Author Topic: Portfolio Charts - The Golden Butterfly  (Read 275091 times)

Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #550 on: January 29, 2018, 10:14:22 AM »
We were talking about PWR, so it was withdrawal rates. Thanks for that. Is that information (worst start years) available on the site? I couldn't see it.

All of the results are displayed on the Withdrawal Rates chart and you can infer the general age of the start date by the length and shade of the line, but the associated start years for each line are not labeled.  I'm happy to look under the hood and find that info for anyone who contacts me directly. 

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #551 on: January 29, 2018, 12:56:04 PM »

You need a strong contrarian streak to stick with the PP or GB. I haven't got it. Too much FOMO.

Have you tried buying the dip?

AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #552 on: January 29, 2018, 02:23:14 PM »
Have you tried buying the dip?

No, I been ridin' the mo-mo gravy train. You?

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #553 on: January 29, 2018, 08:11:35 PM »
Have you tried buying the dip?

No, I been ridin' the mo-mo gravy train. You?

I'm using a logistical asset allocation myself

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #554 on: May 23, 2019, 01:18:40 PM »
In general the Permanent Portfolio will have lower drawdowns than the Golden Butterfly due to its cash position. 

If we are backtesting for performance then what you guys really want is the "Four Season Gold Hawk" which has higher returns than the Golden Butterfly and lower drawdowns.  The asset mix is:

42.5% Small Cap Value
25% Long Term bonds
12.5 % Intermediate bonds
15% Gold
5% Commodities

There it is!

RWD

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Re: Portfolio Charts - The Golden Butterfly
« Reply #555 on: May 23, 2019, 02:14:08 PM »
what you guys really want is the "Four Season Gold Hawk"
I assume you are completely unbiased, khawk?

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #556 on: May 23, 2019, 02:28:38 PM »
Lol completely.  I figured as the inventor I get to name it after myself.  Run the asset mix on portfoliocharts and see if it doesn't perform better than the Golden Butterfly.

AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #557 on: May 24, 2019, 06:57:27 AM »
I don't have the patience, or the inclination to go through and update all my old posts with working images. If you've gotten this far, read all the text from my posts, and are still interested, there's nothing more I can say that will convince you otherwise.

Instead, I'll simply bump this thread every once in a while, with the live results. After 30 years it'll likely look just like the Permanent Portfolio looks now (losing to 100% bonds since inception), but by then I'm sure everyone will have moved on to the next hot thing, and will have long forgotten about their losses in this thread.

Starting value: $1,000,000




And with a $40,000 a year withdrawal:



Note, in both instances you would've been better off with a 60/40 stock/bond portfolio than the Golden Butterfly, but I'm keeping it simple for now.

I miss Interest Compound. Wonder why they don't post anymore?

Plugging the same funds from above into Portfolio Visualizer, and adding the new one:

Portfolio Analysis Results (Sep 2015 - Apr 2019)

Portfolio 1 Final Balance $14,290  CAGR 10.22% (VT)
Portfolio 2 Final Balance $12,527  CAGR 6.34% ("Golden Butterfly")
Portfolio 3 Final Balance $12,331  CAGR 5.88% ("Four Season Gold Hawk")


talltexan

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Re: Portfolio Charts - The Golden Butterfly
« Reply #558 on: May 24, 2019, 07:18:59 AM »
Growth has outperformed Value lately, so you'd expect the 4-season Gold Hawk to underperform in recent history with that SCV position.

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #559 on: May 24, 2019, 02:08:37 PM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months. 

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #560 on: May 24, 2019, 06:46:11 PM »
I don't have the patience, or the inclination to go through and update all my old posts with working images. If you've gotten this far, read all the text from my posts, and are still interested, there's nothing more I can say that will convince you otherwise.

Instead, I'll simply bump this thread every once in a while, with the live results. After 30 years it'll likely look just like the Permanent Portfolio looks now (losing to 100% bonds since inception), but by then I'm sure everyone will have moved on to the next hot thing, and will have long forgotten about their losses in this thread.

