Lifestyle Upgrades

For a while, I hardly thought that this merited a blog entry, but as time goes on, I continue to derive great pleasure from the fact that I’ve been able to eliminate the feeling of having dry skin and the annoying occurrence of static shocking me seemingly every time I touch something during the winter months.  By investing a total of $60 into two products, my experience has improved, and that’s what this blog is all about.

1) Cool Mist Humidifier — $20 at Home Depot.  Running the furnace to keep the place warm has a drying effect on the air in the home.  This is easily counteracted with a humidifier, and I was surprised just inexpensive they can be.  There are certainly more expensive options, but for me, this little 2 gallon number placed in my bedroom does the trick.

2) Chlorine filtering shower head — $39 at Home Depot (requires changing the filter every six months at a cost of $10).  Many people are aware of the benefits of filtering chlorine and other nasty things from their drinking water, but they may neglect the fact that much of the chlorine that our bodies absorb is the result of our daily showers.  Installing a new showerhead is pretty simple, and the positive benefits can be felt almost immediately.

By the way, I’m not a Home Depot shill.  These just happen to be the products that I purchased, and by no means are a specific product endorsement.

Nowadays, market cap weighted index funds and ETFs (Exchange Traded Funds–these trade just like a stock) are widely available at a very low cost.  While it is always fashionable to try to devise ways to beat the market averages, investors’ collective track record for doing so is quite poor.  So even if these index funds don’t represent some sort of mythical ideal, they surely do allow us an easy, inexpensive way to build a global, diversified equity portfolio. 

If market cap indexing is a good strategy domestically, it would follow that it should be a good investment internationally as well.  Interestingly, I’ve seen a few global indexes such as the one offered by Russell, but I have yet to see a single mutual fund or ETF that provides a market cap weighted portfolio of the entire world.  The products that I see are usually more along the lines of single country funds and “all world except for country X” funds.  That still makes it pretty easy to build the portfolio.  All we need are two funds, and an idea of what percentage of our money to put into each one.

 Let’s start with the funds.  While there are certainly other options, I will use Vanguard ETFs as an illustration, because they are generally recognized as low cost index fund pioneers.  We can build the portfolio with Vanguard’s Total Stock Market ETF (ticker VTI) to cover US Equities and the Vanguard FTSE All-World ex-US ETF (ticker VEU) to cover all other countries.  With just two instruments, we get low cost exposure to more than 95% of the global investable universe. 

Since we’d like to be market cap weighted, all that remains is discovering the USA’s percentage of world market cap…(insert Jeopardy theme music)…okay, this was surprisingly difficult to track down, but the World Federation of Exchanges does publish this data on a monthly basis.  Using their monthly domestic market cap figures, I have the US share of global market cap at roughly 40% as of this writing.

So that’s it!  40% goes into VTI and 60% goes into VEU.  We can check the World Federation of Exchanges data on a yearly basis to ensure that our portfolio is still representative of world market cap.  Except for the real world nuisances of adding additional capital and dividend reinvestment, the beauty of this plan is that it never needs to be rebalanced.  Remember, we are not setting some arbitrary division like 50% US and 50% rest of world.  We are simply investing in the entire world by market cap weight.  Whether the US percentage of world market cap shrinks or grows in the future, our portfolio will automatically reflect it.

  Keep in mind that this was just one example, and it’s provided for illustration only…your mileage may vary…blah blah blah…etc….I am not an investment advisor.

Now as soon as someone gives us a good All-World in One index fund option, this plan will get even simpler…100% in one fund…set it and forget it!