- Portfolio Overview
- Asset Allocation and ETFs
- Performance
- Calculators
- Rolling Returns
- Drawdowns
Portfolio Overview
1. Background and Philosophy
The Second Grader's Starter Portfolio was created by Paul B. Farrell, a former investment columnist for MarketWatch and author of multiple books on lazy investing. Farrell advocated for simple, low-cost, and hands-off strategies that even a second grader could understand. His philosophy emphasized broad diversification, minimal maintenance, and long-term growth through index funds. This portfolio is designed to be a foundational strategy for beginners or those who prefer a passive approach.
2. Asset Allocation Analysis
The portfolio consists of three ETFs:
- 60% VTI (Vanguard Total Stock Market ETF): Provides exposure to the entire U.S. equity market, including large-, mid-, and small-cap stocks.
- 30% VEU (Vanguard FTSE All-World ex-US ETF): Covers international developed and emerging markets, excluding the U.S.
- 10% BND (Vanguard Total Bond Market ETF): Offers diversified exposure to U.S. investment-grade bonds.
Key Aspects:
- Diversification: The portfolio is well-diversified across U.S. and international equities (90%) and bonds (10%), reducing concentration risk.
- Risk Level: Moderately aggressive due to the 90% equity allocation, but the bond component provides stability.
- Pros: Low-cost, simple to manage, and captures global market returns. The heavy equity focus aligns with long-term growth goals.
- Cons: Limited bond exposure may not suit risk-averse investors. No explicit allocation to alternatives like commodities or REITs.
3. Practical Application in Retirement Accounts
For 401(k) Accounts:
Investors can replicate this portfolio by identifying equivalent funds in their 401(k) plan:
- VTI Alternative: Look for a U.S. total stock market index fund (e.g., Fidelity's FSKAX or Schwab's SWTSX).
- VEU Alternative: Choose a broad international stock fund (e.g., Fidelity's FTIHX or Vanguard's VTIAX).
- BND Alternative: Use a total bond market fund (e.g., Fidelity's FXNAX or Vanguard's VBTLX).
If exact matches aren't available:
- Allocate the VEU portion to a mix of developed and emerging market funds.
- Replace BND with a general bond fund or stable value fund if necessary.
For IRA Accounts:
Investors can directly purchase the ETFs (VTI, VEU, BND) or their mutual fund equivalents. IRAs offer more flexibility, allowing for precise allocation.
Note: Since commodities are rarely available in 401(k)s, investors can allocate that portion to stocks or omit it entirely.
Asset Allocation
| Symbol | Category/Sector | Target Weight |
|---|---|---|
|
BND Vanguard Total Bond Market ETF |
Fixed Income | 10% |
|
VEU Vanguard FTSE All-World ex-US Index Fund |
International Equity | 30% |
|
VTI Vanguard Total Stock Market ETF |
US Equity | 60% |
Historical Performance
The return data shown below all have the same latest date: 04/25/2025.
AR inception is since 04/10/2007.
AR inception is since 04/10/2007.
| Name | YTD Return | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 15Yr AR | 20Yr AR | Inception |
