Lazy gold hater portfolio

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whatchamacallit
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Lazy gold hater portfolio

Post by whatchamacallit » Wed Apr 28, 2021 7:45 pm

Inspired by golden butterfly and classic Merriman.

25 percent into each
Total us stock
Small cap blend
Total international stock
Intermediate treasury

https://portfoliocharts.com/portfolio/m ... 5AL25EA25Z

Can be done in the most basic retirement plans including TSP using g fund for treasury.


Small cap value has better historical data but blend is simpler and easier to find.

You can get really close to this portfolio with fidelity zero fee funds. They have extended market and international funds with zero fees.

I believe I will start accumulating into this using either ee or I bonds depending on which has higher rate as treasury portion. That gives a bit more of a boost to treasury if your not rebalancing anyway. Ee bonds are also my favorite thing right now.

I am not sure I would ever rebalance either. Just be as lazy as possible and keep adding about 25% to each.
whatchamacallit
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Re: Lazy gold hater portfolio

Post by whatchamacallit » Wed Apr 28, 2021 8:35 pm

Just realized this is really just the no brainer portfolio as well:

https://portfoliocharts.com/portfolio/n ... portfolio/
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Vil
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Re: Lazy gold hater portfolio

Post by Vil » Thu Apr 29, 2021 12:56 am

Is the stock tilt inspired by Biden's recent speech? :D Joke apart, that might look fine for an aggressive investor, but for PP folks (like me) 75% stocks is a huge pill to swallow... Tend to believe in all index implementations correlation between US and world is way way higher to have the split even worth..
whatchamacallit
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Re: Lazy gold hater portfolio

Post by whatchamacallit » Thu Apr 29, 2021 8:13 am

Check it out in portfolio matrix. It recovers a lot better than you would think.


https://portfoliocharts.com/portfolio/portfolio-matrix/


What is surprising is how much better you can make no brainer portfolio by using total stock instead of large blend and juicing a little more yield out of the cash.

I would have previously discredited the no brainer on the portfolio matrix because it is so low on the list

Start date sensitivity is biggest risk but will be good for dollar cost averaging.
D1984
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Re: Lazy gold hater portfolio

Post by D1984 » Thu Apr 29, 2021 10:23 am

whatchamacallit wrote:
Thu Apr 29, 2021 8:13 am
Check it out in portfolio matrix. It recovers a lot better than you would think.


https://portfoliocharts.com/portfolio/portfolio-matrix/


What is surprising is how much better you can make no brainer portfolio by using total stock instead of large blend and juicing a little more yield out of the cash.

I would have previously discredited the no brainer on the portfolio matrix because it is so low on the list

Start date sensitivity is biggest risk but will be good for dollar cost averaging.
IIRC you did mention that SCV would have done better but SCB was easier to find (i.e. an SCV option is not available in TSP or in many 401Ks but a Russell 2000 or S&P 600 or equivalent SCB fund usually is). I'd be curious to see how much replacing the 25% SCB with either 25% SCV or 12.5% SCB + 12.5% SCV would impact performance (and just as importantly, how it would lessen start date sensitivity) during the two "no so great decades" for this portfolio (1970s and 2000s).

I also have a suggestion (two suggestions, actually.....although one of these suggestions might require using more ETFs than a person might be comfortable with since it involves a not purely market cap weighted option) for another part of the portfolio that would've helped pretty decently in the 2000s, helped some in the 1990s, and pretty much provided a huge positive kick in the pants during the 1970s (and it has nothing to do with gold BTW). Anyone interested?
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I Shrugged
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Re: Lazy gold hater portfolio

Post by I Shrugged » Thu Apr 29, 2021 12:25 pm

Bah. These are all just ordinary menu items at the Bogleheads Diner.
::)
stuper1
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Re: Lazy gold hater portfolio

Post by stuper1 » Thu Apr 29, 2021 1:30 pm

D1984 wrote:
Thu Apr 29, 2021 10:23 am
whatchamacallit wrote:
Thu Apr 29, 2021 8:13 am
Check it out in portfolio matrix. It recovers a lot better than you would think.


https://portfoliocharts.com/portfolio/portfolio-matrix/


What is surprising is how much better you can make no brainer portfolio by using total stock instead of large blend and juicing a little more yield out of the cash.

