I can hear about that, hey, in this portfolio, I'm putting on the hat of somebody who's uncomfortable with that and really wants to be in the S&P 500. It just just wants to be a passive investor, but just can't because of current all-time high valuations. That's what this portfolio is attempting to simulate here. And so I'd love a greater reaction from folks listening about how you think this does in accomplishing that goal or whether there's a better approach to doing that. But this is my approach you're doing that by shifting out into four highly liquid big funds that should allow me this option to move

when these rules hit. Okay. So, Scott, you are saying all of this. I mean, look at this document that you wrote. I've got a copy of this document too. This is well thought out. Just because I don't agree with your statement or your philosophy, I have to agree with your statement, the Cape is whatever you it was. And the Buffett Indicator is whatever you said it was. You're not making that up. Those are facts. But those facts don't bother me the way that they bother you. So I just, I think this is very well thought out. And you had given a lot of consideration to this. Anybody who's listening who's like, oh, well, Scott says I should do this. So I should do this. This is not investment advice. This is what Scott is doing based on his personal experiences with stock market crashes, which are

pretty few and based on his, I don't want to say anxiety, but a little bit anxiety light of where the market is currently trading at. So please do your own research. Come up with your own theories, but Scott is doing this based on a lot of thought, not just because some guy from somewhere said to do this so he's doing this. So I just, I want to caution people from taking extreme action just because they heard it on this podcast that one time. Yeah, absolutely. This is not a portfolio that someone should emulate. I am not a professional investor. I am a podcaster that is really interested in this concept.

I'm interested in beginning my very early journeys into investment thesis, and I'm putting a very tiny percentage of my wealth into a portfolio, one of four portfolios I'm building today, into this thesis as a test, to see how it performs against more tried and true portfolios from a real professional, like Frank Vasquez, or the great research that supports passive index fund investing. So this is entertainment purposes only, and with that said, I'm going to go ahead and transact in this portfolio here, and we're going to see how it does so you can all laugh at me as the years go by. So first, we're going to do BND. This is the same fund we did for our stock bond portfolio earlier.

We're going to put 30% of this portfolio into BND, and we are now the proud owners, again, of BND in this portfolio. Okay, the second one is VNQ. This is Vanguard's real estate ETF. And again, there's two reasons for the Vanguard, the real estate component for this. First, it's a way for me to get this portfolio to get more diversification, another less correlated asset into the portfolio that is not just value stocks. So value stocks is really the core thesis of the portfolio here is shifting, avoiding these mega-cap growth stocks that are trading at very high.

multiples and moving into value. Real estate is a way for me to get diversification away from that in this. I've also been noodling on certain asset classes in real estate particularly better valued, but I figured that was beyond my skill to begin analyzing those. We had UC Escola on here a while back, the high-yield landlord who puts in a ton of time and energy and attempting to analyze reeds or sectors in any way it means I have to compete with him. So I don't want to be thinking about that. So, okay. So we're going to do $2,000, 20% of the portfolio into VNQ. Then we're going to be done. Okay, next up is AVUV, our old friend here for U.S. small cap value.

That's going to be 30% of the portfolio are $3,000. And then the last one is going to be AV-DV, which is Adventist International Small-Cap value. It's going to be our international exposure to value stocks. The same thing as we did in the Risk Parity portfolio. So that's the portfolio here. We are now in those four positions. We have no cash left over.

we will reinvest the cash that comes into these periodically as we get distributions. And this portfolio should yield about 4% from day one and be our highest yielding portfolio from a cash flow perspective on this. So if I was taking distributions and assuming they didn't stop, I would be able to distribute at 4% from this portfolio theoretically without having to sell any positions. We'll see how that actually plays out. All right, Scott, I think we should give updates based on where our portfolios are at the end of every quarter in our newsletter. So to our listeners, if you have not yet signed up for our

newsletter, please do so at biggerpocketsmoney.com slash newsletter. And I do want to just thank our sponsor, Public, one more time for supporting Bigger Pockets Money and remind everybody that if you choose to use public as your brokerage and you roll over accounts, either from your after-tax brokerage account or any retirement accounts, that they will do a 1% uncapped match on there. And we like the interface. This is what I've using personally. This is not just for the test portfolios, but for my personal brokerage is also through public these days. So if you are interested in learning more about public.com, you can go to Biggerpocketsmoney.com slash public and or you can go to public.com slash BPM. Either one of those

works. And you can go to check out and that will help you get all the instructions you need to set up an account and get the 1% uncapped match for assets that you roll over to public. This is our final ad break. We'll be right back with more after this. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress. Simplify your

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customers. Visit northwest registeredagent.com slash money free and start building something amazing. Get more with Northwest Registered Agent at Northwest Registered Agent.com slash money free. Thanks for sticking with us. Okay, Scott, I really appreciate you thinking about this and taking time to write down all of your thoughts and where you want to go. You know, you have an investment philosophy for this particular portfolio. And I appreciate it. you sharing that with our audience. I know that some people will agree with you. Some people will agree with me. It's not like you're taking sides and, you know, one of us is more popular than the other. It's me. But I appreciate you taking this time, Scott. Do you think that your lack of long-term

stock market experience with regards to the ups and downs of the stock market plays into your thoughts on this at all? You mean like not having been an investor in the 2008 recession and 2000 recession. I think so. I think that that's absolutely true. I think that I may fear those drawdowns or like, you know, a lengthy period of low or no returns, no capital appreciation at least, on a portfolio, maybe more than people who have lived through it because of my lack of experience being in one of those. So I'm probably much more cautious than the average listener of bigger pockets money and many other investors that I know. And that's fine. I think that everybody has to go through their first recession at one point. It's not exciting.

