Second Grader's Starter Portfolio
Second Grader's Starter Portfolio is a lazy portfolio by Paul Farrell. It is designed as a simple portfolio to follow for beginner investors with small capital and long investment horizon. Farrell gives an example of a second-grader who received a $10,000 gift from his grandmother.
Asset Allocation
| Position | Category/Sector | Target Weight |
|---|---|---|
BND Vanguard Total Bond Market ETF | Total Bond Market | 10% |
VEU Vanguard FTSE All-World ex-US ETF | Foreign Large Cap Equities | 30% |
VTI Vanguard Total Stock Market ETF | Large Cap Growth Equities | 60% |
Performance
Performance Chart
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The earliest data available for this chart is Apr 10, 2007, corresponding to the inception date of BND
Returns By Period
As of May 29, 2025, the Second Grader's Starter Portfolio returned 4.42% Year-To-Date and 9.27% of annualized return in the last 10 years.
| YTD | 1M | 6M | 1Y | 5Y* | 10Y* | |
|---|---|---|---|---|---|---|
^GSPC S&P 500 | 0.12% | 6.51% | -1.84% | 10.98% | 14.10% | 10.82% |
| Second Grader's Starter Portfolio | 4.42% | 5.30% | 2.20% | 11.72% | 12.26% | 9.27% |
| Portfolio components: | ||||||
VTI Vanguard Total Stock Market ETF | 0.14% | 6.70% | -2.37% | 11.92% | 15.18% | 12.12% |
BND Vanguard Total Bond Market ETF | 1.93% | -1.03% | 0.59% | 5.31% | -1.11% | 1.42% |
VEU Vanguard FTSE All-World ex-US ETF | 13.78% | 4.66% | 11.96% | 12.30% | 10.55% | 5.68% |
Monthly Returns
The table below presents the monthly returns of Second Grader's Starter Portfolio, with color gradation from worst to best to easily spot seasonal factors. Returns are adjusted for dividends.
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Total | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | 2.90% | -0.30% | -3.30% | 0.42% | 4.81% | 4.42% | |||||||
| 2024 | 0.15% | 4.01% | 3.06% | -3.60% | 4.20% | 1.76% | 2.13% | 2.20% | 2.12% | -2.05% | 4.08% | -2.78% | 15.93% |
| 2023 | 7.09% | -3.03% | 2.74% | 1.27% | -0.88% | 5.41% | 3.32% | -2.55% | -4.15% | -2.70% | 8.57% | 5.01% | 20.85% |
| 2022 | -4.56% | -2.52% | 1.49% | -7.81% | 0.44% | -7.38% | 6.85% | -3.83% | -8.85% | 5.76% | 7.38% | -4.24% | -17.53% |
| 2021 | -0.17% | 2.36% | 2.60% | 3.88% | 1.23% | 1.44% | 0.74% | 2.16% | -3.79% | 4.83% | -2.14% | 3.34% | 17.39% |
| 2020 | -0.86% | -6.60% | -12.85% | 10.18% | 4.74% | 2.74% | 4.78% | 5.54% | -2.70% | -1.84% | 10.98% | 4.56% | 17.26% |
| 2019 | 7.51% | 2.64% | 1.34% | 3.21% | -5.38% | 6.12% | 0.32% | -1.70% | 1.84% | 2.33% | 2.58% | 2.93% | 25.75% |
| 2018 | 4.72% | -3.97% | -1.25% | 0.36% | 1.10% | -0.18% | 2.86% | 1.42% | 0.19% | -7.02% | 1.71% | -6.75% | -7.30% |
| 2017 | 2.38% | 2.65% | 0.93% | 1.34% | 1.60% | 0.72% | 2.18% | 0.37% | 1.97% | 1.89% | 2.00% | 1.37% | 21.19% |
| 2016 | -4.99% | -0.64% | 6.78% | 1.07% | 0.80% | 0.15% | 3.72% | 0.30% | 0.60% | -1.92% | 1.79% | 1.82% | 9.43% |
| 2015 | -1.40% | 5.04% | -1.07% | 1.76% | 0.40% | -1.96% | 1.02% | -6.00% | -2.83% | 6.77% | -0.07% | -2.05% | -1.05% |
| 2014 | -3.49% | 4.63% | 0.43% | 0.56% | 1.94% | 2.08% | -1.67% | 2.90% | -2.76% | 1.78% | 1.49% | -1.15% | 6.61% |
Expense Ratio
Second Grader's Starter Portfolio has an expense ratio of 0.04%, which is considered low. Below, you can find the expense ratios of the portfolio's funds side by side and easily compare their relative costs.
Risk-Adjusted Performance
Risk-Adjusted Performance Rank
The current rank of Second Grader's Starter Portfolio is 53, indicating average performance compared to other portfolios on our website. Here’s a breakdown of how it compares using common performance measures.
