Simple and effective methods for financial growth based on two legends.
Passive · Index · Simple
John C. Bogle
Buy everything. Pay almost nothing. Hold forever.
Founder of Vanguard · Creator of the index fund · Own the entire market in one fund — don't try to pick winners. Costs are the enemy.
Quality · Value · Factor
Joel Greenblatt
Buy the best businesses at the cheapest prices.
Gotham Capital · ~40% annualized 1985–1994 · Find companies with high returns on capital, then buy them when the stock is cheap. Own the best, pay the least.
⚠️
Educational purposes only — not financial advice.
This dashboard was built for personal learning and portfolio exploration. The author is not a licensed financial advisor, broker-dealer, registered investment advisor, or financial planner. Nothing here constitutes a recommendation to buy or sell any security. All content reflects one individual's research and opinions, which may be incomplete or incorrect. Past performance does not guarantee future results. Consult a qualified financial professional before making any investment decisions.
Start Here
Two men changed investing forever. One said costs and simplicity win. The other proved that buying great businesses cheap beats everything.
John Bogle invented the index fund and built Vanguard. Joel Greenblatt ran one of the best hedge funds in history, then published his entire method in a short book anyone can read. Understanding both is the foundation for every decision in this playbook. This page also explains what indexes and ETFs actually are — in plain English, no jargon.
First: What Is an Index? What Is an ETF?
📊 What Is an Index?
An index is simply a list of stocks with rules for which ones belong and how much weight each one gets. It's not something you can invest in directly — it's more like a scoreboard.
The S&P 500 is the most famous index. Its rule: the 500 largest US companies by market value. Apple is #1 because it's worth the most. A tiny company worth $10 billion barely registers.
Other index types:
✦ Total market — every publicly traded US company (~8,000 stocks)
✦ Small-cap value — smaller companies that look cheap on price
✦ International — companies based outside the US
✦ Bond index — tracks government or corporate debt instead of stocks
📦 What Is an ETF?
An ETF (Exchange-Traded Fund) is the vehicle that lets you actually invest in an index. Think of the index as the recipe and the ETF as the finished dish you can buy.
When you buy one share of Vanguard Total Stock Market Index Fund ETF (VTI), you instantly own a tiny slice of ~8,000 US companies — Apple, Google, a small Ohio manufacturer, and everything in between. One purchase, instant diversification.
ETFs vs Mutual Funds: ETFs trade on a stock exchange like a stock — you can buy at 10am or 2pm. Mutual funds price once per day at market close. Both can track the same index; ETFs are usually cheaper and more tax-efficient.
Expense Ratio (ER): The annual fee, expressed as a percentage. Vanguard Total Stock Market Index Fund ETF (VTI) charges 0.03% — on $10,000 that's $3/year.
🏋️ Cap-Weighted vs. Factor-Weighted
Cap-weighted (like S&P 500 / VTI): Companies are weighted by their total market value. Apple is ~7% of the S&P 500 because it's worth more than all 500 companies average. This means you automatically own more of whatever is already expensive and popular.
Factor-weighted (like FNDB / AVUV): Instead of weighting by price, these use rules like earnings, book value, or profitability. They systematically tilt toward cheaper or higher-quality companies. Higher complexity, historically higher returns — but with periods of underperformance vs. the S&P 500.
Bogle preferred cap-weighted. He argued the simplicity and cost advantages outweigh any benefit from tilting. Greenblatt preferred factor-weighted — specifically tilting toward high quality and low price.
🔒 What Are Bonds?
When you buy a bond, you are lending money — to a company or the US government — and they promise to pay you interest and return your principal later. Bonds are generally safer than stocks but grow more slowly.
Why hold bonds at all? They tend to fall less than stocks in crashes, and they rebalance well — when stocks crash, bond prices often rise, giving you something to sell to buy stocks cheaper.
BND (Vanguard Total Bond Market ETF) holds thousands of US government and corporate bonds at once — instant bond diversification for 0.03%/year.
SGOV is short-term only (0–3 month Treasury bills) — earns close to the Fed funds rate with almost no risk. This portfolio uses SGOV as "dry powder" rather than long-term bonds.
John C. Bogle — Founder of Index Investing
John C. Bogle
1929 – 2019 · "Jack"
Founder, The Vanguard Group (1974) Created first retail index fund (1976) Princeton economics graduate Named one of the four "Giants of the 20th Century" by Fortune Magazine
His Philosophy in Plain English
✦ Nobody consistently beats the market after fees
✦ Buy everything — don't try to pick winners
✦ Keep costs as close to zero as possible
✦ Reinvest dividends. Hold forever. Don't react.
✦ Boring is better. Simple is better.
"Don't look for the needle in the haystack. Just buy the haystack."
The Core Idea — Why Indexing Works
Bogle started with a simple question: if all investors combined own the entire market, then before any costs, the average investor must earn the market's return. After fees and trading costs, the average investor earns less than the market — by exactly the amount they paid. This is not a theory. It's math.
His solution: create a fund that simply owns everything, charges almost nothing, and never trades. In 1976 he launched the Vanguard 500 Index Fund — the first index mutual fund available to regular investors. Wall Street called it "Bogle's Folly." Forty-eight years later, over $10 trillion is invested in index funds worldwide, and the fund industry has been forced to cut fees dramatically just to compete.
Bogle's personal portfolio: two funds — stocks and bonds. He never owned individual stocks. He never tried to time the market. He said the most important quality in an investor is not intelligence but temperament — the ability to stay put when everything feels wrong.
Active funds beaten by index
~85%
Over 20 years · SPIVA = S&P Index vs. Active report, published twice yearly by S&P Global — it tracks how many professional fund managers fail to beat a simple index fund
Avg active fund cost
~0.6%
vs 0.03% for VTI
Lost to 1% fee over 30yr
~25%
Of final wealth
S&P 500 annual avg return
~10%
Before inflation, 1926–present
Key Books
The Little Book of Common Sense Investing (2007) — The clearest single argument for index funds ever written. Start here.
Common Sense on Mutual Funds (1999) — The comprehensive version. Everything Bogle believed about funds, costs, and investor behavior.
Joel Greenblatt — Quality + Value Investor
Joel Greenblatt
1957 – present
Founder, Gotham Asset Management Author, The Little Book That Beats the Market Adjunct Professor, Columbia Business School Wharton School graduate
The Magic Formula — Plain English
✦ Find businesses that earn a lot (ROIC)
✦ Find businesses that are cheap (earnings yield)
✦ Rank all stocks on both screens combined
✦ Buy the top 20–30. Hold 1 year. Repeat.
✦ It works because it's uncomfortable to hold
"Figure out the value of something — and then pay a lot less."
The Magic Formula — How It Actually Works
Greenblatt's insight: most investors are bad at holding through short-term pain. A great company can have a terrible year — an acquisition goes wrong, a product launch delays, a macro downturn hits their sector. The stock gets cheap. Most investors sell. Greenblatt buys.
His two metrics: Return on Invested Capital (ROIC) — how much profit the business generates for every dollar invested in it. A company with 40% ROIC turns $1 of investment into $1.40 of operating profit. That's a great business. Earnings Yield (EBIT ÷ Enterprise Value) — how cheap the stock is relative to what it earns. High earnings yield = cheap stock.
Buy the stocks that rank highest on both screens simultaneously. Hold for at least a year (tax efficiency + time for the market to recognize the value). Sell, rescreen, repeat. No emotion. No news. Just the formula.
Gotham Capital 1985–1994
~40%
Annualized, net of fees
Magic Formula backtest
~30.8%
1988–2004 vs 12.4% S&P
S&P 500 same period
12.4%
Cap-weighted baseline
Minimum hold period
1 yr+
Shorter = noise not signal
Key Books
The Little Book That Beats the Market (2005) — The Magic Formula explained for anyone in under 200 pages. Start here if you want to understand this portfolio's stock picks.
The Big Secret for the Small Investor (2011) — How retail investors can use factor-weighted ETFs to capture what Greenblatt found, without picking individual stocks.
Bogle vs. Greenblatt — Where They Agree and Disagree
Dimension
Bogle — Buy Everything
Greenblatt — Buy the Best, Cheapest
Core belief
Markets are efficient enough — stop trying to pick winners
Markets misprice good businesses regularly — the disciplined can exploit it
What you own
Every US company proportionally — ~8,000 stocks
Only high-ROIC, low-priced businesses — 20–30 stocks in the pure form
Cost priority
Obsessed — 0.03% is achievable and should be the goal
Accepts slightly higher fees for factor exposure (0.25–0.36%)
Role of bonds
Essential — they reduce volatility and rebalance into stocks during crashes
Less central — quality businesses with pricing power are their own ballast
What to do in a crash
Hold. Rebalance from bonds into stocks. Do not panic sell.
The formula keeps buying cheap stocks automatically — the crash creates more opportunities
Best suited for
Anyone who wants to invest simply, cheaply, and permanently
Investors who understand business quality and can hold through factor underperformance
Where they agree completely
Long holding periods. Low turnover. Discipline over emotion. Costs matter. Time in market beats timing the market. Most investors should do less, not more.
Bogle Passive Approach — Simple Portfolios
Own everything. Pay almost nothing. Hold forever. The most evidence-backed way most people should invest.
These portfolios beat approximately 85% of professional active managers over 20-year periods — not because they're clever, but because they're cheap, diversified, and boring. The bond allocation acts as both a volatility cushion and a rebalancing engine: when stocks crash, bonds hold up, giving you something to sell to buy more stocks at lower prices. Bogle's rule of thumb: bond % = your age. Adjust based on your actual risk tolerance.
Option 1 — 2 Funds · US Only
Total Market + Bonds
The classic Bogle two-fund. Simplest possible.
VTI
Vanguard Total Stock Market · 0.03% · ~8,000 stocks
80%
BND
Vanguard Total Bond Market · 0.03% · US bonds
20%
Blended ER: 0.03% · Rebalance once/year · Adjust bond% to your age or comfort · That's the entire strategy.
Option 2 — 3 Funds · US Only
Large + Small + Bonds
Adds small-cap tilt. Still fully passive.
SPYX
S&P 500 Ex-Fossil Fuels Index (SPYX) · 0.20% · 500 largest US companies, fossil fuels excluded
55%
VB
Vanguard Small-Cap Index · 0.05% · ~1,400 stocks
25%
BND
Vanguard Total Bond Market · 0.03%
20%
Blended ER: 0.04% · Small-cap has historically added ~1–2% extra return over decades · Slightly more volatility than 2-fund.
Bogle's Own Words
"The simplest approach is often the most effective. Invest regularly, diversify broadly, minimize costs, and stay the course."
He used a simple two-fund portfolio his entire investing life. When asked how many funds you need, he said: "Two is fine. Three is plenty. More than that is usually more trouble than it's worth."
Option 1 — 2 Funds · Global
World Stock + Bonds
One fund owns the entire world. The ultimate simplicity.
VT
Vanguard Total World Stock · 0.07% · ~9,500 stocks · 50+ countries
80%
BND
Vanguard Total Bond Market · 0.03%
20%
Blended ER: 0.06% · VT is ~60% US, ~40% international by market cap · Auto-rebalances globally · Zero decisions required.
Option 2 — 3 Funds · Classic Bogle Global
US + International + Bonds
The famous Bogleheads 3-fund portfolio.
VTI
Vanguard Total Stock Market · 0.03% · US
60%
VXUS
Vanguard Total International · 0.05% · ex-US world
20%
BND
Vanguard Total Bond Market · 0.03%
20%
Blended ER: 0.04% · The most recommended simple portfolio in investing communities worldwide · Adjust ratios to your preference.
Why Include International?
The US has been the best-performing market for 15 years. That doesn't mean it will be the next 15.
