Only One Fund? That’s Crazy!

A simple portfolio still works.

A couple of weeks ago I wrote about the recently launched Cambria Trinity ETF (TRTY), saying it was the multi-asset fund I’d build for myself or at least the closest one on the market to what I would build for myself. A couple of days ago, Cambria founder Meb Faber disclosed that he was putting most of his stock market portfolio into the fund. The title of his post implies that he thinks people might be surprised he’s putting so much into one fund.

I have always bought into the idea of making investing as simple as possible. The relative simplicity of your portfolio has to boil down to your interest level and how much time you are able to spend on your investments or want to spend on your investments. I’ve written several posts lately about two or three fund portfolios. While I do not think they are ideal, they absolutely can get the job done provided someone has an adequate savings rate and doesn’t make some sort of catastrophic behavioral mistake. A high savings rate and avoiding mistakes are important for everyone.

If a portfolio of one broad-based stock fund and one broad-based bond fund can get it done, then a portfolio consisting of one multi-asset fund that includes alternatives can also get the job done. Target date funds are designed with that idea in mind, I just think they are so flawed that I would avoid them if at all possible.

One thing that is crucial to understand a portfolio consisting of one or two funds, or even three funds, is that you’re very unlikely to ever “beat the market”. Beating the market is far more about ego than actual financial need. A portfolio consisting of more holdings (a mix of funds and stocks) will have at least a few years that it outperforms along with some years that it lags. The thing that matters is staying on a path toward being able to maintain your lifestyle if you stop working with a portfolio that can sustain over the time that you need it.