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I’ve been reading Scott Burns‘s articles for years. He’s one of America’s favorite financial writers. For more than 40 years he has brought straight-shooting coast-to-coast money columns to American breakfast tables. His syndicated column gets published in more than 80 newspapers.His no-nonsense approach led to the creation of the Couch Potato portfolio, in 1991.
He said the average investor could buy just two index funds: a stock index and a bond index. And if they did, they would beat most professional investors. The idea was simple. And he was right. Most people pay far too much money for their investment accounts.
Do-it-yourself couch potato investing is cheap. But not everybody wants to invest on his or her own.
So Scott Burns and Kennon Grose started a firm called AssetBuilder. They create low cost portfolios of index funds for clients. Best of all, they accept American expats.For expats, they build accounts with Schwab’s low cost, commission free exchange traded index funds (ETFs). Investors have a variety of portfolio models to choose from. Some are aggressive. Others are conservative.
Over long periods of time, aggressive models should reap higher returns. But investors would need strong stomachs. Returns for aggressive investors can fluctuate wildly. More conservative portfolios earn lower returns. But they don’t fall as far when stock markets crash.
AssetBuilder uses something called Mean Variance Optimization. This means they build portfolios using a broad range of asset classes. Think of it as eggs in many baskets. And they rebalance those baskets.
For example, their portfolios all contain international stock market indexes. If the international index rises a lot in value, AssetBuilder rebalances the portfolio, selling off pieces of it to add the proceeds to the lagging indexes. This sounds counterintuitive. But long term, it’s a very good strategy. Today’s winning index can be tomorrow’s loser. Today’s loser can be tomorrow’s winner. Nobody can see the future. So AssetBuilder puts together diversified portfolios and rebalances them each year.
AssetBuilder’s Eight Portfolios
The firm offers 8 portfolios. Here’s how $10,000 would have grown, in each of the eight, if it were invested in DFA index funds from January 2000 to the end of February 2015.
|
Portfolio |
Hypothetical Initial Investment |
$10,000 Would Have Grown To: |
|
$10,000 |
$23,200 |
|
|
$10,000 |
$25,700 |
|
|
$10,000 |
$27,200 |
|
|
$10,000 |
$28,600 |
|
|
$10,000 |
$30,060 |
|
|
$10,000 |
$31,700 |
|
|
$10,000 |
$34,600 |
|
|
$10,000 |
$37,200 |
A few things to note:
- AssetBuilder doesn’t have model Portfolios 1-4. Nor does it have a Portfolio 11 or 13. It never did.
- Past returns aren’t indicative of future returns
- These results are with DFA funds. This is what AssetBuilder uses to build portfolios for U.S. based Americans. Results would be similar with Schwab’s ETFs. AssetBuilder uses Schwab’s products (it’s a regulatory thing) for American expatriates overseas.
To open an account, what do you need and what does it cost?
Expatriate Americans will need to use a U.S. address on their account opening forms. This could be the address of a mother, father, sister or brother.
You will need a minimum initial investment of $50,000 to open the account. But speak to Wesley Sisk: wesleys@assetbuilder.com.
There may be a way around that if you can open a Schwab brokerage account on your own. AssetBuilder may be able to then piggyback onto that account. If they can’t do it now, it’s a process that they’re working on.
Costs:
Schwab based ETFs charge their own annual costs. But they’re microscopic. For example, a $100,000 portfolio would cost roughly $50 per year. You don’t see this money come out of your account. It goes directly to Schwab. AssetBuilder then takes its cut, for the account to be built and managed.
AssetBuilder charges the following percentages on assets, based on the account size.
This means AssetBuilder would take $225 a year to manage $50,000.
Here’s the firm’s contact page, where you could leave a message or call them on the phone.
For nearly 3 years, I wrote for AssetBuilder—for free.
I believe in the firm because they’re worth supporting.
If you’re an overseas American, give them a shout. They’re fabulous.
Andrew Hallam is the author of The Global Expatriate’s Guide To Investing (Wiley 2015) and Millionaire Teacher (Wiley 2011)