Starting value: $1,000,000




And with a $40,000 a year withdrawal:



Note, in both instances you would've been better off with a 60/40 stock/bond portfolio than the Golden Butterfly, but I'm keeping it simple for now.

I miss Interest Compound. Wonder why they don't post anymore?

Plugging the same funds from above into Portfolio Visualizer, and adding the new one:

Portfolio Analysis Results (Sep 2015 - Apr 2019)

Portfolio 1 Final Balance $14,290  CAGR 10.22% (VT)
Portfolio 2 Final Balance $12,527  CAGR 6.34% ("Golden Butterfly")
Portfolio 3 Final Balance $12,331  CAGR 5.88% ("Four Season Gold Hawk")

If you look over a longer time frame you will see the outperformance of the Four Season Gold Hawk.  As talltexan mentioned, growth has outperformed value lately.  But over the long run...

bacchi

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Re: Portfolio Charts - The Golden Butterfly
« Reply #561 on: May 24, 2019, 06:53:56 PM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

I follow this portfolio. It's returned 19% CAGR since 2010.

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #562 on: May 24, 2019, 08:08:04 PM »
To be honest I still think the Permanent Portfolio is best.  The whole idea behind it is that you can sleep easy at night knowing you are covered no matter what happens - inflation, deflation, recession, or prosperity.  When you start to skew the portfolio holdings heavier towards one of those conditions, you put yourself at risk of that condition not occurring in the future as much as it has in the past.  Best to take an equal bet on any outcome - no one can predict the future.

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #563 on: May 24, 2019, 08:18:13 PM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

So you were 100% in Bitcoin/crypto in 2018?

Andy R

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Re: Portfolio Charts - The Golden Butterfly
« Reply #564 on: May 24, 2019, 08:34:42 PM »
To be honest I still think the Permanent Portfolio is best.  The whole idea behind it is that you can sleep easy at night knowing you are covered no matter what happens - inflation, deflation, recession, or prosperity.  When you start to skew the portfolio holdings heavier towards one of those conditions, you put yourself at risk of that condition not occurring in the future as much as it has in the past.  Best to take an equal bet on any outcome - no one can predict the future.

Firstly, the results for LT treasuries are based on a period where interest rates came down from 20% to 0%, so for that to work again, interest rates would need to go down to -20%
As a consequence, going forward, your expected return with either Golden Butterfly or the Permanent Portfolio will be so low that this portfolio would only work for those wanting to withdraw sub 2% (ie you have over 50x your yearly spend), and if you are willing to work another decade and a half to reach that point, then sure this seems like a suitable portfolio.


Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #565 on: May 24, 2019, 10:50:23 PM »
Firstly, the results for LT treasuries are based on a period where interest rates came down from 20% to 0%, so for that to work again, interest rates would need to go down to -20%

Everyone has different preferences and I'm always interested in hearing a wide variety of portfolio opinions, but for the sake of accuracy I think it's important to point out that this is not how bond returns work.  Bond convexity is a complicated topic, but here's a pretty good no-math explanation.  One benefit of long term treasuries in a portfolio is how their high convexity provides good returns even at low rates.
« Last Edit: May 24, 2019, 11:58:14 PM by Tyler »

Classical_Liberal

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Re: Portfolio Charts - The Golden Butterfly
« Reply #566 on: May 25, 2019, 01:04:51 AM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

I'd be willing to pay a 2% load and 2% annual ER for this portfolio.  Screw indexing!

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #567 on: May 25, 2019, 01:56:47 AM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

I'd be willing to pay a 2% load and 2% annual ER for this portfolio.  Screw indexing!

Actually, my fund has 100% correlation with it's benchmark index (GDI)

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #568 on: May 25, 2019, 10:33:39 AM »
Firstly, the results for LT treasuries are based on a period where interest rates came down from 20% to 0%, so for that to work again, interest rates would need to go down to -20%

Everyone has different preferences and I'm always interested in hearing a wide variety of portfolio opinions, but for the sake of accuracy I think it's important to point out that this is not how bond returns work.  Bond convexity is a complicated topic, but here's a pretty good no-math explanation.  One benefit of long term treasuries in a portfolio is how their high convexity provides good returns even at low rates.

