The Rick Ferri Core 4 Portfolio Review and ETF Pie for M1 Finance

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.”

Canadians can find the above ETFs on Questrade or Interactive Brokers. Investors outside North America can use Interactive Brokers.

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Disclosures: I am long VTI and VXUS in my own portfolio.

Interested in more Lazy Portfolios? See the full list here.

Disclaimer:  While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a research report. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. Hypothetical examples used, such as historical backtests, do not reflect any specific investments, are for illustrative purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.