Every decade has a different winner. In the 2000s, international stocks crushed the US. In the 2010s, the US crushed international. Nobody knows which decade you're in until it's over. Owning both means you always participate in whatever is working. The cost of this insurance: ~0.04% extra per year.
Bogle Passive Portfolios by Time Horizon
Bond % rises as horizon shortens
Horizon
Goal
Stocks
Bonds
Suggested Funds
Logic
3 Years
Capital preservation
40%
60%
VTI 40% + BND 60%
At 3yr a bad market year leaves no recovery time. Bonds are the floor. Stocks are a small growth opportunity.
5 Years
Balanced growth
60%
40%
VTI 40% + VXUS 20% + BND 40%
Can survive one bear market and recover. Bonds buffer the first crash and rebalance into stocks at lows.
10 Years
Growth with cushion
80%
20%
VTI 60% + VXUS 20% + BND 20%
Two full market cycles likely. Growth is priority. Bonds provide rebalancing fuel in crashes not capital preservation.
20 Years
Maximum growth
90%
10%
VT 90% + BND 10%
At 20yr stocks have never produced a negative 20-year return historically. Bonds are mostly behavioral comfort.
50 Years
Generational compounding
100%
0%
VT 100% or VTI 70% + VXUS 30%
At 50yr every dollar in bonds costs decades of compounding. Total global stock market. Rebalance never — just hold.
The Rule of Thumb
Bond % = Your age. Adjust ±10–20% based on whether you can sleep during a −40% crash.
A 35-year-old holds 35% bonds. A 60-year-old holds 60% bonds. This is a starting point — not a law. If you panic-sold in 2020, you probably need more bonds than your age suggests. If you bought more in 2020, you probably need fewer. The right allocation is the one that keeps you invested through the worst years.
Greenblatt Factor Approach — Simple Portfolios
Own great businesses at fair prices. No stock picking required. Factor ETFs do the screening automatically — every day, at scale.
Greenblatt himself wrote that most investors should use factor ETFs rather than pick individual stocks — they get the same quality+value screening without the concentration risk. These 2–3 fund portfolios apply his philosophy using Avantis and Schwab Fundamental ETFs. Slightly higher cost than Bogle, historically higher return — with periods of underperformance vs. the S&P 500. That underperformance is the price of admission.
Option 1 — 2 Funds · US Quality+Value
Fundamental Core + Small-Cap Value
The Greenblatt thesis in two ETFs.
FNDB
Schwab Fundamental US Broad · 0.25% · ~1,700 stocks
65%
AVUV
Avantis US Small Cap Value · 0.25% · quality+value screened
35%
Blended ER: 0.25% · No bonds — quality businesses are own ballast · Rebalance annually · ~2,450 stocks total.
Option 2 — 3 Funds · US Quality+Value + Reserve
Core + Small-Cap + Cash Reserve
Adds deployment reserve instead of bonds.
FNDB
Schwab Fundamental US Broad · 0.25%
55%
AVUV
Avantis US Small Cap Value · 0.25%
25%
SGOV
iShares 0-3 Mo T-Bill · 0.09% · deploy at market drops
20%
Blended ER: 0.23% · SGOV earns ~4–5% while waiting · Deploy at −25%, −35%, −40%+ drops · See Deployment Triggers tab for rules.
Why No Bonds in the Greenblatt Approach?
Greenblatt's "defense" is buying cheap quality — not holding ballast.
Bonds reduce volatility but they also reduce the crash-buying opportunity. The Greenblatt approach uses a cash reserve instead: earn the T-bill rate while waiting, then deploy aggressively when the market sells off quality businesses cheaply. The reserve does the job bonds do — smooths returns — but adds return instead of reducing it when you deploy at the bottom.
Option 1 — 2 Funds · Global Quality+Value
US Fundamental + Intl Fundamental
Greenblatt factor exposure across 40+ countries.
FNDB
Schwab Fundamental US Broad · 0.25%
65%
FNDF
Schwab Fundamental Intl Large · 0.25% · 25+ countries
35%
Blended ER: 0.25% · Both ETFs use the same fundamental-weight methodology · ~3,000 total stocks · 40+ countries.
Option 2 — 3 Funds · Global + Small-Cap Value
US + Intl + US Small-Cap Value
Adds the highest-returning factor globally.
FNDB
Schwab Fundamental US Broad · 0.25%
45%
FNDF
Schwab Fundamental Intl Large · 0.25%
25%
AVUV
Avantis US Small Cap Value · 0.25%
30%
Blended ER: 0.25% · ~3,200 stocks total · Full quality+value factor coverage across US large, US small, and international.
Why FNDB + FNDF Instead of VTI + VXUS?
Fundamental weighting vs. cap weighting — same idea, profoundly different execution.
VTI weights Apple at ~7% because Apple is worth the most. FNDB weights Apple based on its sales, earnings, dividends, and book value — so a company trading at 35× earnings that's merely big doesn't dominate the fund. FNDB systematically tilts away from expensive stocks and toward reasonably priced ones — Greenblatt's whole thesis — without anyone having to pick a single stock. The extra 0.22%/year in fees has historically been more than offset by the factor premium.
Greenblatt Factor Portfolios by Time Horizon
Reserve replaces bonds · factor tilt increases with horizon
Horizon
Goal
Equity
Reserve/Bonds
Suggested Funds
Notes
3 Years
Preserve with mild quality tilt
50%
50%
QUAL 30% + FNDB 20% + SGOV 50%
Heavy reserve. No AVUV — small-cap too volatile for 3yr. Quality large-cap only. Deploy reserve at −25%+ only.
5 Years
Balanced quality+value
70%
30%
FNDB 40% + AVUV 15% + FNDF 15% + SGOV 30%
Full factor exposure returns. Reserve at 30% — enough for one serious deployment cycle.
AVUV is largest position. Minimal reserve. Every dollar in cash costs decades of compounding at this horizon.
The Factor Premium Requires Time
Small-cap value underperforms the S&P 500 for 3–5 years at a stretch. That's the cost of the premium.
From 2017–2021, AVUV-style small-cap value lagged large-cap growth badly. From 2022 onward it started to recover. Factor investing only works if you hold through the painful periods — which is why shorter horizons tilt away from it. The premium is real. It requires patience to collect.
⚠️ Greenblatt Inspired · Active · Advanced — This Portfolio
This is not a passive set-and-forget portfolio. It requires annual stock thesis reviews, deployment discipline during bear markets, and comfort with factor underperformance.
The 8-ETF + 10-stock structure below is the full recommended portfolio developed across this playbook. It applies Greenblatt's quality+value philosophy at scale using factor ETFs, supplemented by 10 individual high-ROIC, durable-moat stocks. The 20% cash reserve replaces bonds and deploys systematically across 5 bear market trigger levels. If you want something simpler, use the Bogle or Greenblatt Simple tabs above. This version is for investors who want to go deeper.
Architecture
Three sleeves, one philosophy: quality + value + geographic diversity with 20% deployable reserve as active defense.
US Equity (50%): FNDB as the broad fundamental-weighted core (~1,700 stocks, value tilt), AVUV for small-cap quality+value (the Greenblatt engine, ~750 stocks), DGRW as a quality-growth dividend anchor (~1.8% yield · quality-growth tilt), QUAL as a quality tilt (high ROE, low leverage), and a 10-stock individual sleeve for highest-conviction Greenblatt picks. International (30%): FNDF for developed markets, AVDV for international small-cap value (~1,100 stocks, 20+ countries), AVES for emerging markets — all three use quality+value screens that avoid cap-weight momentum traps. Reserve (20%): SGOV or VUSXX earning the Fed rate with zero duration risk, deployed systematically across 5 bear market trigger levels. Tech at ~20% is a deliberate overweight through the individual stock sleeve (ASML, MSFT, ADBE) — considered conviction, not cap-weight accident.
Complete Allocation
FNDB20%
AVUV13%
DGRW5%
QUAL5%
Stock Sleeve7%
FNDF13%
AVDV10%
AVES7%
SGOV/VUSXX20%
US Equity — 50%
FNDB
Schwab Fundamental US Broad · ~1,700 stocks · value tilt
20%
16% — 24%
AVUV
Avantis US Small Cap Value · quality+value · ~750 stocks
Schwab Fundamental Intl Large · developed markets · fundamental-weighted
13%
10% — 16%
AVDV
Avantis Intl Small Cap Value · ~1,100 stocks · 20+ countries
10%
7% — 13%
AVES
Avantis Emerging Markets Value · quality+value screen
7%
5% — 9%
Cash Reserve — 20%
SGOV
iShares 0-3 Mo T-Bill · or VUSXX · earns Fed rate · zero duration risk
20%
3% min — 20% max
Tech (Deliberate)
~20%
Vs 38% accidental in current portfolio
Intentional overweight
Unique Companies
~3,600
Vs ~1,400 in current portfolio
+157%
Fossil Fuel
~7%
Vs ~9% in current portfolio
−2pp
Dry Powder
20%
$100k on $500k — 32% more vs 15%
+$25k firepower
Weighted ER
0.21%
Vs ~0.27% current portfolio
−22%
Defense Philosophy
No bonds. Active defense through a 20% cash reserve deployed systematically when markets fall hardest.
This structure will fall harder than low-volatility portfolios in the first weeks of a bear market — and then outperform significantly through the deployment and recovery cycle. The 20% reserve is not idle drag; it is the active defense mechanism. Over a 10-year horizon, deploying at −25% to −40% lows historically generates far more wealth than passive defensive dampening. The playbook exists precisely so you execute without hesitation when everything feels worst.
📅
Stock picks as of March 10, 2026 — not financial advice.
Individual stock selections reflect research and analysis conducted on this date. Business conditions, ROIC, competitive moats, and valuations change continuously. Every position should be re-evaluated annually each September against the 4-question thesis checklist (see Rebalance Rules tab). This is not a recommendation to buy or sell any security. The author is not a licensed financial advisor. Do your own research before acting on anything here.
Stock Sleeve Philosophy
10 stocks · ~0.7% each · Greenblatt quality+value framework. VEEV replaces DXCM. SDSTY and EADSY dropped entirely.
Each stock selected for: (1) ROIC above 15% — the business earns exceptional returns on invested capital, (2) Durable moat — structural competitive advantage that protects those returns, (3) Not already dominated by the ETF sleeve — adds exposure unavailable or underweighted in FNDB/AVUV/AVDV. Annual thesis review replaces mechanical rebalancing — exit if ROIC declines below 12% for 2+ consecutive years or the competitive moat is broken.
10-Stock Sleeve — Full Evaluation
ASML
ASML Holding · Semiconductor Lithography
★ Highest Conviction
ROIC
67.8%
P/E
~37×
Rev Growth
+31%
The strongest Greenblatt score on the list. ROIC of 67.8% — every dollar invested returns 68 cents annually. Only company on earth that makes EUV lithography machines. Every advanced semiconductor — Apple chips, Nvidia GPUs, AMD processors — requires ASML's machines. 10-year technological lead with High-NA EUV next generation. Revenue grew 31% in 2025. Adds European tech anchor with zero correlation to US momentum stocks.
Allocation: 0.9% · Greenblatt: Quality 10/10 · Value 7/10
IDEXX
IDEXX Laboratories · Veterinary Diagnostics
★ Strong Keep
ROIC
45%+
P/E
~51×
Gross Margin
61.8%
Second-highest ROIC on the list. Dominant veterinary diagnostics platform — proprietary analyzers create consumable lock-in. Pet humanization trend is a structural secular growth driver. EPS grew 21% Q3 2025, revenue grew 14% Q4 2025. Recurring reference lab and consumable revenue makes earnings highly predictable. Quality compounder that will never be in AVUV (too large, wrong sector).