I would have previously discredited the no brainer on the portfolio matrix because it is so low on the list

Start date sensitivity is biggest risk but will be good for dollar cost averaging.
IIRC you did mention that SCV would have done better but SCB was easier to find (i.e. an SCV option is not available in TSP or in many 401Ks but a Russell 2000 or S&P 600 or equivalent SCB fund usually is). I'd be curious to see how much replacing the 25% SCB with either 25% SCV or 12.5% SCB + 12.5% SCV would impact performance (and just as importantly, how it would lessen start date sensitivity) during the two "no so great decades" for this portfolio (1970s and 2000s).

I also have a suggestion (two suggestions, actually.....although one of these suggestions might require using more ETFs than a person might be comfortable with since it involves a not purely market cap weighted option) for another part of the portfolio that would've helped pretty decently in the 2000s, helped some in the 1990s, and pretty much provided a huge positive kick in the pants during the 1970s (and it has nothing to do with gold BTW). Anyone interested?
Yes, I'm interested.
D1984
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Re: Lazy gold hater portfolio

Post by D1984 » Thu Apr 29, 2021 6:03 pm

stuper1 wrote:
Thu Apr 29, 2021 1:30 pm
D1984 wrote:
Thu Apr 29, 2021 10:23 am
whatchamacallit wrote:
Thu Apr 29, 2021 8:13 am
Check it out in portfolio matrix. It recovers a lot better than you would think.


https://portfoliocharts.com/portfolio/portfolio-matrix/


What is surprising is how much better you can make no brainer portfolio by using total stock instead of large blend and juicing a little more yield out of the cash.

I would have previously discredited the no brainer on the portfolio matrix because it is so low on the list

Start date sensitivity is biggest risk but will be good for dollar cost averaging.
IIRC you did mention that SCV would have done better but SCB was easier to find (i.e. an SCV option is not available in TSP or in many 401Ks but a Russell 2000 or S&P 600 or equivalent SCB fund usually is). I'd be curious to see how much replacing the 25% SCB with either 25% SCV or 12.5% SCB + 12.5% SCV would impact performance (and just as importantly, how it would lessen start date sensitivity) during the two "no so great decades" for this portfolio (1970s and 2000s).

I also have a suggestion (two suggestions, actually.....although one of these suggestions might require using more ETFs than a person might be comfortable with since it involves a not purely market cap weighted option) for another part of the portfolio that would've helped pretty decently in the 2000s, helped some in the 1990s, and pretty much provided a huge positive kick in the pants during the 1970s (and it has nothing to do with gold BTW). Anyone interested?
Yes, I'm interested.

OK, the first suggestion is pretty simple:

Suggestion #1

Substitute half (or even if not half at least 35 or 40% or so) of the 25% Total International with Emerging Markets (i.e. put anywhere from maybe 8.75% to 12.5% of the portfolio in total in EM) . Several reasons for this:

One: EM makes up less of total international by pure market cap (it makes up just over 25% of VXUS if I remember correctly; this is assuming one counts South Korea as developed and not emerging) than it does by actual GDP, population, or expected future economic output growth. Adding a bit more EM therefore evens the odds out in terms of EM's economic impact vs developed markets.

Two, EM has less correlation with US equity than ex-US developed does. If two types of equity have roughly equal expected returns then the lower the correlation the better in terms of helping to minimize portfolio volatility. The fact taht EM valuations are cheaper right now to boot is just icing on the cake; even if EM was valued the same as DM ex-US it's still cheaper than US stocks (and has tilts to different sectors than US does as well)

Three, EM would have provided the portfolio with plenty of extra "oomph" during the 1970s and 2000s (The two decades shown on Portfoliocharts during which this portfolio did poorly and if which one was starting in, say, 1970, 1973, 2000, or 2001 could permanently lower one's retirement SWR). See Image