Excellent commentary Tyler, I was hoping you would chime in on this thread again.

What are your thoughts on the Four Season Gold Hawk vs the Golden Butterfly?

Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #569 on: May 25, 2019, 11:58:53 AM »
What are your thoughts on the Four Season Gold Hawk vs the Golden Butterfly?

The numbers are certainly impressive, and I can see why you like it.  That said, I might suggest flipping the country to the new Japan setting to temper expectations a little.  That advice applies to all portfolios, BTW.

Contrary to what people might think from only skimming this very long thread about the Golden Butterfly, it is definitely not my goal to advocate for a single way to invest suitable for all people.  Everyone is different, and I just want to help them understand the many different portfolio options out there and supply good data so that they can make an informed choice.  The Golden Butterfly is one suggestion of my own creation, the Pinwheel Portfolio is another, and I have an open mind to all kinds of ideas for building an effective and sustainable asset allocation.  I'll also point out that my tools have changed a lot in the three years since this thread first started, including at least one designed specifically based on feedback from this discussion.  So please take the time to visit Portfolio Charts if you haven't in a while, even if it's just to check in on your own portfolio and remind yourself why you're very happy with your choice.  :)

As an aside, I'm totally bookmarking the Golden Dragon Portfolio for future inclusion on the site.  My biggest regret is that I didn't learn about Dragoncar's masterpiece before April 1st. 
« Last Edit: May 25, 2019, 12:15:10 PM by Tyler »

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #570 on: May 25, 2019, 01:57:58 PM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

Are you saying invest in the top performing asset class (from the previous 12 months) for the next 12 months?

khawk

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Re: Portfolio Charts - The Golden Butterfly
« Reply #571 on: May 25, 2019, 02:13:03 PM »
What are your thoughts on the Four Season Gold Hawk vs the Golden Butterfly?

The numbers are certainly impressive, and I can see why you like it.  That said, I might suggest flipping the country to the new Japan setting to temper expectations a little.  That advice applies to all portfolios, BTW.


Yes, I ran the numbers on Japan as well.  It's somewhat similar to the Golden Butterfly in terms of drawdowns etc.

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #572 on: May 25, 2019, 03:50:59 PM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

Are you saying invest in the top performing asset class (from the previous 12 months) for the next 12 months?

No, thatís some kind of traditional momentum play.  Iím more interested in forward Momentum, or ďFOMOĒ

Telecaster

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Re: Portfolio Charts - The Golden Butterfly
« Reply #573 on: May 25, 2019, 04:06:19 PM »
How do you know what the best performing assets will be for the next 12 months? 

less4success

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Re: Portfolio Charts - The Golden Butterfly
« Reply #574 on: May 25, 2019, 04:32:34 PM »
dragoncar was making a joke (or is perhaps from the future).

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #575 on: May 25, 2019, 06:46:43 PM »
dragoncar was making a joke (or is perhaps from the future).

Sorry, sometimes I forget that not all creatures think fourth-dimensionally

Andy R

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Re: Portfolio Charts - The Golden Butterfly
« Reply #576 on: May 25, 2019, 08:07:42 PM »
Firstly, the results for LT treasuries are based on a period where interest rates came down from 20% to 0%, so for that to work again, interest rates would need to go down to -20%

Everyone has different preferences and I'm always interested in hearing a wide variety of portfolio opinions, but for the sake of accuracy I think it's important to point out that this is not how bond returns work.  Bond convexity is a complicated topic, but here's a pretty good no-math explanation.  One benefit of long term treasuries in a portfolio is how their high convexity provides good returns even at low rates.

Thanks for the link.
So does that mean that if you have 20 year bonds and interest rates go up 1%, that you would not expect a 20% drop in the value of the bonds, and that the percentage drop would be different from 20% interest rates going to 19% vs 2% interest rates going to 1%? From the video, it looks like it would be different but I am wondering exactly what the numbers would be. Do you know a resource where I could see what it should be?

Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #577 on: May 25, 2019, 08:58:07 PM »
Thanks for the link.
So does that mean that if you have 20 year bonds and interest rates go up 1%, that you would not expect a 20% drop in the value of the bonds, and that the percentage drop would be different from 20% interest rates going to 19% vs 2% interest rates going to 1%? From the video, it looks like it would be different but I am wondering exactly what the numbers would be. Do you know a resource where I could see what it should be?

A change in rates on a 20 year bond (with annual coupon payments) from 2% to 1% will have have a capital appreciation of 17%.  From 20% to 19% it will have a capital appreciation of only 5%.  The numbers are also dependent on the bond maturity, as the longer the maturity the more convex the curve.  I won't pretend to understand the inner workings of how all of that works, but you can easily calculate it for yourself in Excel using the formula here: https://portfoliocharts.com/bond-index-calculator/
« Last Edit: May 25, 2019, 09:01:42 PM by Tyler »

Classical_Liberal

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Re: Portfolio Charts - The Golden Butterfly
« Reply #578 on: May 25, 2019, 10:51:47 PM »
@Tyler
Since most people here tend to index.  If someone holds a LTT index with average maturity of, say 20 years.  And LTT rates drop (say 20-19, or 2 to 1 like in previous example), is it a reasonable assumption to use that formula with the average maturity date of the fund for estimates of fund value increases in those scenarios?  Or is this a bad assumption and I'm missing something?

Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #579 on: May 25, 2019, 11:15:19 PM »
Since most people here tend to index.  If someone holds a LTT index with average maturity of, say 20 years.  And LTT rates drop (say 20-19, or 2 to 1 like in previous example), is it a reasonable assumption to use that formula with the average maturity date of the fund for estimates of fund value increases in those scenarios?  Or is this a bad assumption and I'm missing something?

Good question.  The yield curves make the calculations a little complicated, but I believe using the weighted average maturity of the fund should provide a reasonable estimate. 

I'm realizing this could be a good topic for a post of its own.  You guys are always good for inspiration.  ;)
« Last Edit: May 25, 2019, 11:17:06 PM by Tyler »

effigy98

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Re: Portfolio Charts - The Golden Butterfly
« Reply #580 on: May 27, 2019, 01:40:10 PM »
Here is my modification:

20% IETC (VGT for backtesting)
20% VDC
20% IJS
20% TLT
20% GLDM (GLD for backtesting)

- Adding more risk to get a potentially higher return using VDC (consumer staples) in place of cash. The drawdowns on this asset class during the last couple recessions are impressively low. My only fear is some of the companies are killing their customers over time which is not good for profits. They are being replaced by stoner company acquisitions though.
- Instead of total stock market, going cloud and automation. Working in the industry, I know that companies are getting rid of most of their IT staff and infrastructure and moving to the top companies in IETC at a rapid pace. This is also one of the most profitable businesses out there, like a modern day toll road for data and with moats with alligators in them. There are also theories that during a downtown this will even accelerate as a cost cutting measure.
« Last Edit: May 27, 2019, 01:41:43 PM by effigy98 »

Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #581 on: May 27, 2019, 09:48:19 PM »
I'm realizing this could be a good topic for a post of its own.  You guys are always good for inspiration.  ;)

Done.  :)

https://portfoliocharts.com/2019/05/27/high-profits-at-low-rates-the-benefits-of-bond-convexity/

I don't want to derail this Golden Butterfly thread with unrelated bond talk, but feel free to PM me if you have any questions. 

Classical_Liberal

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Re: Portfolio Charts - The Golden Butterfly
« Reply #582 on: May 28, 2019, 03:21:13 AM »
I'm realizing this could be a good topic for a post of its own.  You guys are always good for inspiration.  ;)

Done.  :)

https://portfoliocharts.com/2019/05/27/high-profits-at-low-rates-the-benefits-of-bond-convexity/

I don't want to derail this Golden Butterfly thread with unrelated bond talk, but feel free to PM me if you have any questions.

