Sheltered Sam 30/70 description

Mar 18, 2025 | 401Ks

Overview of the William Bernstein Sheltered Sam 30/70 Allocation

1. Background and Philosophy

The William Bernstein Sheltered Sam 30/70 Allocation is a lazy portfolio designed by Dr. William Bernstein, a renowned neurologist-turned-financial theorist and author of books like The Four Pillars of Investing. Bernstein advocates for low-cost, passive investing with a focus on diversification and risk management. This portfolio is tailored for conservative investors, particularly those in or near retirement, as it emphasizes income generation and capital preservation with a 30% equity / 70% fixed-income split.

2. Asset Allocation Analysis

The portfolio is structured as follows:

  • Equities (30%):
    • U.S. Large-Cap Value (7.5%): VTV (Vanguard Value ETF)
    • U.S. Large-Cap Blend (6%): VV (Vanguard Large-Cap ETF)
    • U.S. Small-Cap Value (4.5%): IJS (iShares S&P Small-Cap 600 Value ETF)
    • Real Estate (3%): VNQ (Vanguard Real Estate ETF)
    • International Developed Markets (2.1%): EFV (iShares MSCI EAFE Value ETF)
    • Emerging Markets (1.5%): EEM (iShares MSCI Emerging Markets ETF)
    • U.S. Small-Cap Blend (1.5%): IJR (iShares Core S&P Small-Cap ETF)
    • Europe (1.5%): VGK (Vanguard FTSE Europe ETF)
    • Asia-Pacific (1.5%): VPL (Vanguard FTSE Pacific ETF)
  • Fixed Income (70%):
    • Short-Term Treasuries (42%): SHY (iShares 1-3 Year Treasury Bond ETF)
    • Inflation-Protected Bonds (28%): TIP (iShares TIPS Bond ETF)
  • Commodities (0.9%): GLTR (Aberdeen Standard Physical Precious Metals Basket ETF)

Key Aspects:

  • Diversification: The portfolio spans U.S. and international equities, real estate, and bonds, reducing concentration risk.
  • Risk Level: The 70% fixed-income allocation makes it suitable for low-risk tolerance investors.
  • Pros:
    • Emphasizes capital preservation with a heavy bond allocation.
    • Includes inflation protection via TIP.
    • Low-cost ETFs minimize expenses.
  • Cons:
    • Lower growth potential due to limited equity exposure.
    • Commodities (GLTR) may add volatility without significant returns.

3. Practical Application in Retirement Accounts

For 401(k) Accounts:

  • Step 1: Identify equivalent funds in your 401(k) plan. For example:
    • Replace VTV with a U.S. large-cap value fund.
    • Replace SHY with a short-term bond fund.
  • Step 2: If a specific ETF (e.g., IJS) is unavailable, use a broader small-cap or value fund.
  • Step 3: For commodities (GLTR), which are rarely available in 401(k)s, reallocate to stocks or bonds.

For IRA Accounts:

Investors can directly purchase the ETFs listed in the portfolio, as IRAs offer greater flexibility. Rebalance annually to maintain the target allocation.