EM did better in the 1930s than US or ex-US developed (mainly because it didn't start out at as high of valuations in 1928-29 and had less far to fall) and thus provided diversification during the Great Depression; in the *1940s (see note 1 below this post) EM did relatively poorly but it didn't matter because US stocks (and especially US smallcaps and/or US SCV) kicked tail during this period and thus carried the portfolio; during the 1950s EM, ex-US developed, and US all did very well, during the 1960s the US did pretty good and so did EM while market-cap weighted developed ex-US lagged and gave around a bit less than a 4.10% CAGR from 1960-69 (almost all of which came during the years 1960, 1967, 1968, and 1969....the mid-1960s sucked for developed ex-US, from 1970-79 developed ex-us outdid the US (which actually lost more than 1.4 percent a year in real terms from 1970-79) while emerging skyrocketed to a 415%+ return for the decade as a whole and an average CAGR of over 17%; in the 1980s US stocks did great as the first part of the 1982-2000 bull market accelerated, developed ex-US was pure gold (especially from 1984-1988), and EMs struggled mightily from late 1980 to 1983, were roughly flat in 1984, and then zoomed back from 1985 to 1989 at a more than 37% CAGR during those years despite the crash of 1987; in the 1990s US stocks led by the dotcom boom had their best decade since the 1950s; international was very weak--thanks to the bursting of the Japan bubble seeing as how Japan made up almost 2/3rds of the EAFE as of 1989, and EM did wonderfully from 1990-93; flamed out spectacularly from 1994-1998 due to the Peso crisis, Asian Financial Crisis, LTCM, and Russian debt default, and then put in a stunning performance in 1999 by gaining more than 60% in one year as it bounced back.

From the 2000s or so onward you probably know how from experience how EM stocks, DM ex-US, and US stocks did so need for any history lessons on my part....EM again carried the portfolio during the 2000s (when US stocks had a lost decade and ex-US barely returned 1% real per year); emerging markets stocks did worse than either developed ex-US or US from 2010-19 but they weren't needed then because FANTMAG led-US growth was the locomotive of the portfolio for that decade.

The point is that EM helped to carry the portfolio during times when US stocks were stinking up the joint. Given this, and given it less correlated nature (to US equities) vs DM ex-US, I believe replacing part of Total International with EM couldn't hurt much and would likely help at least a little.

* Note 1 - One might reasonably wonder why the attached image shows EM doing poorly during the 1940s but yet still posting an overall positive return for the decade while Credit Suisse (using the Dimson-Marsh-Staunton dataset aka DMS) show it losing money rather spectacularly for the 1940-49 period. The difference is that the attached image uses GFD data prior to 1988 rather than DMS data; GFD classified Japan as "developed" after 1915 and didn't even include mainland China in any indexes after 12-31-1930 until China's Shanghai Stock Exchange exchange reopened in 1990. Given that China and Japan were two of the worst-performing equity markets in the late 1940s (Japan due to losing WWII, being bombed to rubble, hyperinflation, and having to start over basically from scratch, and Chinese equities going to zero due to the combined effects of one disaster after another...being occupied by Japan and being a war zone, and then when WWII was eventually over the Chinese Civil War restarting, and then finally the Communist victory and takeover in 1949) not including them in EM does upwardly bias the returns somewhat for the 1940s. With that said, Japanese stocks were the second or third best performer in the world from 1900 to 1939--including earning an almost 10.5% real inflation-adjusted CAGR from 1930 to 1939--and also returned gains of 660% per year in the 1950s, so if you did include Japan in EM it would make the 1930s even better for EM (and while it would lower the returns for developed ex-US during the 30s somewhat developed ex-US would still more or less tie the US during 1930-39 despite not having Japan to pull them up), and make EM do much better during the 50s while costing DM ex-US about 2.4% or 2.5% a year in CAGR from 1950-59 (which isn't a huge deal because even without Japan the ex-US developed markets during the 1950s---pulled upwards by mouthwatering returns from France, Italy, Australia, Finland, Austria, Netherlands, and most of all Germany--still did swimmingly; in fact, from 1957-1960 foreign developed stocks even without Japan clobbred US stocks by roughly 10% per year; this includes the year 1959 when developed market ex-US equities returned close to 50% in one year). From 1966 or 1967 onwards DMS classifieds Japan as developed; not having Japan in DM ex-US for the first half of the 60s subtracts about 1% a year in returns for these five or six years for DM ex-US and adds roughly that much to EM.

OK, that was a long enough detour but I figured it might be interesting nonetheless and shed some more light on EM vs developed ex-US market historical performance.

Suggestion #2

Before I post the second suggestion, though, let me ask a quick question (because the answer is related to what the second suggestion is):

The question is this: If you could only choose ONE reason for developed international ex-US stocks' (i.e. EAFE or EAFE + Canada) dreadful performance drought vs US since 1990, what would you say that reason is?
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