the intent of cash in the pp is to be neutral . it isn't there to pretend it is part of the bond fund to make it appear less volatile or to be part of stocks to make their beta appear lower or any other asset.buddtholomew wrote:Total Bond Market Index has a duration of 5.6 years. The fund holds a variety of bonds including corporates and treasuries. LT treasuries in combination with cash can replicate 5.6 years in duration and eliminate default risk. To me, these are similar enough approaches to consider the two options a wash over time (barbell vs. bullet strategy).LC475 wrote:What do you mean? Are you counting gold as a kind of equity?buddtholomew wrote: That aside, the only other difference between the portfolios is the amount allocated to equities. It is 100% in the BH portfolio and split 25% equities, 25% gold in the PP.
I see gold as more of an alternative type of cash. US dollars are cash for the short term, gold is cash for the long term. Thus you have a portfolio that's 50% cash and 50% income-generating, and the income-generating is further split 50-50 between the two main ways to structure income-generating assets: debt and ownership. At least, that's one way to look at it.
Now each portfolio has 50% remaining to allocate. BH will allocate the entire amount to equities and the PP splits 25% in Gold and 25% in equities. That is the major distinction between the two portfolios. BH investors may choose to hold REITs, INT or SC, but it is still considered equities.
Hope this clarifies.
each asset is what it is without being combined with anything else to disguise it.
if stocks fell then the cash works with the portfolio as a whole . if it is stocks and bonds then it mitigates both . but trying to pretend if you combine cash and long term bonds like they exclusively are one and the same asset class and you really have an equal to an intermediate bond fund is not correct .
all that counts at the end of the day is that balance you have from the pp and not how you try to disguise the assets from what they are .
for all purposes long term treasury's are exactly what they are , stocks and gold are what they are and cash stands ready to do its part for the portfolio as a whole .