to see your stock portfolio keep going down and down, and then the next day it's down even more? How frequently do you think you're going to check in on these portfolios? Like you personally logging into public.com and look, oh, look at that, look at that, look at that. I think I'm going to check in them in a lot the next two months, and then it's going to fade and we're going to revisit them infrequently over time here. I'll probably shut them down after five, five, ten years at some point just to reduce complexity in my personal position, because these are my personal accounts.

But I do think it'll be a fun, a fun little thought experiment to see. how these do over time. And one of the one of the reasons why I wanted to do this today is last year I talked about how I sold a bunch of stocks to reallocate to real estate. And I bought two properties. You helped me buy both of those properties actually, Mindy. So thank you for that. And it's kind of impossible to it'll be it'll be absolutely impossible at least for the time being to talk about how that does. Right. Like are those properties worth more or less now than I bought them for? What's the appreciation rate. I can do that with stocks. Like I say, here's what the stock portfolio would have done. But I have no idea what the real estate portfolio is from an appreciation standpoint, right?

Almost certainly I'm down from a transaction, if I factor in transaction costs on buying and selling them if I were to sell them again. But how is that going to perform? It's very hard to actually perform that counterfactual analysis on a move like what I made last year. This is one that I can actually now scientifically say, okay, at these points in time, this is how this portfolio is doing. This is how this portfolio is doing. And I can better understand the quality of the assumptions, or at least the outcomes that go into these plays from an investment perspective. So that's one of the reasons why I'm excited about doing this. How can I hold myself accountable to my own investment decisions last year around selling out of stocks and moving into real estate?

I won't be able to for years or decades, really, to understand the directional impact. And even then, if it's close, it may be hard to ever tell how good the move was or not. This one I'll be able to tell exactly how the moves play out. So that's one of the reasons why I'm excited about this little portfolio challenge. Okay, but that's financially you won't be able to tell for a while. What about emotionally? Because I remember this was really weighing on you at the beginning of the year. You did not like the PE ratio of the stock market.

You didn't like how, in your words, it was overvalued. You felt like it was overvalued. How do you feel moving that money out of your stock portfolio and into real estate? You know, great about it. I don't understand it. I don't. I don't. I understand real estate.

Right. Here's rents. They may go up. They may go down on it. But here's my property. It's there. It's going to charge just much rent. It's going to cost me about this much to upkeep. I can get that. I can grab my head around it. I do not understand the stock market right now. I just don't get it. I don't understand why it's trading at these levels here. It's as expensive as ever been. And I could not. I would lose sleep every single night if I was 100% in VOLO like I was for for a long time with my stock portfolio. So how do you sleep? You sleep. You sleep pretty good, though, with that same allocation to a large degree, right? well no matter what. But no, I don't, this, this does not keep me up at night. I just have insomnia. But no, I think that it is fine because I've been through the 1999, 2000 stock market crash, the 2008 stock market crash, the COVID-V. I've been through, and there's a lot of other ones that, like, daily the market is down for a long period of time. And over the course of the year, it's back up or whatever. So I've been through this. And I get over it by just not checking in on my portfolio all that frequently. I don't want to look in and see, oh, I've got $10,000 today. And then look in a week later, oh, it's only $9,000. That's not going to make my heart sing.

So I'm investing for the long term. I just don't look. That's another big difference I think is the other component for this is I'm not investing for the long term anymore. I am now harvesting my portfolio to some degree and living off of it to a certain degree. And so that changes how I feel about this allocation to 100% stocks. I need the portfolio in order to sustain my quality of life at this point. That's the difference. That's what fire is and always was about. And I can't do that if it's 100% in stocks. I just won't, I cannot sleep if that is how it's allocated. And I think that's valid. I think that anybody listening who was like, yeah, you know, Scott, that makes a lot of sense. Maybe your portfolio needs to change like Scott's portfolio has

changed. In which case, do your own giant thesis statement. Yeah, or, or there's plenty, there's plenty of like very well polished portfolios out there. Like, we should get Paul Merriman, Mindy here on, on Bigger Pockets Money. We've talked to Frank Vasquez. There's 60, 40 stock bond allocations. Bill Bangans got research on allocations. I think it's like 55% stocks, 40% bonds and 5% cash or something like that. Some, some portfolio like that, please don't quote me directly on that. But there are researched portfolios out there. You don't have to build your own thesis. I am just a true nerd and like putting mine out there so that I can get attacked by people in the comments section of YouTube videos for all the flaws in it, which is great. That helps me

learn. So please do provide feedback publicly or privately. It's got at biggerpocketsmoney.com on this and I look forward to hearing it. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Indy Jensen saying, see you later, Alligator.