Great article! 

vand

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Re: Portfolio Charts - The Golden Butterfly
« Reply #583 on: May 28, 2019, 05:01:39 AM »
A article from a fairly mainstream outlet also advocating for a diversified multi-asset portfolio:

https://www.marketwatch.com/story/this-investing-strategy-gives-you-a-little-less-return-but-a-lot-less-risk-2019-04-03

""Most idiots have an 80/20 portfolio (80% stocks/20% bonds) or a 90/10 portfolio or even a portfolio that is 100% stocks."

 

"How about a 35/55/3/3/4 portfolio? Thatís 35% stocks, 55% bonds, 3% broad commodities, 3% gold, and 4% REITs. If you think about what this is, itís a stock/bond portfolio with a really good inflation hedge.

Want to know the risk/return of that portfolio? It gives you almost the return of the 80/20 portfolio with half the risk."


talltexan

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Re: Portfolio Charts - The Golden Butterfly
« Reply #584 on: May 28, 2019, 06:52:34 AM »
I'd like to introduce the Golden Dragon Portfolio.  On January 1, simply invest in the top returning asset class for the next 12 months.

I'm doing this, except that it's on my birthday instead of Jan 1 so that I'm not part of a crowd of people all buying at the same time.

AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #585 on: May 28, 2019, 07:18:17 AM »
A article from a fairly mainstream outlet also advocating for a diversified multi-asset portfolio:

https://www.marketwatch.com/story/this-investing-strategy-gives-you-a-little-less-return-but-a-lot-less-risk-2019-04-03

""Most idiots have an 80/20 portfolio (80% stocks/20% bonds) or a 90/10 portfolio or even a portfolio that is 100% stocks."

"How about a 35/55/3/3/4 portfolio? Thatís 35% stocks, 55% bonds, 3% broad commodities, 3% gold, and 4% REITs. If you think about what this is, itís a stock/bond portfolio with a really good inflation hedge.

Want to know the risk/return of that portfolio? It gives you almost the return of the 80/20 portfolio with half the risk."

Continuing the quote from the article:
"And itís mostly because of the gold."

3% in gold? Okay.

bacchi

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Re: Portfolio Charts - The Golden Butterfly
« Reply #586 on: May 28, 2019, 09:50:31 AM »
A article from a fairly mainstream outlet also advocating for a diversified multi-asset portfolio:

https://www.marketwatch.com/story/this-investing-strategy-gives-you-a-little-less-return-but-a-lot-less-risk-2019-04-03

""Most idiots have an 80/20 portfolio (80% stocks/20% bonds) or a 90/10 portfolio or even a portfolio that is 100% stocks."

 

"How about a 35/55/3/3/4 portfolio? Thatís 35% stocks, 55% bonds, 3% broad commodities, 3% gold, and 4% REITs. If you think about what this is, itís a stock/bond portfolio with a really good inflation hedge.

Want to know the risk/return of that portfolio? It gives you almost the return of the 80/20 portfolio with half the risk."

Does it though? I see the 80/20 with a lot more return for 1994-2014, per portfoliovisualizer. It does reduce volatility -- any portfolio with that many bonds will -- but whether "almost the return" means 32% less is a matter of opinion I guess.

A 45/55 portfolio also had a similar return to a 35/55/3/3/4.

« Last Edit: May 28, 2019, 09:54:10 AM by bacchi »

Telecaster

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Re: Portfolio Charts - The Golden Butterfly
« Reply #587 on: May 28, 2019, 09:58:11 AM »
Does it though? I see the 80/20 with a lot more return for 1994-2014, per portfoliovisualizer. It does reduce volatility -- any portfolio with that many bonds will -- but whether "almost the return" means 32% less is a matter of opinion I guess.

A 45/55 portfolio also had a similar return to a 35/55/3/3/4.

The article said the portfolio was over 20 years.  Basically started right before the dotcom bust.   Not being heavily weighted in stocks at that time was a good thing. 

vand

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Re: Portfolio Charts - The Golden Butterfly
« Reply #588 on: May 28, 2019, 10:14:15 AM »
Thanks for running it through the portfolio analyzer tool so we can get some concrete numbers.
As ever, the starting point can subtly nudge the argument.