Allocation: 0.8% · Greenblatt: Quality 10/10 · Value 4/10
ISRG
Intuitive Surgical · Robotic Surgery
★ Strong Keep
ROIC
~20%
P/E
~70×
Market Share
~80%
80% global robotic surgery market share. 9,500+ installed da Vinci systems generating recurring blade and instrument revenue. 10+ year surgeon training curves create near-impenetrable switching costs. Revenue grew 20%, EPS grew 23% in 2025. Expensive at 70× but the moat is one of the strongest in all of medical devices — no credible competitor has closed the gap in 20 years of trying.
Allocation: 0.8% · Greenblatt: Quality 8/10 · Value 3/10
SBGSY
Schneider Electric · Energy Management & AI Infrastructure
★ Strong Keep
ROIC
~15%
Tailwind
AI + Grid
Geography
Europe
Best international pick on the list. Dominant data center power management platform (EcoStruxure) — every AI data center needs Schneider's power distribution and cooling systems. This is the picks-and-shovels of AI infrastructure without paying AI multiples. ROIC ~15%, improving margins, building automation + grid infrastructure structural tailwinds. European industrial anchor unavailable at this quality in AVDV.
Allocation: 0.8% · Greenblatt: Quality 7/10 · Value 6/10
ADBE
Adobe · Creative Cloud Platform
★ Best Value on List
ROIC
~29%
P/E
~27×
EPS
$20+
Most Greenblatt-complete pick on the list at current prices. ROIC 29%, P/E ~27× — cheapest it has been in years. 30M+ Creative Cloud subscribers with massive switching costs. AI risk (Figma, Canva, generative tools) is real but Adobe is integrating Firefly aggressively. The selloff from AI fear has created genuine value — a $20+ EPS business at 27× is a reasonable valuation for this quality level. Deliberate tech weight addition.
Allocation: 0.8% · Greenblatt: Quality 8/10 · Value 7/10
V
Visa · Global Payment Network
★ Greenblatt Core
ROIC
~40%
Net Margin
53%
P/E
~32×
Among the top 5 highest-ROIC large caps on earth. The payment network is a genuine toll road — Visa processes every swipe with zero credit risk and 53% net margins. Network effects are the strongest financial moat in existence: 4.3 billion cards, 130 million merchant locations, acceptance in 200+ countries. Added as a new position replacing EADSY — fills a financials quality gap that AVUV covers systematically but not with this moat quality.
Allocation: 0.8% · Greenblatt: Quality 9/10 · Value 6/10
MSFT
Microsoft · Cloud + AI Platform
★ Tech Anchor
ROIC
~30%
P/E
~33×
Azure Growth
+30%
Deliberate tech weight addition — the most defensible large-cap tech pick. ROIC ~30%, Azure cloud growing 30%+, Office 365 and Teams with near-100% enterprise lock-in. 77,000+ GitHub Copilot paying organizations and OpenAI exclusive partnership make MSFT the clearest AI infrastructure bet. Already in FNDB and QUAL at small weights — explicit holding reinforces conviction. Adds meaningful tech sector weight cleanly.
Allocation: 0.8% · Greenblatt: Quality 8/10 · Value 6/10
ABB
ABB Ltd · Electrification & Robotics
★ Keep
ROIC
~22%
P/E
~25×
Dividend
~2%
Most reasonably valued of the international names. ROIC ~22%, P/E ~25×, 2% dividend. World-leading robotics and electrification — industrial automation, EV charging, grid systems, factory robotics. Manufacturing reshoring + electrification of industry + AI-driven automation are structural tailwinds. Greenblatt fit: Quality 7/10, Value 7/10 — the most balanced quality/value score on the list after ADBE.
Allocation: 0.7% · Greenblatt: Quality 7/10 · Value 7/10
LIN
Linde · Industrial Gases
★ Compounder
ROIC
~9.5%
Free Cash Flow
$5B+
Op Margin
28%
Lowest ROIC on the list but justified by permanent contract structure. Long-term take-or-pay agreements with pricing indexed to inflation create near-permanent revenue streams. AI data center cooling and semiconductor manufacturing require massive industrial gas supply — Linde is a direct AI infrastructure beneficiary without AI multiples. $5B+ free cash flow, consistent buybacks. Hydrogen energy transition is a decade-long additional tailwind.
Allocation: 0.6% · Greenblatt: Quality 5/10 · Value 5/10
VEEV
Veeva Systems · Life Sciences Cloud — replaces DXCM
★ New Addition
ROIC
31.4%
P/E
~24×
Op Income Gr.
+61%
Replaces DXCM which carried unquantifiable GLP-1 structural risk. ROIC 31.4% vs. WACC 10.87% — significant economic value creation. Dominant cloud platform for pharmaceutical and biotech companies — CRM, clinical trials, regulatory submissions, drug safety. Down 37% from 52-week high on Vault CRM migration risk from Salesforce — a near-term risk that is also the long-term moat strengthener. Operating income grew 61% FY2025, EPS grew 38%, Q4 revenue grew 16%.
Allocation: 0.7% · Greenblatt: Quality 8/10 · Value 7/10
Stock Sleeve Summary — Ranked by ROIC
7% of total portfolio · ~0.7% avg per stockData as of Mar 10, 2026 · re-evaluate each September
Ticker
Company
Sector
ROIC
P/E
Greenblatt
Alloc
ASML
ASML Holding
Tech · Europe
67.8%
37×
★★★★★
0.9%
IDEXX
IDEXX Laboratories
Healthcare
45%+
51×
★★★★★
0.8%
V
Visa
Financials
~40%
32×
★★★★½
0.8%
MSFT
Microsoft
Tech · US
~30%
33×
★★★★☆
0.8%
VEEV
Veeva Systems
Healthcare SaaS
31.4%
24×
★★★★☆
0.7%
ADBE
Adobe
Tech · US
~29%
27×
★★★★☆
0.8%
ISRG
Intuitive Surgical
Healthcare
~20%
70×
★★★★☆
0.8%
ABB
ABB Ltd
Industrials · CH
~22%
25×
★★★★☆
0.7%
SBGSY
Schneider Electric
Industrials · FR
~15%
28×
★★★★☆
0.8%
LIN
Linde plc
Materials
~9.5%
30×
★★★☆☆
0.6%
Total Sleeve
7.5%
🔍 Greenblatt Magic Formula Screener — Powered by Claude AI
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Claude applies strict Magic Formula ranking + qualitative quality gates across the S&P 500 universe. Choose your mode below — New Picks finds stocks that complement your existing sleeve without repeating it. Optimize Full Sleeve evaluates all 20 candidates (current sleeve + screener universe) and selects the single best 10 overall — combining strengths from both approaches into one optimal portfolio. Data reflects Claude's knowledge through August 2025 — the freshest annual snapshot available. Run every September: Claude's training captures full-year financials and competitive developments through August, making September the ideal time to review positions with the most current data.
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Magic Formula Picks
⚠️ Not financial advice. Claude's knowledge reflects filings and market data through August 2025. Verify each pick individually before investing. Consult a licensed financial advisor.
Sector Allocation
How to Use These Picks
Starting points — not buy orders. Run the 4-question thesis check before acting.
For each stock: (1) Confirm ROIC and earnings yield still hold with latest earnings, (2) Check for major news since August 2025, (3) Verify the moat is intact, (4) Confirm sector weights stay within target ranges. Run the screener each September — Claude's knowledge through August captures the latest full-year financials, making September the ideal annual review window. See the Rebalance Rules tab for the full checklist.
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Your Current Portfolio
Enter your holdings to unlock personalized sector comparison and transition advice.
Add each position below — ticker and percentage of total portfolio. The Sectors tab will compare your sector breakdown to the total stock market and to this proposed portfolio. The Transition tab will give you specific taxable vs. non-taxable advice based on what you actually hold.
Holdings
Ticker / Name
% of Portfolio
Account Type
Total allocated
0%
—
Account types:
● Taxable (brokerage)
● Tax-Deferred (Traditional IRA / 401k)
● Tax-Free (Roth IRA / Roth 401k)
✓ Portfolio saved — Sectors and Transition tabs updated with your data.
Sector Breakdown — Three-Way Comparison
Total US Stock Market
VTI benchmark
Technology
~30%
Healthcare
~13%
Financials
~13%
Consumer Cyc.
~11%
Industrials
~9%
Comm. Services
~8%
Consumer Def.
~7%
Energy
~5%
Real Estate
~3%
Utilities
~2%
This Proposed Portfolio
Quality-tilted
Technology
~20%
Financials
~17%
Industrials
~15%
Healthcare
~13%
Consumer Cyc.
~11%
Basic Materials
~9%
Energy (Fossil)
~7%
Consumer Def.
~6%
Comm. Services
~2%
Your Portfolio
Not entered yet
Enter your holdings in the My Portfolio tab to see your sector breakdown here.
Sector Profitability — 20-Year Historical Context
Average Annual Return by Sector · 2004–2024
S&P 500 sectors · approximate
Sector
~20yr Ann. Return
vs. S&P 500 (~10%)
Key Driver
Technology
~15–18%
+5–8pp
Platform monopolies, high ROIC, recurring revenue compounding
Financials
~10–12%
+0–2pp
Exchanges and networks outperformed; banks dragged by 2008
Healthcare
~11–13%
+1–3pp
Aging demographics, pricing power, patent moats
Comm. Services
~10–12%
+0–2pp
Google and Meta dominated post-2010; legacy telecom dragged 2004–2010
Industrials
~9–11%
±1pp
Cyclical but durable; best performers were monopoly industrials
Consumer Cyclical
~10–13%
+0–3pp
Amazon dominated; auto and retail were poor
#06b6d4; Consumer Defensive
~8–10%
±0pp
Steady, low-volatility; underperformed in bull markets
Basic Materials
~7–9%
−1–3pp
Commodity cycles; poor capital allocators as a group
Real Estate
~7–9%
−1–3pp
Income reliable; capital appreciation lagged equities
Utilities
~6–8%
−2–4pp
Regulated monopoly pricing; inflation erodes real returns
Energy (Fossil)
~5–7%
−3–5pp
Volatile commodity cycles; capital destruction in downturns; long-term headwind from energy transition
What the 20-Year Data Shows
The sectors that compounded best were not the most popular — they were the most defensible.
Technology outperformed because it produced genuine monopolies (Google, Microsoft, Apple) not just growth stories. Healthcare was steady because aging demographics and pricing power are structural, not cyclical. Energy underperformed despite oil price spikes because commodity businesses destroy capital in downturns faster than they create it in booms. The proposed portfolio deliberately overweights the top three sectors (Tech, Financials, Healthcare, Industrials) and underweights or eliminates the bottom four (Energy, Utilities, Real Estate, Basic Materials as a primary sector bet). This is not a market call — it's an alignment with where durable business models concentrate.
Your Portfolio vs. Recommended — Sector Gap Analysis
Two-Trigger System
Annual review every January + immediate action if any position breaches its band. Contributions first — sell only if the gap can't close within 3 months of new money.
Never rebalance during a falling market — if AVUV drifts from 13% to 9% because markets are down, that is the deployment system's job, not a rebalance event. Only rebalance when a position breaches its ceiling due to outperformance, or when it is the annual September review. Tax rule: In tax-advantaged accounts (IRA/401k) rebalance freely. In taxable accounts, weigh the capital gains cost — a 1–2pp drift may not be worth the tax drag; a 4–5pp breach almost always is.
ETF Positions — Targets, Bands & Rebalance Rules
Annual Jan + immediate on breach
Position
Target %
Floor
Ceiling
When to Rebalance
How to Rebalance
US Equity — 50% of total portfolio
FNDB
Schwab Fundamental US Broad · Core position
20%
16%
24%
September annual review always. Immediate if <16% or >24%. Widest band of any position — small drifts are noise at this size.
Direct new contributions here first if below 20%. Only sell FNDB to rebalance if it is above 24% and contributions alone can't close within 3 months.
