Here we’re discussing the Rick Ferri Core 4 Portfolio, looking at its components, historical performance, and the best ETF’s to use for it.
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What Is the Rick Ferri Core 4 Portfolio?
As the name suggests, the Core 4 Portfolio was created by financial adviser and author Rick Ferri in 2007. To be clear, he has created several “Core-4” portfolios. Here we’re talking about the “Classic” one. Even within the “Classic” Core 4 Portfolio, Ferri proposes 4 different risk tolerances: low-risk, conservative, moderate, and aggressive, each with a different asset allocation. For the sake of simplicity in this post, I’ll be using the “Moderate” risk tolerance allocation which is 60/40 stocks/bonds.
Rick Ferri is a retired US Marine Corps officer and fighter pilot and former stockbroker. He is now an investing consultant and author. Ferri believes in “decoupling” advice from portfolio management, and supports low-fee index investing. Read more about him here. You can get the second edition of his most popular book All About Asset Allocation here on Amazon.
The “Moderate” allocation of the Classic Core 4 Portfolio looks like this:
- 36% Total US Stock Market
- 6% US REITs
- 18% Total International Stock Market
- 40% Total US Bond Market
Rick Ferri Core 4 Portfolio – Performance Backtest
Going back to 1996, here’s a comparison of the Core 4, a traditional 60/40, and the S&P 500 through 2021:
Notice how the addition of REITs increased the return of the Core 4 compared to its 60/40 benchmark, thereby allowing it to have higher general and risk-adjusted returns, with slightly lower volatility but also a slightly larger max drawdown. This drawdown was larger because it was from the 2008 Global Financial Crisis.
Also notice how the volatility and drawdowns of the Core 4 and 60/40 are lower than the S&P 500 by about 1/3.
Rick Ferri Core 4 Portfolio ETF Pie for M1 Finance
M1 Finance is a great choice of broker to implement the Rick Ferri Core 4 Portfolio because it makes regular rebalancing seamless and easy with one click, has zero transaction fees, and incorporates dynamic rebalancing for new deposits. I wrote a comprehensive review of M1 Finance here.
Using entirely low-cost Vanguard funds, we can construct the Core 4 Portfolio pie with the following ETF’s:
- VTI – 36%
- VNQ – 6%
- VXUS – 18%
- BND – 40%
You can add the Core 4 Portfolio pie to your portfolio on M1 Finance by clicking this link and then clicking “Add to Portfolio.”
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.
Disclosures: I am long VTI and VXUS in my own portfolio.
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.