Risk-Adjusted Performance Indicators
This table presents a comparison of risk-adjusted performance metrics for positions. Risk-adjusted metrics are performance indicators that assess an investment's returns in relation to its risk, enabling a more accurate comparison of different investment options.
| Sharpe ratio | Sortino ratio | Omega ratio | Calmar ratio | Martin ratio | |
|---|---|---|---|---|---|
VTI Vanguard Total Stock Market ETF | 0.59 | 1.02 | 1.15 | 0.66 | 2.47 |
BND Vanguard Total Bond Market ETF | 1.01 | 1.34 | 1.16 | 0.39 | 2.34 |
VEU Vanguard FTSE All-World ex-US ETF | 0.73 | 1.18 | 1.16 | 0.95 | 2.98 |
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Dividends
Dividend yield
Second Grader's Starter Portfolio provided a 2.00% dividend yield over the last twelve months.
| TTM | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Portfolio | 2.00% | 2.10% | 2.17% | 2.19% | 1.85% | 1.67% | 2.27% | 2.49% | 2.08% | 2.29% | 2.33% | 2.39% |
| Portfolio components: | ||||||||||||
VTI Vanguard Total Stock Market ETF | 1.30% | 1.27% | 1.44% | 1.67% | 1.21% | 1.42% | 1.78% | 2.04% | 1.71% | 1.92% | 1.98% | 1.76% |
BND Vanguard Total Bond Market ETF | 3.77% | 3.67% | 3.09% | 2.60% | 1.97% | 2.22% | 2.72% | 2.81% | 2.54% | 2.51% | 2.57% | 2.79% |
VEU Vanguard FTSE All-World ex-US ETF | 2.82% | 3.24% | 3.32% | 3.12% | 3.07% | 2.00% | 3.10% | 3.27% | 2.66% | 2.96% | 2.95% | 3.52% |
Drawdowns
Drawdowns Chart
The Drawdowns chart displays portfolio losses from any high point along the way. Drawdowns are calculated considering price movements and all distributions paid, if any.
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Worst Drawdowns
The table below displays the maximum drawdowns of the Second Grader's Starter Portfolio. A maximum drawdown is a measure of risk, indicating the largest reduction in portfolio value due to a series of losing trades.
The maximum drawdown for the Second Grader's Starter Portfolio was 52.66%, occurring on Mar 9, 2009. Recovery took 884 trading sessions.
The current Second Grader's Starter Portfolio drawdown is 0.75%.
Depth | Start | To Bottom | Bottom | To Recover | End | Total |
|---|---|---|---|---|---|---|
| -52.66% | Nov 1, 2007 | 339 | Mar 9, 2009 | 884 | Sep 7, 2012 | 1223 |
| -31.07% | Feb 13, 2020 | 27 | Mar 23, 2020 | 99 | Aug 12, 2020 | 126 |
| -25.11% | Nov 9, 2021 | 235 | Oct 14, 2022 | 322 | Jan 29, 2024 | 557 |
| -16.87% | Jan 29, 2018 | 229 | Dec 24, 2018 | 81 | Apr 23, 2019 | 310 |
| -16.3% | May 22, 2015 | 183 | Feb 11, 2016 | 126 | Aug 11, 2016 | 309 |
Volatility
Volatility Chart
The chart below shows the rolling one-month volatility.
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Diversification
Diversification Metrics
Number of Effective Assets
The portfolio contains 3 assets, with an effective number of assets of 2.17, reflecting the diversification based on asset allocation. This number of effective assets suggests a highly concentrated portfolio, where a few assets dominate the allocation, potentially increasing the portfolio's risk due to lack of diversification.
Asset Correlations Table
| ^GSPC | BND | VEU | VTI | Portfolio | |
|---|---|---|---|---|---|
| ^GSPC | 1.00 | -0.16 | 0.83 | 0.99 | 0.97 |
| BND | -0.16 | 1.00 | -0.11 | -0.15 | -0.11 |
| VEU | 0.83 | -0.11 | 1.00 | 0.84 | 0.93 |
| VTI | 0.99 | -0.15 | 0.84 | 1.00 | 0.98 |
| Portfolio | 0.97 | -0.11 | 0.93 | 0.98 | 1.00 |
AI Insight on Diversification
The portfolio is moderately diversified but leans toward concentration in equity positions. The correlation matrix shows that VTI (a U.S. total stock market ETF) and VEU (an international equity ETF) have a high positive correlation of 0.84, indicating that these two equity positions tend to move in the same direction most of the time. This high correlation between VTI and VEU reduces the diversification benefits within the equity portion of the portfolio.
Conversely, BND (a bond ETF) has low and slightly negative correlations with both VTI (-0.15) and VEU (-0.11), which helps to provide some diversification by offsetting equity risk. This low correlation of BND with the equity ETFs is a positive factor for risk reduction.
Looking at the portfolio's correlation with individual positions, it is very highly correlated with VTI (0.98) and VEU (0.93), but only weakly correlated with BND (-0.11). This suggests that the portfolio's overall returns are heavily influenced by the equity holdings, especially VTI, which appears to dominate the portfolio's behavior.
In summary, while the inclusion of BND adds some diversification benefit due to its low correlation with equities, the portfolio remains concentrated in equities with highly correlated positions. The strong dominance of VTI and VEU correlations indicates that the portfolio is more equity-centric and may be vulnerable to equity market swings, limiting the overall diversification effect.