AVUV
Avantis US Small Cap Value · Greenblatt engine
13%
10%
16%
September + quarterly check — small-cap is volatile and most likely to breach. Trim immediately if above 16%; buy immediately if below 10%.
Buy AVUV via contributions if below 13%. Trim excess into FNDB or FNDF if above 16%. Do not trim during a market decline — that is the deployment system's domain.
DGRW
WisdomTree US Quality Dividend Growth · Defensive anchor
5%
3%
7%
September annual review. Dividends (~1.8% yield · quality-growth tilt) are paid quarterly — redirect them to the most underweight position rather than reinvesting in DGRW automatically.
Small position; contributions are the easiest rebalance lever. Trim above 7% only if September annual review confirms persistent overweight.
QUAL
iShares MSCI USA Quality · Quality tilt
5%
3%
7%
September annual review only. QUAL is a steady position — breaches are rare given its large-cap composition. No need for quarterly monitoring.
Hold within band via contributions. Do not actively add above target; do not reduce below 3%.
Individual Stock Sleeve — 7% of total portfolio · see per-stock table below
International Equity — 30% of total portfolio
FNDF
Schwab Fundamental Intl Large · Core intl
13%
10%
16%
January + mid-year check. USD/foreign currency swings can push this 2–3pp in either direction in a single quarter. Don't react to currency moves alone.
Buy via contributions when below 13%. Trim into AVUV or FNDB if above 16% at September annual review.
AVDV
Avantis Intl Small Cap Value · Most volatile
10%
7%
13%
September + quarterly check. Most likely position to breach a band. Monitor quarterly. Breach below 7% in falling markets = deployment system territory, not rebalance.
Trim above 13% into FNDF. Buy below 10% via contributions. Do not sell AVDV during a general market decline — the whole point is to hold it through volatility.
AVES
Avantis Emerging Markets Value · EM sleeve
7%
5%
9%
January + mid-year check. Tight ±2pp band because EM volatility is outsized at 7% weight. A 2pp drift represents 29% relative movement — act promptly on breach.
Buy via contributions below 7%. Trim excess into AVDV or FNDF above 9%. Don't rebalance based on geopolitical headlines alone.
Cash Reserve — 20% baseline · dynamic range 3%–20%
SGOV / VUSXX
T-Bill ETF or Treasury Money Market · Dry powder
20%
3% min
20% max
Governed by deployment system, not calendar rebalance. The reserve falls as triggers fire and is rebuilt via the refill protocol. September annual review confirms refill progress only.
Never "rebalance" out of reserve into equities except via the 5-trigger system. Rebuild to 20% via 30% of new contributions once S&P returns to within 10% of prior ATH.
Total Portfolio
100%
Wtd ER ~0.21%
Annual September full portfolio review — Claude's August knowledge cutoff makes September ideal · Immediate action on any band breach · Never rebalance into a falling market
September annually. Highest conviction — let it run. Only trim if above 1.3% and another position is below floor.
IDEXX
IDEXX Laboratories · Vet Diagnostics
0.8%
0.4%
1.2%
ROIC <25% sustained · or recurring revenue model disrupted
September annually. Sticky compounder — expect slow drift, not sudden moves. Standard annual check sufficient.
ISRG
Intuitive Surgical · Robotic Surgery
0.8%
0.4%
1.2%
ROIC <12% · or credible competitor closes <5yr gap
September annually. High P/E (~70×) makes it prone to sharp drawdowns on miss — do not panic-sell below floor; review thesis, not price.
SBGSY
Schneider Electric · Energy Mgmt
0.8%
0.4%
1.2%
ROIC <12% · or data center power management moat lost
September annually. ADR — check for liquidity before trading. EUR/USD moves will cause apparent drift; only rebalance on real thesis changes.
ADBE
Adobe · Creative Cloud
0.8%
0.4%
1.2%
ROIC <15% · or subscriber base structurally declines 2+ years
September annually. Currently cheapest on the list (~27× P/E) — lean into it if it falls further below 0.4%. AI integration thesis check every January.
V
Visa · Payment Network
0.8%
0.4%
1.2%
ROIC <20% · or network effect moat structurally eroded
September annually. Visa is stable and boring — exactly right. Annual check on regulatory risk (interchange fee legislation) is the primary thesis monitor.
MSFT
Microsoft · Cloud + AI
0.8%
0.4%
1.2%
ROIC <20% · or Azure loses cloud leadership to AWS/GCP decisively
September annually. Also held in FNDB and QUAL at small weights — monitor total effective exposure stays <3% including ETF overlap.
ABB
ABB Ltd · Robotics + Electrification
0.7%
0.3%
1.1%
ROIC <12% · or industrial automation growth stalls 2+ years
September annually. Swiss-listed ADR — check liquidity. Most balanced quality/value score on the list; don't trim unless ceiling is breached.
LIN
Linde plc · Industrial Gases
0.6%
0.3%
1.0%
Free cash flow <$3B sustained · or take-or-pay contract model breaks
September annually. Smallest ETF-sleeve allocation. ROIC is lower (~9.5%) but justified by permanent contract structure — use FCF as the primary health metric, not ROIC alone.
September annually. Down 37% from high — currently below target weight. Buy via contributions until at 0.7%. Primary watch: Vault CRM migration completion rate every quarter.
Sleeve Total
7.5%
5% min
10% max
Replace exited stock with next-best Greenblatt candidate
Rebalance entire sleeve to equal weight once annually in January. Thesis check on every holding every January — not just price check.
01
Order of Operations
Step 1 — Contributions first. Direct new money to the most underweight position. No tax event, no friction, no selling required.
Step 2 — Wait 3 months. If contributions close the gap within 3 months, done. If not, proceed to Step 3.
Step 3 — Sell to rebalance. Only in tax-advantaged accounts unless the breach is extreme (>5pp). In taxable accounts, weigh gains cost first.
02
The One Rule That Overrides All Others
Never rebalance into a falling market.
If AVUV falls from 13% to 8%, that is not a rebalance event — it is a deployment trigger event. The 5-trigger system handles falling markets. The rebalance system handles normal drift from growth differences.
Rebalance = trim winners / grow laggards during normal markets. Deploy = buy aggressively during crashes. These are separate systems.
03
Stock Sleeve Annual Checklist
Every January, for each of the 10 stocks ask:
① ROIC still above threshold? (see per-stock table)
② Moat intact? New competitors? Pricing power lost?
③ Capital allocation changed? Buybacks → acquisitions?
④ Position at target weight? Below floor → add. Above ceiling → trim.
If ① and ② are both failing: exit. Don't wait for price recovery.
System Design — $100k Reserve on $500k Portfolio
20% reserve · 5 trigger levels · Increasing aggression as the drop deepens. Maximum capital at maximum fear. Pre-committed now, executed under stress.
Triggers measured from S&P 500 most recent all-time high (52-week high is a workable proxy). Deployment percentages are of remaining reserve at that moment. The system deploys more — not less — as the drop deepens because that is what the historical data demands. Every -40%+ bear since 1950 has recovered to new highs. The plan is written here, in calm, so you don't have to decide in panic.
Level 1
−10%
from all-time high
Dip Buy — Trickle In
Happens ~every 16 months historically. Very common — most don't become bear markets. Small starter position. Don't waste big ammunition here.
Deploy
15%
of reserve · ~$15k
AVUV40%
AVDV30%
FNDB20%
AVES10%
Level 2
−15%
from all-time high
Meaningful Correction — Buy More
~40% of these continue to -20%+. Step up. This is where Greenblatt instinct kicks in — good businesses getting genuinely cheaper.
Deploy
20%
of reserve · ~$17k
AVUV35%
FNDF25%
FNDB25%
AVDV15%
Level 3
−25%
from all-time high
Bear Market — Significant Deployment
Official bear territory. Terrible headlines. Earnings yields spike as prices fall — the Magic Formula at work. Deploy anyway. Every -25% drop historically has been a good 3-year entry.
Deploy
30%
of reserve · ~$20k
AVUV30%
FNDB25%
AVDV20%
AVES15%
DGRW10%
Level 4
−35%
from all-time high
Severe Bear — Major Deployment
Occurred 8 times since 1950. Every single one recovered to new highs. News will feel existential. That is the signal — not the reason to pause.
Deploy
50%
of reserve · ~$24k
AVUV28%
FNDB22%
AVDV20%
FNDF15%
AVES15%
Level 5
−40%+
from all-time high
Capitulation — Deploy Everything Remaining
2009. 2020. The world feels broken. This is when Buffett said "be greedy when others are fearful." Zero hesitation. Every dollar here is doing the most work of your investing life.
Deploy
100%
all remaining reserve
AVUV28%
FNDB20%
AVDV20%
FNDF15%
AVES12%
DGRW5%
The Three Rules That Override Everything
Never skip a level. Never deploy more than scheduled. Never sell existing holdings to fund deployment.
Rule 1 — Never skip: If it hits -25%, you deploy at -10%, -15%, and -25% in sequence. No waiting to "see where the bottom is." Rule 2 — Never over-deploy: Saving ammunition for deeper drops is the entire point of the tiered system. Rule 3 — Additive only: The reserve is separately funded. Deployment buys are on top of your existing portfolio — you are never selling FNDB to buy AVUV.
The Equally Important Second Half
Deploying the reserve is only half the system. Rebuilding it ensures you enter the next bear market fully loaded.
Bear markets occur every 5–7 years on average. Over your 10-year horizon you will likely face 2. If you deploy fully in Year 2 and never rebuild, you have nothing for Year 7. The refill protocol is as non-negotiable as the deployment triggers.
R1
Don't Refill During Recovery
Do NOT redirect contributions to SGOV while the market is recovering. The best returns are in months 1–18 post-bottom. Let deployed positions compound. Continue regular contributions into FNDB, AVUV, AVDV. Refill begins only when S&P is within 10% of previous ATH.
R2
30% Rule — Skim on the Way Up
Once S&P is near old ATH: direct 30% of all new contributions to SGOV until reserve is rebuilt to 20% of total portfolio. This is "skimming the cream" — converting new equity gains to reserve without selling existing positions.
R3
Partial Deploy = Partial Refill
Only reached Level 2 before recovery? Only refill the 35% you deployed. Match the refill to the deployment. Same 30% of contributions rule. Don't over-save after a shallow correction — let equity work for you.
R4
Where to Hold Reserve
SGOV (preferred): 0-3 mo T-Bill, state-tax-exempt, earns Fed rate, zero duration risk. VUSXX (acceptable): If you're already there, the friction of switching exceeds the yield difference. Never: BND, VGSH, or anything with credit risk for the reserve.
The Insurance Premium Math
20% in SGOV at 4.5% vs. fully invested at 7% costs ~0.5%/year. That's ~$2,500/year on a $500k portfolio. Deployed once per decade, it pays for itself many times over.
The drag: 20% × (7% − 4.5%) = 0.5% annualized. The payoff: historically deploying $100k at a -40% bear market bottom generates approximately $40,000–$80,000 in additional returns over 3–5 years versus holding that same $100k in equities from peak. You pay $2,500/year for the option to capture $60,000. That is a favorable trade — but only if you execute.
Quick Reference Card
Print this. Keep it somewhere. Read it when the market is falling and you feel sick.
−10%
from ATH
Level 1 — Trickle In
Buy: 40% AVUV · 30% AVDV · 20% FNDB · 10% AVES Common correction. Small bet. Don't overcommit here.
15%
of reserve
−15%
from ATH
Level 2 — Buy More
Buy: 35% AVUV · 25% FNDF · 25% FNDB · 15% AVDV ~40% become bears. Position for both outcomes. Step up.