My biggest takeaway from most of these alternative portfolios is that for many people (and I include myself) it's OK to reduce your equity exposure right down..like 30% or less... you might be giving up 1-1.5% performance which over a lifetime of investing which admittedly would compound to a significant amount, but if it lets you sleep easy and keeps you in the game during periods of crisis and market meltdowns it is more than worth it.

Ironically, it should be "normal" folk who need to weigh more heavily in equities as they are the ones who will be working for 45+ years. For many aspiring FIRE'ers who have optimised the manageable side of their lives and achieved a high savings rate, the bulk of their nestegg will come from their earnings, not from returns on investment, therefore these diversified portfolios strategies like the GB and PP should be attractive to them.


bacchi

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Re: Portfolio Charts - The Golden Butterfly
« Reply #589 on: May 28, 2019, 10:22:51 AM »
Ironically, it should be "normal" folk who need to weigh more heavily in equities as they are the ones who will be working for 45+ years. For many aspiring FIRE'ers who have optimised the manageable side of their lives and achieved a high savings rate, the bulk of their nestegg will come from their earnings, not from returns on investment, therefore these diversified portfolios strategies like the GB and PP should be attractive to them.


That depends on how quickly one wants to GTF out of work.

Per portfolicharts, the portfolio above gets someone out anywhere from 13-19 years.
A 45/55 has a 12-19 year span.
An 80/20 has a 9-18 year span.

A 25 year old might get out at 34 with an 80/20 but also might get out at 43.

A 25 year old in the bond heavy portfolios might get out 37 but also might get out at 44 (and these bond portfolios are tilted to the lower end).

Is the 3 years worth the risk?


Tyler

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Re: Portfolio Charts - The Golden Butterfly
« Reply #590 on: May 28, 2019, 10:30:08 AM »
Thanks for running it through the portfolio analyzer tool so we can get some concrete numbers.
As ever, the starting point can subtly nudge the argument.

Yep.  Just as a friendly reminder, Portfolio Charts has a bunch of free tools to help you study every start date simultaneously.  ;)

Buffalo Chip

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Re: Portfolio Charts - The Golden Butterfly
« Reply #591 on: May 28, 2019, 06:45:16 PM »
Ironically, it should be "normal" folk who need to weigh more heavily in equities as they are the ones who will be working for 45+ years. For many aspiring FIRE'ers who have optimised the manageable side of their lives and achieved a high savings rate, the bulk of their nestegg will come from their earnings, not from returns on investment, therefore these diversified portfolios strategies like the GB and PP should be attractive to them.


That depends on how quickly one wants to GTF out of work.

Per portfolicharts, the portfolio above gets someone out anywhere from 13-19 years.
A 45/55 has a 12-19 year span.
An 80/20 has a 9-18 year span.

A 25 year old might get out at 34 with an 80/20 but also might get out at 43.

A 25 year old in the bond heavy portfolios might get out 37 but also might get out at 44 (and these bond portfolios are tilted to the lower end).

Is the 3 years worth the risk?

The fun thing about portfoliocharts is you can run all sorts of allocations to maximize historic return while minimizing variance. What I found interesting is that the ďput it all in the total market index fundĒ portfolio seems to be suboptimal. Mix of assets including some small portion in gold seems to do better.  Of course this is looking backward so there is NO certainty of future results.

vand

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Re: Portfolio Charts - The Golden Butterfly
« Reply #592 on: May 29, 2019, 12:38:30 AM »


Does it though? I see the 80/20 with a lot more return for 1994-2014, per portfoliovisualizer. It does reduce volatility -- any portfolio with that many bonds will -- but whether "almost the return" means 32% less is a matter of opinion I guess.

A 45/55 portfolio also had a similar return to a 35/55/3/3/4.

Out of interest, why 1994-2014? Just as starting from 2000 would have nudged the arguments against equities, you could argue that starting from 1994 is starting from early on during the greatest equity bull market in history.

