The Roger Gibson 5 Asset Portfolio is comprised of global stocks, global bonds, REITs, and commodities. Here we’ll take a look at its components, performance, and the best ETF’s to use in its execution.
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Who is Roger Gibson?
As the name suggests, the Roger Gibson 5 Asset Portfolio was created by financial adviser Roger Gibson. He also created the Talmud Portfolio.
In a 1998 paper titled Asset Allocation and the Rewards of Multiple-Asset-Class Investing, Gibson drew from the foundational work of Harry Markowitz, the father of modern portfolio theory, to show how a combination of volatile, uncorrelated assets could produce higher returns and, more importantly, higher risk-adjusted returns, with less volatility than the average of those assets held in isolation.
This of course is the same premise upon which many portfolios like the All Weather Portfolio are built. Markowitz proposed the idea of the efficient frontier for portfolios, along which we can assess expected returns for any given level of volatility, or expected volatility for any given expected return.
What is the Roger Gibson 5 Asset Portfolio?
The 5 Asset Portfolio is globally diversified across stocks and bonds. It is composed as follows:
- 20% U.S. Stock Market
- 20% International Stock Market
- 20% U.S. REITs
- 14% U.S. Bonds
- 6% International Bonds
- 20% Commodities
Roger Gibson 5 Asset Portfolio Performance vs. the S&P 500
With my commodities data only going back to 2007, here’s the 5 Asset Portfolio’s performance vs. an S&P 500 index fund through 2019:
With international stocks and commodities suffering in recent years, the 5 Asset Portfolio has delivered lower general and risk-adjusted returns (Sharpe), with volatility only slightly lower than the S&P 500. I very much question the high allocations to commodities and REITs. I don’t think their diversification benefits warrant an allocation of 40% of the total portfolio. It’s almost diversification for the sake of diversification with unnecessarily equivalent allocations compared to the stocks holdings.
Roger Gibson 5 Asset Portfolio ETF Pie for M1 Finance
M1 Finance is a great choice of broker to implement the Gibson 5 Asset Portfolio because it makes regular rebalancing seamless and easy, has zero transaction fees, and incorporates dynamic rebalancing for new deposits. I wrote a comprehensive review of M1 Finance here.
Using mostly low-cost Vanguard funds, we can construct the Gibson 5 Asset Portfolio pie like this:
- VTI – 20%
- VXUS – 20%
- VNQ – 20%
- BND – 14%
- BNDX – 6%
- PDBC – 20%
You can add the Gibson 5 Asset Portfolio pie to your portfolio on M1 Finance by clicking this link and then clicking “Invest in this pie.”
Don’t want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.
Disclosure: I am long VXUS.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.