20%
of reserve
−25%
from ATH
Level 3 — Significant
Buy: 30% AVUV · 25% FNDB · 20% AVDV · 15% AVES · 10% DGRW Bear market. Terrible headlines. This is the job. Do not pause.
30%
of reserve
−35%
from ATH
Level 4 — Major Deployment
Buy: 28% AVUV · 22% FNDB · 20% AVDV · 15% FNDF · 15% AVES Severe bear. Generational event. 8 times since 1950. All recovered.
50%
of reserve
−40%+
from ATH
Level 5 — ALL IN. Zero Hesitation.
Buy: 28% AVUV · 20% FNDB · 20% AVDV · 15% FNDF · 12% AVES · 5% DGRW 2009. 2020. World feels broken. Best buying moment of your investing life.
100%
all remaining
Complete Portfolio At a Glance
All targets
Ticker / Position
Type
Target
Floor
Ceiling
ER
FNDB
Schwab Fundamental US Broad
US Core
20%
16%
24%
0.25%
Equity🌍 United States📊 Large + Mid Cap
AVUV
Avantis US Small Cap Value
US SmCap Val
13%
10%
16%
0.25%
Equity🌍 United States📊 Small Cap
DGRW
WisdomTree Quality Dividend Growth
US Dividend
5%
3%
7%
0.28%
Equity🌍 United States📊 Large Cap
QUAL
iShares MSCI USA Quality
Quality Tilt
5%
3%
7%
0.15%
Equity🌍 United States📊 Large Cap
Stock Sleeve
ASML · IDEXX · ISRG · SBGSY · ADBE · V · MSFT · ABB · LIN · VEEV
Greenblatt
7%
5%
10%
varies
FNDF
Schwab Fundamental Intl Large
Intl Dev
13%
10%
16%
0.25%
Equity🌍 Developed Markets📊 Large Cap
AVDV
Avantis Intl Small Cap Value
Intl SmCap
10%
7%
13%
0.36%
Equity🌍 Developed Markets📊 Small Cap
AVES
Avantis Emerging Markets Value
Emg Markets
7%
5%
9%
0.36%
Equity🌍 Emerging Markets📊 Mid + Large Cap
SGOV / VUSXX
T-Bill ETF or Treasury Money Market
Dry Powder
20%
3% min
20% max
0.09%
Cash (SGOV or VUSXX)🌍 US T-Bills / Money Market📊 —
Total · 9 positions + 10 stocks
100%
Weighted avg ER
~0.21%
The Most Important Thing
At Level 4 and 5 every instinct will tell you not to buy. The news will justify it. This plan is the counter-argument you wrote when you were calm.
March 6, 2009: S&P at 666. "Is capitalism ending?" — CNBC. Anyone who bought that day earned +400% over 10 years. March 23, 2020: Global pandemic, no vaccine, no timeline. Anyone who bought that day earned +100% in 12 months. The feeling at those moments is indistinguishable from "this time it's permanent." It never is. The plan knows this. Follow the plan.
Important Disclosure
This dashboard is for educational and informational purposes only and does not constitute personalized investment advice. Individual stock evaluations are based on publicly available data and represent one analytical framework — they are not buy recommendations. ROIC, P/E, and sector weight figures are approximate and may change. Historical drawdown and recovery data is based on S&P 500 index performance and does not guarantee future results. All investing involves risk including possible loss of principal. Consult a licensed financial advisor before implementing any investment strategy.
Portfolio Size Calculator
Enter your total portfolio value to see exact dollar amounts for every position and every deployment trigger level.
All amounts update instantly. Deployment dollar figures assume the reserve is at its full 20% starting amount. Partial-deploy scenarios (reserve already partially used) are shown below the main tables.
Total Portfolio Value
$
Reserve (20%)
$100,000
Target Position Sizes
Position
Role
Target %
Target $
Floor $
Ceiling $
Deployment Trigger Dollar Amounts — from full $100k reserve
Level
Drop
Deploy % of Reserve
Deploy $
AVUV $
FNDB $
AVDV $
FNDF $
AVES $
DGRW $
Stock Sleeve Dollar Allocations
Stock
Company
Target %
Target $
Add Below $
Trim Above $
Partial Reserve Scenario
If reserve has already been partially deployed, the remaining dollar amounts scale proportionally.
Example on a $500k portfolio: After Level 1 fires (−10%), you've deployed 15% of reserve = $15,000. Remaining reserve = $85,000. Next trigger (Level 2) deploys 20% of remaining$85,000 = $17,000. The trigger percentages are always of the reserve at that moment, not the original $100k.
Transition Plan — Your Portfolio → Proposed Structure
Personalized advice based on what you hold and where you hold it.
Enter your holdings in the My Portfolio tab to get specific transition steps for each position, split by taxable and non-taxable accounts. The guidance below applies generally — your specific plan will appear once holdings are entered.
Core Tax Principles — Applies to Any Transition
Tax-Free / Tax-Deferred Accounts
Roth IRA · Traditional IRA · 401k
✦ Sell anything freely — no capital gains tax
✦ Do all rebalancing here first
✦ Hold highest-growth assets in Roth (never taxed)
✦ Hold income-producing assets in Traditional IRA
✦ Build stock sleeve here preferentially
✦ No wash-sale rule applies across account types — but do not repurchase substantially identical securities within 30 days in a taxable account after harvesting a loss
Taxable Brokerage Account
After-Tax Dollars
✦ Sell with gains only if structural improvement clearly justifies tax drag
✦ Always harvest losses — pair against gains in same tax year
✦ Hold for 12+ months to qualify for long-term capital gains rates (0/15/20%)
✦ Use new contributions to rebalance rather than selling
✦ Highly appreciated positions — consider holding unless thesis broken
✦ Consider gifting highly appreciated shares to charity (avoid gains entirely)
Sell vs. Hold Decision Framework
When to Sell in a Taxable Account
Tax-aware order
Situation
Taxable Action
Non-Taxable Action
Position at a loss
Sell immediately — harvest loss to offset gains. Replace with similar but not identical ETF for 30 days.
Sell freely, no tax consideration needed.
Small gain (<15% unrealized)
Sell if holding >12 months (long-term rate). Pair with any harvested losses to neutralize tax.
Sell freely.
Large gain (>50% unrealized)
Pause. Only sell if thesis is broken or position is significantly over-weight. Consider holding and rebalancing via contributions.
Sell freely — this is the most valuable use of a tax-advantaged account.
Redundant ETF (overlaps new holdings)
Sell if at a loss or small gain. If large gain, let it run and use contributions to build the replacement.
Sell and replace immediately.
Highly appreciated single stock
Hold unless moat broken or concentration above 10% of portfolio. Consider tax-loss pair or donor-advised fund for charity.
Sell and diversify if over 5% of total portfolio.
Position in wrong account type
Gradually migrate: hold in taxable until a natural sell point, rebuild in IRA/Roth.
Sell and move to optimal account immediately.
Optimal Asset Location — What Goes Where
Asset Location by Account Type
Hold each asset in its optimal account
Asset
Best Account
Reason
Individual Stocks (ASML, V, MCO…)
Roth IRA
Highest expected growth + never taxed on exit. If no Roth, use Traditional IRA over taxable.
AVUV — US Small Cap Value
Roth IRA
Small-cap value has highest expected return premium — maximize in tax-free account.
AVDV — Intl Small Cap Value
Taxable
Foreign tax credit (FTC) only claimable in taxable accounts — you lose the FTC in an IRA.
FNDF / AVES — Intl ETFs
Taxable
Same FTC reason — international ETFs pay foreign taxes, reclaim in taxable only.
FNDB — US Core
Either
Tax-efficient ETF, low turnover. Fine in taxable; better alternatives for IRA slots.
DGRW — Dividend Growth
IRA/401k
Dividends are taxed annually in taxable — shelter the income in a tax-deferred account.
QUAL — Quality ETF
Either
Low turnover, qualified dividends — manageable in taxable but slightly better in IRA.
SGOV / VUSXX — Reserve
Taxable
SGOV is state-tax-exempt — that exemption only applies in a taxable account. In an IRA it provides no tax advantage over other bonds.
General Transition Sequence — Any Portfolio
Phase 1
Non-Taxable First
Day 1 – Week 1
Start in your IRA/401k/Roth where there are no tax consequences. Sell all positions that don't belong in the final portfolio. Buy replacements immediately to stay invested. This should take one day per account — do it completely before touching any taxable account.
Ideal sequence: Roth IRA first (highest-growth assets), then Traditional IRA or 401k (income assets), then taxable last.
Phase 2
Loss Harvest in Taxable
Week 1 – Week 2
In your taxable account, identify every position with an unrealized loss. Sell those first — the tax losses offset gains you'll realize when selling appreciated positions. Replace immediately with a similar-but-not-identical substitute to stay invested (e.g. sell VIOV, buy AVUV same day — different fund, same small-cap value exposure, no wash-sale issue).
Track carefully: Note the total losses harvested. These offset gains dollar-for-dollar.
Phase 3
Gain Positions in Taxable
Week 2 – Month 2
Use harvested losses to offset gains when selling appreciated positions. Prioritize selling positions held >12 months (long-term rate 0–20% vs. short-term rate up to 37%). For positions with large gains and no thesis issue — hold and redirect new contributions toward the target allocation instead of selling.
Rule of thumb: If the structural improvement is worth more than 1.5× the tax drag over 5 years, sell. If it's a minor optimization, let contributions do the rebalancing.
Phase 4
Stock Sleeve + Reserve
Month 1 – Month 6
Build the 10-stock sleeve gradually — never all at once. Spread over 4–6 months to average entry prices. Build reserve (SGOV) to 20% in parallel via contributions. Do not sell equity ETFs to fund the reserve — let cash flow build it.
Stock sleeve priority order: Start with the highest conviction names first (ASML, V, IDEXX), then fill the rest at equal pace over subsequent months.
Your Personalized Transition Plan
Non-Taxable Accounts
Roth · IRA · 401k
Taxable Brokerage
After-Tax Account
Important
This is a framework, not financial advice. Tax situations vary significantly.
Consult a CPA or tax advisor before executing significant taxable transactions. The guidance above reflects general principles — your marginal tax rate, state taxes, existing loss carryforwards, and account mix all affect the optimal sequence. The most important rule: never let tax-aversion permanently prevent a structurally better portfolio.
Life After the Transition
Transition complete. Stock sleeve built. Reserve at 20%. This is the simplified ongoing playbook — nothing more needed.
Once you've finished the 4-phase transition and the stock sleeve is fully funded, the portfolio requires very little active management. The entire job reduces to: route new contributions correctly, check bands once a year, watch for deployment triggers, and do an annual stock thesis review. Everything on this page fits on a single printed sheet.
The Complete Portfolio — Steady State Targets
US Equity — 50%
20%
FNDB
US Fundamental Core
band: 16 – 24%
13%
AVUV
US Small Cap Value
band: 10 – 16%
5%
QUAL
Quality Tilt
band: 3 – 7%
5%
DGRW
Dividend Quality
band: 3 – 7%
7%
10 Stocks
Individual Sleeve
band: 5 – 10%
International — 30%
13%
FNDF
Intl Developed
band: 10 – 16%
10%
AVDV
Intl Small Cap Value
band: 7 – 13%
7%
AVES
Emerging Markets
band: 5 – 9%
FNDF + AVDV + AVES covers ~45 countries. All three use quality+value screens. Currency drift: check mid-year alongside January.
Cash Reserve — 20% (dynamic)
20%
SGOV / VUSXX
0-3 Mo T-Bill · Fed rate
floor: 3% · max: 20%
Not a permanent 20% cash drag. It deploys at 5 trigger levels (−10% / −15% / −25% / −35% / −40%+ from ATH) and rebuilds via 30% of contributions once S&P recovers to within 10% of prior ATH. Annual drag vs. fully invested: ~0.5%. Expected payoff per bear market cycle: $40k–$80k on $500k portfolio.
