Consuelo Mack is a long time fan of Professor Burton Malkiel and Dr. Charles Ellis. In fact, she had both of them on her show several times. So naturally, she was intrigued when Burt and Charley joined the Rebalance team and took a central role leading the firm’s Investment Committee and helping to design and monitor the firm’s retirement portfolios. These two legendary financial thought leaders are very sought after by financial services companies, university endowments, and pension plans.
What is so special about Rebalance? Ms. Mack decided to dedicate a 30-minute episode to how the firm is part of a new generation of investment advisory companies that leverage technology and innovative business models to provide consumers with fundamentally more attractive and lower-cost retirement investing options.
In this segment, Professor Burton Malkiel and Mitch Tuchman explain Rebalance’s model portfolios:
Consuelo Mack: This week on Wealthtrack, putting your retirement portfolio on autopilot. Financial thought leader Burton Malkiel has teamed up with online investment advisory pioneer Mitch Tuchman to offer retirement portfolios of low-cost index funds that automatically rebalance. Why they believe the combination will lead to smooth retirement landings is next on Consuelo Mack Wealthtrack.
Consuelo Mack: How many portfolios are you offering? How do you make the decisions? I know Burt that’s part of your job, is to make the decisions of what goes into the portfolios, but Mitch do you want to tell me about what the model is?
Mitch Tuchman: Sure. Well, there’s basically six model portfolios. They’re bookended by an income portfolio and a growth portfolio and then the four in the middle, and basically what we have done is we have created a growth portfolio of index funds that includes U.S., foreign developed, emerging market, we believe in a small-cap “tilt,” as they say in the business, and some REITs.
Consuelo Mack: Right. So, you’ve got stocks, you’ve got bonds, you’ve got dividends?
Mitch Tuchman: Sure, and then on the income side we have, now this is where Burt and Charley Ellis, who’s also on our Investment Committee, have actually said, you know, certain markets are not efficient.
Burt Malkiel: I’m an index investor. I believe in indexing. I would start off saying buy a total bond market fund, but if you look at what’s in a total bond market fund, it’s about two-thirds either direct Treasury securities or government agency securities, which are in affect government securities and the yield is, in my judgment, quite inadequate. So, what we have done is, we have tried to look at parts of the bond market that are not too risky but give the investor at least some chance of a decent return, and we’ve also used a dividend-paying stock substitution for at least a part of the bond portfolio. So, there are some interesting things that we’ve done. We generally have a little more of a portfolio composition in foreign and emerging markets than other investors because we start off from the view that a lot of these markets are basically cheaper than the U.S. market.
