M1 Finance provides Expert Pies that are pre-built portfolios available for you to invest in if you prefer not to choose your own investments. They are comprised of low-cost Vanguard ETF’s. This is ideal for the investor who wants a lazy portfolio to be completely hands-off. M1’s category of “General Investing” Expert Pies allows you to select a portfolio based on your personal risk tolerance. This is all great. The not-so-great is the fact that these portfolios have some wonky assets and allocations.
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M1 maintains that these portfolios are mean-variance optimized (think Modern Portfolio Theory and Harry Markowitz). This is unnecessary and likely just overfitting in my opinion, and makes them complicated and uneven. This specific pie isn’t so bad because it contains basically no bonds, which is where the weirdness usually lies, but it still:
- Puts 1% in an international total bond fund, which doesn’t make much sense.
- Underweights Emerging Markets, which have paid a significant risk premium historically.
- Uses small- and mid-cap blend funds rather than small- and mid-cap value where we’d expect greater returns and a convenient diversification benefit.
At the time of writing, M1’s Ultra Aggressive Portfolio pie looks like this:
- 34% VEA – Developed Markets
- 29% VOO – S&P 500
- 13% VB – Small-Cap Blend
- 9% VO – Mid-Cap Blend
- 7% VWO – Emerging Markets
- 7% VNQ – U.S. REITs
- 1% BNDX – Total International Bond Market
In improving this portfolio, we’re basically just going to fix the things I mentioned above:
- Ditch the 1% bonds that aren’t doing anything.
- Use a 1:1 ratio of Developed to Emerging Markets.
- Purposefully target small- and mid-cap value.
My resulting improved Ultra Aggressive Portfolio looks like this:
- 25% VOO – S&P 500
- 25% VEA – Developed Markets
- 25% VWO – Emerging Markets
- 10% IVOV – US Mid-cap Value
- 10% VIOV – US Small-cap Value
- 5% VNQ – US REITs
You can add this pie to your portfolio using this link.
What do you think of my attempt to improve M1’s Ultra Aggressive Portfolio? Let me know in the comments.
Disclosure: I am long VOO and VWO 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.
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