Stock Sleeve — Targets at a Glance Picks as of Mar 10, 2026 · re-evaluate each September
ASML
0.9%
add <0.5% · trim >1.3%
IDEXX
0.8%
add <0.4% · trim >1.2%
ISRG
0.8%
add <0.4% · trim >1.2%
SBGSY
0.8%
add <0.4% · trim >1.2%
ADBE
0.8%
add <0.4% · trim >1.2%
V
0.8%
add <0.4% · trim >1.2%
MSFT
0.8%
add <0.4% · trim >1.2%
ABB
0.7%
add <0.3% · trim >1.1%
LIN
0.6%
add <0.3% · trim >1.0%
VEEV
0.7%
add <0.3% · trim >1.1%
Annual Monitoring Calendar
September
Annual Review
✦ Check all 8 ETF positions vs. bands
✦ Rebalance to target if any breach
✦ Weigh all 10 stocks vs. targets
✦ Thesis check each stock (4 questions)
✦ Re-run stock screener — Claude's knowledge
cuts off in August, making September the
freshest possible annual data window
✦ Redirect DGRW dividends to laggards
✦ Confirm reserve is at target 20%
✦ Review deployment trigger thresholds
March + June
Quarterly Bands
✦ Check AVUV and AVDV only
✦ Both can breach ±3pp in one quarter
✦ Check FNDF for currency-driven drift
✦ No action needed unless breach found
✦ 10 minutes max — look, then close
Monthly
Contributions
✦ Route new money to most underweight
✦ Use the $ Calculator tab for amounts
✦ If reserve is rebuilding: 30% → SGOV
✦ Otherwise: 100% → most underweight ETF
✦ Stocks: build any below floor first
Always On
Trigger Watch
✦ S&P drops −10%: fire Level 1
✦ S&P drops −15%: fire Level 2
✦ S&P drops −25%: fire Level 3
✦ S&P drops −35%: fire Level 4
✦ S&P drops −40%+: fire Level 5, all in
Contribution Routing — Decision Tree
New contribution arrives
Is the reserve below 20% and is S&P within 10% of prior ATH?
YES — Reserve rebuilding
→ 30% to SGOV/VUSXX
→ 70% to most underweight ETF position
NO — Reserve is full or market below ATH
→ 100% to most underweight position
ETF first if any below floor; else closest to floor
Is any stock position below its add-below threshold?
YES
→ Add to the underweight stock first
Then route remainder to underweight ETF
NO — All stocks near target
→ 100% to most underweight ETF
FNDB or AVUV are usually the answer
One rule to remember: New money goes to whatever is furthest below target.
Never redirect contributions based on recent performance or market outlook.
Annual Stock Thesis Checklist — 4 Questions Per Stock
①
Is ROIC still above the exit threshold?
Check the stock's most recent annual report. Compare to the exit ROIC in the Rebalance Rules tab. One bad year is noise. Two consecutive years below threshold = exit signal. Use EBIT ÷ (Net Working Capital + Net Fixed Assets) for consistency.
②
Is the competitive moat intact?
New competitors with credible paths to disruption? Pricing power declining (gross margin compression)? Customer churn accelerating? A temporarily lower ROIC from investment is fine. A permanently compromised moat is not.
③
Has capital allocation changed for the worse?
Did management do a large dilutive acquisition? Shift from buybacks to empire-building? Take on excessive debt? Great businesses are destroyed by bad capital allocation more often than by competition. Check cash flow statement, not just income statement.
④
Is the position at the right weight?
Check actual % vs. add-below / trim-above thresholds. If above ceiling, trim to target. If below floor, add via next contributions. Weight check is mechanical. The first three questions are judgment calls — don't skip them.
The Steady State Rules You'll Want to Break
These will feel wrong in the moment. They are right in the long run.
Don't move contributions to cash when the market feels expensive. Your reserve already handles the deployment strategy. Market timing on top of a market timing system is just noise. Don't add a new ETF because it's interesting. Every addition creates drift, overlap, and another thing to monitor. The 8-ETF structure is complete. Don't sell a stock just because it's dropped 30%. Review the 4 thesis questions. If all four pass, the lower price is an add signal, not a sell signal. Don't rebalance more than once a year unless a band is clearly breached — transaction costs, tax drag, and behavioral noise compound over time.
Four Portfolio Variants by Time Horizon
Same core philosophy. Radically different risk posture, allocation, and stock sleeve depending on how long the money needs to last.
The 10-year playbook in the rest of this dashboard is the base case. These four variants show how the same quality+value framework should be expressed differently at 3, 5, 20, and 50 years. Shorter horizons require capital preservation priority — the reserve is larger and the stock sleeve shrinks or disappears. Longer horizons can accept more volatility and lean harder into small-cap value and individual conviction bets. Tech is capped at 20% blended in all four versions.
3-Year Horizon — Capital Preservation First
You need this money in 3 years. Volatility is not your friend. Not losing is the job.
At 3 years you cannot afford a −40% bear market in year 1 with no recovery runway. The structure shifts sharply toward preservation: large reserve, no small-cap, no individual stocks, deploy only at −25%+ drops. At 30 months begin moving reserve toward 50%.
TOTAL EQUITY
50%
US quality large-cap only
CASH · SGOV/VUSXX
40%
Double the base case
TECH CAP
~15%
Below 20% cap
BLENDED ER
~0.14%
Simplified · lower cost
US Equity
QUAL · Large Cap Quality
25%
iShares MSCI USA Quality
FNDB · Broad Market
15%
Schwab Fundamental US
DGRW · Dividend Growth
10%
WisdomTree Qual. Div.
International Equity
FNDF · Developed Large Cap
10%
Schwab Fundamental Intl
3-Year Allocation
Position
Role
Target %
Floor
Ceiling
ER
Rationale
US Equity — 50%
QUAL
iShares MSCI USA Quality
Core US
25%
20%
30%
0.15%
Largest position — high-quality large caps hold value in short-horizon bear markets better than value/small-cap tilts
Equity🌍 United States📊 Large Cap
FNDB
Schwab Fundamental US Broad
US Broad
15%
11%
19%
0.25%
Broad diversification, value tilt, ~1,700 stocks. No AVUV — small-cap volatility is too high for 3-year horizon
Equity🌍 United States📊 Large + Mid Cap
DGRW
WisdomTree Quality Dividend Growth
Dividend
10%
7%
13%
0.28%
Larger DGRW position at 3yr — quality dividend growers are defensive and provide income during sideways markets
Equity🌍 United States📊 Large Cap
International — 10% · Developed Only
FNDF
Schwab Fundamental Intl Large
Intl Dev
10%
7%
13%
0.25%
Minimal intl. No AVDV (intl small-cap too volatile), no AVES (EM too volatile for 3yr). Developed large-cap only.
Equity🌍 Developed Markets📊 Large Cap
Cash Reserve — 40% · Double the base case
SGOV / VUSXX
T-Bill ETF or Money Market
Reserve
40%
30%
40%
0.09%
40% reserve at 3yr. Deploys only at L3 (−25%) and L4 (−35%). No L1/L2 deployment — those shallow drops don't give enough recovery runway. Reserve also acts as capital preservation.
Cash (SGOV or VUSXX)🌍 US T-Bills / Money Market📊 —
3-Year Special Rules
No individual stocks. No AVUV. Only deploy at −25% or deeper.
Stock sleeve: eliminated. Individual stocks require a 3–5 year minimum horizon to express their thesis. At 3 years, a VEEV or ISRG could be down 40% on a bad quarter with no time to recover. The quality is embedded in QUAL and DGRW instead. Deployment: L3+ only. Don't fire L1 or L2 — a −10% or −15% drop that recovers in 6 months is not worth deploying reserve into when you may need the capital in 18 months. Only deploy at genuine bear market levels (−25%+) where the expected 2-year recovery still fits inside your horizon. At 30 months: begin shifting reserve from 40% toward 50%, reducing equity exposure, in preparation for capital deployment.
5-Year Horizon — Balanced Growth + Protection
Growth matters but you cannot afford to be wiped out early. Moderate risk. Small-cap value re-enters.
At 5 years you can survive one −40% bear and a 2-year recovery — but only once. The structure returns toward the base case: 25% reserve, smaller stock sleeve (3%), AVUV at reduced weight. A bear in year 1 recovers; a bear in year 4 is dangerous.
TOTAL EQUITY
57%
Re-adds small-cap value
CASH · SGOV/VUSXX
25%
+5pp vs base case
TECH CAP
~18%
Under 20% cap
BLENDED ER
~0.19%
Near base case
US Equity
FNDB · Broad Market
22%
Schwab Fundamental US
QUAL · Large Cap Quality
15%
iShares MSCI USA Quality
DGRW · Dividend Growth
9%
WisdomTree Qual. Div.
AVUV · Small Cap Value
8%
Avantis US Small Cap
International Equity
FNDF · Developed Large
10%
Schwab Fundamental Intl
AVDV · Developed Small
5%
Avantis Intl Small Cap
AVES · Emerging Value
3%
Avantis EM Value
Individual Stock Sleeve
Stocks (5) · ASML · V · MSFT · ADBE · VEEV
3%
Highest-conviction moats only · 0.6% each
5-Year Allocation
Position
Role
Target %
Floor
Ceiling
ER
Rationale
US Equity — 57%
FNDB
Schwab Fundamental US Broad
US Core
22%
17%
27%
0.25%
Largest position. Broad fundamental-weighted core provides 5-year diversification without single-stock or factor risk.
Equity🌍 United States📊 Large + Mid Cap
QUAL
iShares MSCI USA Quality
Quality
15%
11%
19%
0.15%
Elevated vs base case (15% vs 5%) — quality factor is the strongest short-to-medium horizon factor, reducing drawdown risk.
Equity🌍 United States📊 Large Cap
AVUV
Avantis US Small Cap Value
SmCap Val
8%
5%
11%
0.25%
Returns at 5yr. Reduced vs base case (8% vs 13%) — small-cap premium requires 5–7+ years to reliably express.
Equity🌍 United States📊 Small Cap
DGRW
WisdomTree Quality Dividend Growth
Dividend
9%
6%
12%
0.28%
Slightly larger than base case — income and quality tilt provides ballast during medium-horizon volatility.
Equity🌍 United States📊 Large Cap
Stocks (5)
ASML · ADBE · V · MSFT · VEEV
Sleeve
3%
1%
5%
—
Reduced to 5 highest-conviction, most durable moats only. 0.6% each. See stock selection rationale below.
Equity🌍 Global📊 Large Cap
International — 18%
FNDF
Schwab Fundamental Intl Large
Intl Dev
11%
8%
14%
0.25%
Core international. Returns at 5yr. Developed markets have shorter recovery cycles than EM.
Equity🌍 Developed Markets📊 Large Cap
AVDV
Avantis Intl Small Cap Value
Intl SmCap
5%
3%
7%
0.36%
Small position — intl small-cap premium requires patience. Reduced vs base case (5% vs 10%).
Equity🌍 Developed Markets📊 Small Cap
AVES
Avantis Emerging Markets Value
EM
2%
0%
4%
0.36%
Minimal EM — too volatile for meaningful 5yr allocation. Token position to avoid complete exclusion.
Equity🌍 Emerging Markets📊 Mid + Large Cap
Cash Reserve — 25%
SGOV / VUSXX
T-Bill ETF or Money Market
Reserve
25%
15%
25%
0.09%
+5pp vs base case. Deploys L1–L4 only (not L5 — don't go all-in at year 3 of a 5-year horizon). Refill to 25% after recovery.
Cash (SGOV or VUSXX)🌍 US T-Bills / Money Market📊 —
5-Year Stock Sleeve — 5 Stocks Only
ASML · ADBE · V · MSFT · VEEV — the 5 with the most durable moats and shortest thesis validation cycle.