I'd also add in that since the 1980s we have been in a secular bull market in bonds.. this has seen, baring a few short spikes, inflation move in a long term downtrend. That was not the case in the 1960-1980 period before. It is worth backtesting these strategies to see what they did during periods of rising inflation. Indeed, Harry Browne devised the PP pretty much at the height of the period of higher inflation when most other portfolios were getting hammered; that it has withstood the test of time so long since despite an unrecognisable macroeconomic environment today should say something about its strengths.
« Last Edit: May 29, 2019, 02:30:57 AM by vand »

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #593 on: May 29, 2019, 01:14:01 AM »

Out of interest, why 1994-2014

Probably because they date range fits the narrative

AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #594 on: May 29, 2019, 07:44:35 AM »
Indeed, Harry Browne devised the PP pretty much at the height of the period of higher inflation when most other portfolios were getting hammered; that it has withstood the test of time so long since despite an unrecognisable macroeconomic environment today should say something about its strengths.
What does "withstood the test of time" mean to you?

Harry Browne devised the PP in 1982? How has it done since then?

dragoncar

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Re: Portfolio Charts - The Golden Butterfly
« Reply #595 on: May 29, 2019, 08:56:27 AM »
Indeed, Harry Browne devised the PP pretty much at the height of the period of higher inflation when most other portfolios were getting hammered; that it has withstood the test of time so long since despite an unrecognisable macroeconomic environment today should say something about its strengths.
What does "withstood the test of time" mean to you?

Harry Browne devised the PP in 1982? How has it done since then?

7.49% cagr, not that everyone will agree with choosing a 1982 starting date

https://www.peaktotrough.com/hbpp.cgi
https://portfoliocharts.com/portfolio/permanent-portfolio/

bacchi

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Re: Portfolio Charts - The Golden Butterfly
« Reply #596 on: May 29, 2019, 10:51:11 AM »
Out of interest, why 1994-2014? Just as starting from 2000 would have nudged the arguments against equities, you could argue that starting from 1994 is starting from early on during the greatest equity bull market in history.

Because that's what portfoliovisualizer spit out. I didn't see a way to change the time period, at least for that particular tool.

AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #597 on: May 29, 2019, 07:13:32 PM »

7.49% cagr, not that everyone will agree with choosing a 1982 starting date

https://www.peaktotrough.com/hbpp.cgi
https://portfoliocharts.com/portfolio/permanent-portfolio/

What's the right starting date for the PP?

The book Fail-Safe Investing is copyright 1999.
https://en.wikipedia.org/wiki/Fail-Safe_Investing

The Permanent Portfolio Family of Funds was established in 1982.
https://en.wikipedia.org/wiki/Permanent_Portfolio_Family_of_Funds





AdrianC

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Re: Portfolio Charts - The Golden Butterfly
« Reply #598 on: June 05, 2019, 03:45:01 PM »
While googling trying to find the right starting date for the Permanent Portfolio - still looks like 1982...Iím open to being corrected - I came across this piece by Michael Batnick:

https://theirrelevantinvestor.com/2016/12/02/the-permanent-portfolio/

ďI have little bad to say about the actual construction of the Permanent Portfolio; I can think of far worse ways to manage your money. The biggest potential problem is that sitting through underperformance is very difficult, which is obviously true of anything other than a plain-vanilla index. But if you think youíre able to stay invested in this model through thick and thin than youíd find yourself far ahead of most investors out there.Ē

Batnick and Ben Carlson do a weekly podcast I enjoy, called Animal Spirits.

Anyway, good piece. Similar to what Bill Bernstein wrote about the PP.

arebelspy

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Re: Portfolio Charts - The Golden Butterfly
« Reply #599 on: June 05, 2019, 05:02:18 PM »
But if you think youíre able to stay invested in this model through thick and thin than youíd find yourself far ahead of most investors out there.Ē

That statement is true of almost any portfolio containing any amount of equities between 25% and 100%.

For the higher percentages, that means riding out the crashes. For the lower percentages, that means sitting tight during bull markets where you're under -performing. Either way, pick your AA and sit tight, and you'll likely do fine.
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