The Krypto Fund is my name for our core investments: these are our long-term, mostly retirement oriented investments. We don't plan tapping these until retirement. These exclude speculation & trading accounts, "Alpha" accounts, short-term savings in banks and similar funds. I'm going to describe the basic style here & will write a lot more over time about variations, taxes, withdrawal issues, why I do what I do, etc., but I think short/medium posts work best. For 2006, the Krypto Fund was up 17.1%; year-to-date it's up 2.8% - pretty good compared to the averages & hedge fund averages.
Krypto Fund contains almost all index funds in different asset classes: the allocations NOW are 30% US stocks, 20% foreign stocks, 20% real estate funds, 10% bonds, 10% inflation-protected bonds, 10% gold & silver. I use a spreadsheet to compute the asset class %'s weekly based on Friday's prices. The US stock funds are Vanguard Total Market Fund, the corresponding exchange traded fund (ticker VTI), or the CREF Stock Account. [Mrs. Bunkerman is a scientist, so her retirement savings from work go to TIAA-CREF funds. Their "Stock Account" has some foreign stocks, so I reallocate these out in the spreadsheet based on annual percentage components]. The foreign stocks are Vanguard Pacific Index, European Index and Emerging Markets Index Funds (& corresponding ETFs) - I allocate 1/3 of the total foreign stocks component to each, hence these are really 6.66% of total Krypto Fund each. The real estate asset class is the Vanguard Real Estate Index Fund and the TIAA-CREF Real Estate Fund. The bonds are the Vanguard Total Bond Market Index Fund and the TIAA traditional fixed income account. The inflation-protected bonds are Vanguard or TIAA-CREF inflation-protected bond funds, as appropriate. Gold & silver are mostly American Eagle gold coins and silver bullion bars. One can use the ETFs for gold & silver (tickers are GLD and SLV, respectively).
I use the corresponding Vanguard Admiral funds if I can as their fees are slightly lower, but with various old accounts spread over two of us over the years, that's not always possible. The Vanguard Real Estate Index Fund invests in REIT stocks, by the way, while the TIAA-CREF Real Estate Fund invests in actual buildings, etc., so they perform somewhat differently.
The spreadsheet computes the % size of each asset class each week. IF an asset class is more than 5% off its target percentage, I look to reallocate some funds to top it off if it's low or take some out if it's too large. For example, if the US stocks are over 31.5% of the total Krypto Fund, that's 5% of the target 30%. So I look to see what's low & move the excess 1.5% to other asset classes. One has to consider fund restrictions for frequent moves, but since we have multiple accounts, I have always been able to figure out a way to reallocate.
See David Swenson's great book, "Unconventional Success" for a description of why this type of personal investing works well. I have done long-term investing along this strategy for over 20 years. When I read his book, I was happy to see he agreed with me (joke haha) and I learned about the value of the inflation-protected bonds. So I added that asset class. I also adjusted my rebalancing trigger to 5% from 10%, as I realized from his book I had been missing many good re-balancing opportunities with a 10% trigger. My percentages were pretty close to his, otherwise. Also, I have some gold & silver for many reasons.
I love that name, The Krypto Fund. I like to think my dog, Krypto, pushes the computer key every week to do the reallocation. She accepts dog biscuits as payment. :-)