Dropped from 10-year sleeve: IDEXX, ISRG, SBGSY, ABB, LIN. These are excellent 10-year holds but their thesis validation cycles are long (ISRG's surgical robotics expansion, LIN's hydrogen buildout, ABB's industrial automation cycle) and some carry elevated valuation risk over 5 years. The 5 retained have either high ROIC combined with reasonable valuation (ADBE ~27×, VEEV ~24×) or structural monopoly characteristics that don't require a long wait for thesis expression (ASML, V, MSFT).
20-Year Horizon — Maximum Factor Expression
Time is your edge. Take more risk, lean harder into factors, hold more international.
At 20 years, short-term volatility is meaningless. Multiple bear cycles will occur and fully recover. Structure shifts toward maximum factor loading: AVUV and AVDV at largest weights, reserve at 15%, stock sleeve expands to 12 stocks with higher-beta conviction picks.
TOTAL EQUITY
57%
Max factor tilt
CASH · SGOV/VUSXX
15%
−5pp vs base case
TECH CAP
~20%
At 20% cap
BLENDED ER
~0.22%
Slightly higher sleeve
US Equity
FNDB · Broad Market
18%
Schwab Fundamental US
AVUV · Small Cap Value
18%
Avantis US Small Cap
QUAL · Large Cap Quality
5%
iShares MSCI USA Quality
DGRW · Dividend Growth
4%
WisdomTree Qual. Div.
International Equity
FNDF · Developed Large
12%
Schwab Fundamental Intl
AVDV · Developed Small
11%
Avantis Intl Small Cap
AVES · Emerging Value
5%
Avantis EM Value
Individual Stock Sleeve
Stocks (12) · Full 10 + NVO + NFLX
12%
Original sleeve + 2 high-beta additions · 1% each
20-Year Allocation
Position
Role
Target %
Floor
Ceiling
ER
Rationale
US Equity — 57%
FNDB
Schwab Fundamental US Broad
US Core
18%
14%
22%
0.25%
Slightly reduced to make room for larger AVUV. Still largest single ETF position.
Equity🌍 United States📊 Large + Mid Cap
AVUV
Avantis US Small Cap Value
SmCap Val
18%
14%
22%
0.25%
Elevated to match FNDB — 20 years is the ideal horizon for the small-cap value premium. Historical excess return: ~3–4% annualized over large-cap blend over 20yr rolling periods.
Equity🌍 United States📊 Small Cap
QUAL
iShares MSCI USA Quality
Quality
5%
3%
7%
0.15%
Reduced role at 20yr — quality factor's strongest advantage is in drawdown dampening, less important when time allows full recovery.
Equity🌍 United States📊 Large Cap
DGRW
WisdomTree Quality Dividend Growth
Dividend
4%
2%
6%
0.28%
Reduced — at 20yr the dividend reinvestment compounds but the income isn't needed. Small quality-growth anchor.
Equity🌍 United States📊 Large Cap
Stocks (12)
Full 10 + 2 additions
Sleeve
12%
8%
16%
—
Expanded to 12 stocks at ~1% each. Add 2 higher-beta conviction picks (see below). 20yr horizon absorbs single-stock risk.
Equity🌍 Global📊 Large Cap
International — 28%
FNDF
Schwab Fundamental Intl Large
Intl Dev
12%
9%
15%
0.25%
Developed markets core. Maintains allocation — 20yr captures full international reversion cycles.
Equity🌍 Developed Markets📊 Large Cap
AVDV
Avantis Intl Small Cap Value
Intl SmCap
11%
8%
14%
0.36%
Elevated vs base case. International small-cap value has historically had the largest factor premium globally over 15–20yr horizons.
Equity🌍 Developed Markets📊 Small Cap
AVES
Avantis Emerging Markets Value
EM
5%
3%
7%
0.36%
Modest EM. 20yr is adequate for EM value premium to express despite cycles. Still capped — EM governance risk is real.
Equity🌍 Emerging Markets📊 Mid + Large Cap
Cash Reserve — 15%
SGOV / VUSXX
T-Bill ETF or Money Market
Reserve
15%
5%
15%
0.09%
Reduced to 15% — at 20yr the drag cost is more meaningful and you have more cycles to deploy into. Full 5-trigger system still active.
Cash (SGOV or VUSXX)🌍 US T-Bills / Money Market📊 —
NVO (Novo Nordisk): GLP-1 obesity and diabetes platform — multi-decade secular growth with a 20-year patent and supply moat. ROIC ~65%. Expensive (~30×) but the addressable market is so large and the moat so deep that 20 years is the right horizon. NFLX: Content platform with 260M+ subscribers, growing ad tier, and global penetration still early in many markets. ROIC improving rapidly (~25%). At 20yr the streaming consolidation thesis has time to fully play out. Both would be too volatile for 5-year inclusion but are appropriate here.
50-Year Horizon — Generational Compounding
Volatility is irrelevant. Permanent capital loss is the only risk that matters.
At 50 years you are investing for heirs or decades ahead. The structure optimizes entirely for long-run compounding: maximum small-cap value, maximum international, minimal reserve, expanded stock sleeve with highest-growth structural compounders. A −50% drawdown is noise at this horizon.
TOTAL EQUITY
65%
Max growth posture
CASH · SGOV/VUSXX
5%
Opportunistic only
TECH CAP
~20%
At 20% cap
BLENDED ER
~0.23%
Slightly higher sleeve
US Equity
AVUV · Small Cap Value
22%
Avantis US Small Cap — largest position
FNDB · Broad Market
15%
Schwab Fundamental US
QUAL · Large Cap Quality
8%
iShares MSCI USA Quality
DGRW · Dividend Growth
5%
WisdomTree Qual. Div.
International Equity
AVDV · Developed Small
14%
Avantis Intl Small Cap
FNDF · Developed Large
10%
Schwab Fundamental Intl
AVES · Emerging Value
6%
Avantis EM Value
Individual Stock Sleeve
Stocks (15) · Full 10 + 5 structural compounders
15%
1% each · 50yr secular tailwind picks
50-Year Allocation
Position
Role
Target %
Floor
Ceiling
ER
Rationale
US Equity — 65%
AVUV
Avantis US Small Cap Value
SmCap Val
22%
17%
27%
0.25%
Largest single position at 50yr. The small-cap value premium compounds most powerfully over multi-decade horizons. Historical data: ~$1 in US small-cap value became ~$1,800 over 50yr vs ~$400 for large-cap blend (Fama-French, 1970–2020).
Equity🌍 United States📊 Small Cap
FNDB
Schwab Fundamental US Broad
US Core
15%
11%
19%
0.25%
Broad diversification anchor. Reduced vs base case — at 50yr you want factor concentration, not breadth for breadth's sake.
Equity🌍 United States📊 Large + Mid Cap
Stocks (15)
Original 10 + 5 additions
Sleeve
15%
10%
20%
—
Expanded to 15 stocks at ~1% each. Add 5 structural compounder picks with 50-year secular tailwinds. See below.
Equity🌍 Global📊 Large Cap
QUAL
iShares MSCI USA Quality
Quality
8%
5%
11%
0.15%
Maintained as quality anchor. At 50yr the quality factor compounds — low-leverage, high-ROE businesses survive and compound through every regime change.
Equity🌍 United States📊 Large Cap
DGRW
WisdomTree Quality Dividend Growth
Dividend
5%
3%
7%
0.28%
Dividend reinvestment compounds powerfully over 50 years. A 1.8% yield reinvested for 50 years at 9% growth is substantial.
Equity🌍 United States📊 Large Cap
International — 30%
AVDV
Avantis Intl Small Cap Value
Intl SmCap
14%
10%
18%
0.36%
Largest intl position. International small-cap value is historically the single best-performing factor globally over 30–50yr periods.
Equity🌍 Developed Markets📊 Small Cap
FNDF
Schwab Fundamental Intl Large
Intl Dev
10%
7%
13%
0.25%
Developed large-cap intl core. 50yr captures full global economic cycles — diversification across currencies and regimes is critical.
Equity🌍 Developed Markets📊 Large Cap
AVES
Avantis Emerging Markets Value
EM
6%
3%
9%
0.36%
Full EM allocation at 50yr. Over 50 years, today's EM becomes tomorrow's developed market (South Korea, Taiwan precedent). Long enough horizon for EM governance improvements to compound.
Equity🌍 Emerging Markets📊 Mid + Large Cap
Cash Reserve — 5% · Opportunistic Only
SGOV / VUSXX
T-Bill ETF or Money Market
Reserve
5%
0%
10%
0.09%
Minimal reserve. At 50yr, every dollar in cash costs you decades of compounding. Deploy at L4 (−35%) and L5 (−40%+) only. After deployment, do not rebuild — just stay fully invested.
Cash (SGOV or VUSXX)🌍 US T-Bills / Money Market📊 —
Original 10 + 5 additions chosen for 50-year secular tailwinds.
NVO (Novo Nordisk): GLP-1 platform, ROIC ~65%, multi-decade obesity/metabolic disease wave. NFLX (Netflix): Content platform with 260M+ subs, ad tier scaling, global white space. MA (Mastercard): Second payment network toll road alongside V — together they own global digital payments infrastructure for the next 50 years. SPOT (Spotify): Audio streaming with podcast/audiobook expansion — two-sided platform with growing creator economics moat, ROIC turning positive. High-risk pick warranting only 0.8% allocation. TSM (TSMC ADR): Semiconductor foundry with no credible rival at leading-edge nodes — the physical infrastructure of AI, EVs, and every digital product for the next 50 years. ROIC ~25%. Geopolitical risk is real but 50yr horizon absorbs it. Cap at 1% given concentration risk.
50-Year Warning
Technology changes everything. Build in a mandatory 10-year portfolio review.
At 50 years, the ETF structure (AVUV, FNDB, AVDV) may not exist in its current form — but the factors they express (small-cap value, quality, international diversification) will always be accessible in some vehicle. Every 10 years, review the ETF lineup for survivorship and factor purity. The individual stock sleeve requires annual reviews as always — at 50 years, many of today's sleeve holdings may have been acquired, disrupted, or transformed beyond recognition. Exit rules apply unchanged: ROIC below threshold for 2+ years or moat broken = replace.
Side-by-Side Comparison — All Four Horizons
Dimension
3 Year
5 Year
10 Year (Base)
20 Year
50 Year
US Equity %
50%
57%
50%
57%
65%
International %
10%
18%
30%
28%
30%
Cash Reserve %
40%
25%
20%
15%
5%
AVUV weight
0%
8%
13%
18%
22%
AVDV weight
0%
5%
10%
11%
14%
AVES weight
0%
2%
7%
5%
6%
Stock sleeve
0 stocks
5 stocks · 3%
10 stocks · 7%
12 stocks · 12%
15 stocks · 15%
Deploy triggers
L3, L4 only
L1–L4
L1–L5
L1–L5
L4, L5 only
Blended ER
~0.14%
~0.19%
~0.21%
~0.22%
~0.23%
Primary risk
Bear market timing
Sequence of returns
Execution discipline
Behavioral drift
Factor/vehicle obsolescence
Tech % (blended)
~15%
~18%
~20%
~20%
~20%
Living Off Your Portfolio
The transition from accumulation to distribution is the most dangerous phase of investing. Getting this wrong can mean running out of money.
The core tension: withdraw too much and you deplete your principal. Withdraw too little and you lived unnecessarily lean. The research is surprisingly clear on what works — and it runs counter to what feels intuitive. This tab covers the four methods of generating income, what the historical data says about safe withdrawal rates, and how to structure a portfolio that pays you without eating itself.
The Withdrawal Rate Question — What Does History Say?