|---|---|---|---|---|---|---|---|---|
| Paul Farrell Second Grader | -1.62% | 9.99% | 8.27% | 12.36% | 8.58% | 9.32% | NA | 7.39% |
| VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES) | -5.72% | 10.78% | 10.28% | 15.64% | 11.99% | 12.63% | 10.12% | 9.74% |
| VSMGX (VANGUARD LIFESTRATEGY MODERATE GROWTH FUND INVESTOR SHARES) | 0.45% | 9.37% | 5.99% | 7.75% | 5.66% | 6.51% | 5.96% | 5.29% |
| Ticker/Portfolio | Last 1 Week | 1 Yr | 3 Yr | 5 Yr | 10 Yr | 15 Yr | 20 Yr | Inception | YTD | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998 | 1997 | 1996 | 1995 | 1994 | 1993 | 1992 | 1991 | 1990 | 1989 | 1988 | 1987 | 1986 | 1985 | 1984 | 1983 | 1982 | 1981 | 1980 | 1979 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Annualized Return (%) | Paul Farrell ...nd Grader | 5.52 | 9.99 | 8.27 | 12.36 | 8.58 | 9.32 | NA | 7.39 | -1.62 | 16.11 | 20.90 | -17.68 | 17.84 | 17.37 | 25.69 | -7.34 | 21.25 | 9.50 | -1.20 | 6.71 | 23.77 | 15.88 | -2.74 | 14.65 | 29.34 | -34.78 | 4.39 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| VFINX (VANGUA...R SHARES) | 7.12 | 10.78 | 10.28 | 15.64 | 11.99 | 12.63 | 10.12 | 9.74 | -5.72 | 24.84 | 26.12 | -18.24 | 28.53 | 18.74 | 31.33 | -4.55 | 21.66 | 11.83 | 1.23 | 13.52 | 32.17 | 15.82 | 1.96 | 14.91 | 26.52 | -37.02 | 5.39 | 15.64 | 4.77 | 10.74 | 28.50 | -22.17 | -12.03 | -9.05 | 21.08 | 28.62 | 33.18 | 22.87 | 37.45 | 1.18 | 10.15 | 8.24 | 32.05 | -3.33 | 28.37 | 14.92 | 3.97 | 9.30 | 22.60 | 3.67 | 17.07 | 19.25 | -8.55 | 27.89 | -2.07 | |
| VSMGX (VANGUA...R SHARES) | 3.69 | 9.37 | 5.99 | 7.75 | 5.66 | 6.51 | 5.96 | 5.29 | 0.45 | 10.28 | 15.51 | -16.01 | 10.08 | 13.59 | 19.30 | -6.28 | 14.86 | 7.09 | -2.21 | 6.38 | 14.73 | 9.78 | 0.12 | 13.14 | 20.35 | -26.49 | 7.21 | 13.30 | 5.68 | 11.76 | 22.40 | -10.34 | -4.78 | 1.27 | 14.09 | 21.59 | 17.90 | 10.77 | 26.58 | 2.04 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | |
| Sharpe Ratio | Paul Farrell ...nd Grader | NA | 0.22 | 0.25 | 0.65 | 0.43 | NA | NA | 0.35 | -0.11 | 0.87 | 1.43 | -0.91 | 1.50 | 0.57 | 2.30 | -0.61 | 3.37 | 0.71 | -0.09 | 0.66 | 2.23 | 1.26 | -0.12 | 0.82 | 1.19 | -0.99 | 0.15 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| VFINX (VANGUA...R SHARES) | NA | 0.23 | 0.32 | 0.74 | 0.56 | NA | NA | 0.44 | -0.70 | 1.44 | 1.69 | -0.81 | 2.17 | 0.53 | 2.40 | -0.34 | 3.16 | 0.89 | 0.08 | 1.19 | 2.90 | 1.25 | 0.08 | 0.82 | 0.97 | -0.92 | 0.15 | 1.24 | 0.25 | 0.88 | 1.63 | -0.90 | -0.68 | -0.59 | 0.98 | 1.24 | 1.62 | 1.63 | 4.33 | -0.18 | 0.91 | 0.58 | 1.92 | -0.53 | 1.73 | 0.60 | 0.00 | 0.31 | 1.49 | -0.24 | 0.80 | 0.65 | -1.27 | 1.19 | -3.84 | |
| VSMGX (VANGUA...R SHARES) | NA | 0.29 | 0.15 | 0.51 | 0.38 | NA | NA | 0.49 | -0.10 | 0.48 | 1.37 | -1.22 | 1.32 | 0.70 | 2.78 | -0.86 | 3.76 | 0.83 | -0.26 | 1.01 | 2.16 | 1.23 | 0.01 | 1.18 | 1.12 | -0.98 | 0.41 | 1.36 | 0.50 | 1.49 | 2.09 | -0.75 | -0.58 | -0.23 | 1.08 | 1.57 | 1.57 | 0.93 | 4.20 | 4.63 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | |
| Standard Deviation(%) | Paul Farrell ...nd Grader | NA | 16.37 | 15.97 | 15.61 | 16.02 | NA | NA | 18.06 | 23.96 | 11.00 | 11.68 | 20.89 | 11.84 | 29.82 | 10.56 | 14.14 | 6.11 | 13.04 | 13.60 | 10.15 | 10.62 | 12.53 | 22.25 | 17.74 | 24.68 | 35.99 | 16.00 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| VFINX (VANGUA...R SHARES) | NA | 19.39 | 18.60 | 17.94 | 18.44 | NA | NA | 18.12 | 28.69 | 12.67 | 13.09 | 24.19 | 13.11 | 34.69 | 12.48 | 17.11 | 6.68 | 13.11 | 15.51 | 11.39 | 11.07 | 12.74 | 23.36 | 18.07 | 27.22 | 40.99 | 16.02 | 10.04 | 10.29 | 11.10 | 17.04 | 25.96 | 21.55 | 22.20 | 18.17 | 20.48 | 18.21 | 11.77 | 7.77 | 9.92 | 8.83 | 9.93 | 14.69 | 16.06 | 13.09 | 17.07 | 33.80 | 16.55 | 11.67 | 12.80 | 13.62 | 18.09 | 14.61 | 16.53 | 23.80 | |
| VSMGX (VANGUA...R SHARES) | NA | 10.43 | 10.86 | 10.39 | 10.40 | NA | NA | 11.50 | 14.60 | 7.69 | 8.26 | 14.34 | 7.62 | 19.08 | 6.43 | 8.81 | 3.80 | 8.31 | 8.51 | 6.28 | 6.80 | 7.99 | 14.68 | 11.10 | 18.01 | 27.95 | 10.37 | 7.43 | 6.96 | 7.25 | 10.38 | 15.37 | 12.42 | 12.30 | 10.07 | 11.65 | 9.10 | 7.74 | 5.41 | 15.57 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | |
| Draw Down(%) | Paul Farrell ...nd Grader | NA | 15.48 | 15.93 | 25.13 | 31.20 | NA | NA | 51.64 | 15.48 | 7.21 | 10.43 | 24.88 | 4.98 | 31.20 | 5.66 | 17.06 | 1.93 | 10.08 | 12.37 | 7.61 | 7.16 | 10.49 | 19.94 | 13.86 | 23.87 | 45.92 | 9.20 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| VFINX (VANGUA...R SHARES) | NA | 18.76 | 18.76 | 24.59 | 33.83 | NA | NA | 55.25 | 18.76 | 8.45 | 9.97 | 24.59 | 5.14 | 33.83 | 6.63 | 19.40 | 2.60 | 10.29 | 12.05 | 7.30 | 5.59 | 9.60 | 18.71 | 15.66 | 27.17 | 47.73 | 9.88 | 7.47 | 7.01 | 7.47 | 13.79 | 33.02 | 29.18 | 16.55 | 11.81 | 19.20 | 10.79 | 7.45 | 2.50 | 8.48 | 4.84 | 5.63 | 5.57 | 19.19 | 7.35 | 7.24 | 33.08 | 11.63 | 7.51 | 10.58 | 7.02 | 13.21 | 15.61 | 16.03 | 2.40 | |
| VSMGX (VANGUA...R SHARES) | NA | 9.62 | 13.24 | 22.29 | 22.43 | NA | NA | 41.18 | 9.62 | 4.17 | 8.15 | 21.74 | 3.53 | 22.43 | 3.12 | 11.47 | 1.14 | 6.20 | 8.34 | 4.70 | 5.67 | 6.27 | 12.90 | 8.64 | 19.61 | 36.81 | 6.11 | 6.13 | 4.74 | 5.89 | 8.91 | 20.06 | 17.93 | 8.77 | 6.26 | 11.99 | 6.02 | 4.75 | 1.82 | 1.89 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | |
| Yield(%) | Paul Farrell ...nd Grader | NA | 2.02 | 2.15 | 2.14 | 2.24 | NA | NA | 0.00 | 0.18 | 2.35 | 2.53 | 1.78 | 2.10 | 1.91 | 2.79 | 2.23 | 2.46 | 2.50 | 2.26 | 2.48 | 2.51 | 2.81 | 2.37 | 2.29 | 2.70 | 1.91 | 1.43 | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
| VFINX (VANGUA...R SHARES) | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | |
| VSMGX (VANGUA...R SHARES) | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA | NA |
Paul Farrell Second Grader Return Calculator
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Rolling Returns
From 04/10/2007 to 04/25/2025, the worst annualized return of 3-year rolling returns for Paul Farrell Second Grader is -7.41%.
From 04/10/2007 to 04/25/2025, the worst annualized return of 5-year rolling returns for Paul Farrell Second Grader is -0.8%.
From 04/10/2007 to 04/25/2025, the worst annualized return of 10-year rolling returns for Paul Farrell Second Grader is 5.43%.
Maximum Drawdown
Paul Farrell Second Grader Maximum Drawdown