Annual Withdrawal Rate vs. Portfolio Survival
30-year horizon · historical data 1926–2024
Withdrawal Rate
Historical Success
Real Purchasing Power
Verdict
6%+
~50–60%
Deteriorates rapidly
Depletes most portfolios within 20–25 years. Only safe in very short retirements or with guaranteed income supplements (pension, SS).
5%
~75–80%
Declines in bad decades
Risky over 30 years. Works in favorable markets (high returns, low inflation). Fails in scenarios like 1966–1982 (high inflation + stagnant markets).
4% (The Rule)
~95%
Roughly maintained
The Bengen "4% Rule" (1994) — studied every 30-year rolling period since 1926. A 60/40 portfolio survived 95% of periods at 4%. Most ended with more than the starting balance. The canonical baseline.
3.5%
~98%
Maintained + growing
Survives virtually all historical periods. Portfolio typically grows in real terms. The recommended floor for a 30–40 year retirement at current valuations.
3%
>99%
Grows in real terms
Near-certain survival over 40+ years. Portfolio compounds even while distributing. The target for early retirees (FIRE) and 40+ year horizons. Portfolio often doubles in real terms.
2% or less
100%
Grows substantially
Perpetual portfolio — principal grows faster than withdrawals in nearly every scenario. Appropriate for generational wealth transfer or extreme longevity planning.
The 4% Rule Caveat — Current Valuations Matter
The 4% rule was calibrated on historical average valuations. Starting a retirement at peak valuations reduces safe rates to ~3–3.5%.
The Shiller CAPE (cyclically adjusted P/E) is a strong predictor of forward 10-year returns. When the CAPE is above 30 (as it has been since ~2018), expected 10-year real returns drop to ~4–6% vs. the historical ~7%. This compresses your margin of safety. Starting a 30-year retirement today with a 4% withdrawal when CAPE is 35 is riskier than it was in 1994. The practical answer: use 3.5% as your baseline planning rate, keep the first 2–3 years of spending in cash (SGOV/VUSXX), and use the dynamic guardrails approach described below.
Inflation — The Silent Killer of Fixed Withdrawals
The Inflation Problem
Historic US inflation averages ~3% per year. At 3% inflation, purchasing power halves in 24 years. A $5,000/mo withdrawal in 2025 needs to become $9,040/mo by 2049 to buy the same goods. If your portfolio doesn't grow with inflation, you silently get poorer every year.
Key periods:
1966–1982: Inflation averaged 6.5%. Most portfolios failed.
2021–2023: 6–9% spike. Bonds cratered simultaneously.
2024–present: ~3.5% returning to norm.
Inflation-Adjusted Withdrawal Math
The 4% rule assumes you increase withdrawals by inflation each year. Start at $40k/yr on a $1M portfolio, add 3% each year: year 10 you withdraw $52k, year 20 you withdraw $70k, year 30 you withdraw $94k.
To keep pace with inflation, your portfolio must:
✦ Earn ≥ (withdrawal rate + inflation rate) in nominal terms
✦ On a 3.5% withdrawal + 3% inflation = portfolio needs ~6.5% nominal return
✦ Historical equity returns: ~10% nominal · ~7% real
✦ At 80% equity, expected nominal: ~8–9% → comfortable margin
Withdrawal Rate Calculator
Portfolio Value ($)
Annual Withdrawal Rate: 3.5%
1%4% rule8%
Annual Withdrawal
$35,000
Monthly Withdrawal
$2,917
In 20yrs (3% inflation)
$63,214
needed annually to keep pace
Sustainability Rating
✓ Sustainable
~98% historical success
To generate this income at 3.5% (recommended safe rate): need
Four Ways to Generate Income — Ranked by Portfolio Impact
What it is: The interest your 20% cash reserve (SGOV or VUSXX) earns at the current Fed rate. At 5%, a $200k reserve earns $10,000/yr without touching principal. Best for: Covering 1–2 months of living expenses passively. Automatic income with zero portfolio disruption. The problem: Rate follows the Fed. When rates drop to 2%, your $200k reserve earns only $4,000/yr — not enough to live on. Never plan your retirement around cash interest alone. In the context of this portfolio: At 20% reserve and current rates, cash interest covers roughly 0.8–1.1% of portfolio value per year. Use it as your first income layer — spend it before selling equity.
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Dividends
Dividend Income — DGRW, FNDB, Individual Stocks
~1.5–2.5% blended yieldQualified tax rateGrows with earnings
What it is: Cash distributions paid by companies in your ETFs and individual stocks. DGRW yields ~1.8–2.1%, FNDB ~2%, individual sleeve ~1–1.5% blended. The key feature: dividend growth. DGRW's underlying companies grow dividends ~8–12%/yr — meaning your income grows faster than inflation without selling a share. Best for: The core steady income layer of a retirement portfolio. Qualified dividends are taxed at 0/15/20% — far lower than ordinary income rates. The problem: Pure dividend investing requires a very large portfolio or accepting a low withdrawal rate. At 2% blended yield, a $1M portfolio generates $20k/yr — only works with other income sources. High-yield trap: Do NOT chase yield. A 5% yielding ETF often has anemic growth, a shrinking business, or will cut its dividend. DGRW at 2% with 10% annual dividend growth beats a 5% fixed-yield fund within 8 years and you haven't sacrificed portfolio growth.
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Selling
Targeted Selling — The Most Efficient Method
Tax-controlledFlexible amountServes as rebalancing
What it is: Selling a small percentage of your portfolio each year to generate income. At 3.5%, you sell 3.5% of the portfolio's current value — this automatically adjusts to portfolio performance (sell less in down years, more in up years). Why it's most efficient: You only pay capital gains on the gain portion, not the entire proceeds. If you paid $50k for shares now worth $100k, you only owe tax on $50k. Dividends force tax on the full distribution amount. What to sell first (the pecking order):
① Sell overweight positions first — this is free rebalancing
② Sell positions with losses first (harvest tax losses)
③ Sell in tax-deferred accounts when possible (no current tax)
④ In taxable accounts, always sell positions held 12+ months (long-term rate)
⑤ Never sell AVUV or growth assets in a downturn — they recover fastest Systematic selling rule: Once a year, sell the amount needed for next 12 months, park in SGOV/VUSXX, draw down monthly. Never sell during panic.
④
Buckets
The Bucket Strategy — Combining All Three
3-layer systemBehavioral anchorBear market proof
The bucket approach resolves the emotional problem of watching your portfolio fall while you're forced to sell. Three buckets:
Bucket 1 — Cash (1–2 years of expenses): SGOV/VUSXX. Never touch the equity portfolio until this is replenished. Earn interest, use it as monthly income. When markets fall, you live from this bucket — you never have to sell at the bottom.
Bucket 2 — Near-term growth (3–7 years of expenses): DGRW + QUAL + bond ladders if desired. Dividends and modest growth. Replenishes Bucket 1 annually in good years.
Bucket 3 — Long-term growth (everything else): AVUV, FNDB, AVDV, AVES, individual stocks. This is your compounding engine. It grows while Buckets 1 and 2 fund your life. You only touch this every 5–7 years, ideally during strong market periods.
Recommended Income Portfolio Structure
The Income-Optimized Version of This Portfolio
Same core holdings — different emphasis. Boost income layer without sacrificing compounding.
You do not need a completely different portfolio to live off your investments. The existing structure handles it well with two modifications: increase DGRW from 5% to 10–12% (larger dividend income layer), and keep Bucket 1 (2 years expenses) in SGOV/VUSXX regardless of the reserve deployment rules. The equity compounding engine (AVUV, FNDB, AVDV) stays unchanged. The stock sleeve continues to generate modest dividends. You live off: cash interest + dividends + annual targeted selling of ~1–1.5%. Total withdrawal covered without touching growth assets in most years.
Income Layer — What Each Holding Generates
On a $1M portfolio · approximate 2024 yields
Holding
Weight
~Yield
Annual Income
Notes
SGOV / VUSXX
Cash Reserve
20%
4.5–5.3%
$9,000–$10,600
State-tax-exempt. Use as first income layer. Rate follows Fed funds rate.
DGRW
Quality Dividend Growth
5%
~1.9%
~$950
Grows 8–12%/yr. In 10 years this same 5% generates nearly $2,000/yr at current growth rates.
FNDB
US Fundamental Core
20%
~2.0%
~$4,000
Fundamental weighting skews toward dividend payers. Steady yield.
FNDF / AVDV
International ETFs
23%
~2.5–3.5%
~$6,325
International value ETFs typically yield more than US. Foreign tax withheld — reclaim via FTC in taxable.
AVUV
US Small Cap Value
13%
~1.2%
~$1,560
Low yield — this is your compounding engine. Do not optimize for yield here.
QUAL + AVES
Quality + EM Value
12%
~1.5–2.0%
~$2,025
Modest income. AVES typically yields more than QUAL.
Stock Sleeve (10)
Individual positions
7%
~0.8–1.2%
~$700
V and MSFT are strongest dividend contributors in sleeve. ADBE and VEEV pay nothing.
Total Passive Income (cash + dividends)
~$24,560
~2.5% of $1M portfolio from cash + dividends alone. Add ~1% targeted selling = 3.5% total withdrawal.
Dynamic Guardrails — Adjusting in Bad Years
Green Zone
Portfolio Up
+10% or more
Take the full planned withdrawal and consider a one-time "splurge" up to 10% above baseline. Replenish Bucket 1 to full 2-year level. This is the time to sell for income — the portfolio can absorb it easily. Also consider Roth conversions while staying under the next tax bracket.
Yellow Zone
Portfolio Flat
±10%
Take the inflation-adjusted baseline withdrawal. No extras. Live on cash interest + dividends. Delay any targeted selling unless Bucket 1 drops below 1 year of expenses. No portfolio changes needed — this is the normal operating range.
Red Zone
Bear Market
−15% or worse
Cut discretionary spending 10–20%. Live on Bucket 1 cash only — do not sell equity. This is exactly what the reserve was built for. A bear market that lasts 18 months is survivable with 2 years of cash. When the market recovers, replenish Bucket 1 from equity sales before resuming full withdrawals. Never sell AVUV or growth ETFs during a bear — they recover fastest and the capital gains from recovery are your inflation protection.
Sequence of Returns Risk — The Most Dangerous Thing Nobody Talks About
Two identical 30-year average returns can produce completely opposite outcomes depending on when the bad years happen.
If your portfolio earns −30%, −15%, +12%/yr in years 1–3 while you're withdrawing, you may never recover — even if the average return over 30 years is 8%. Compare: a retiree who starts in 1999 (dot-com bust immediately) vs. 2009 (bull market immediately) — same 30-year average, completely different outcomes. The solution is the bucket strategy + the guardrails: never sell equity in a down year. The 20% cash reserve in this portfolio is your sequence-of-returns shield. It gives you 4–5 years of buffer before you ever need to touch growth assets during a crash.
Income Decision Hierarchy — What to Spend First
Every month, spend in this order:
1
Cash interest (SGOV/VUSXX) — spend this first. It's income that appears automatically without selling anything. At current rates, covers ~1% of portfolio per year.
2
Dividends — collect quarterly dividends from DGRW, FNDB, FNDF, individual stocks. Redirect to your checking account rather than reinvesting once you're in distribution mode. Covers ~1.5% of portfolio per year.
3
Annual targeted sale — once per year (not monthly), sell overweight positions to top up Bucket 1. Do this in January after reviewing the prior year. Sell in tax-deferred accounts first, then taxable. Never sell in Q4 unless absolutely necessary (wait for next year's tax bracket).
4
RMDs from tax-deferred accounts — once you hit age 73 (current law), Required Minimum Distributions force withdrawals from Traditional IRA/401k. Coordinate with #3 to avoid pushing yourself into a higher bracket. Consider Roth conversions in low-income years before 73 to reduce future RMDs.
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