Actually, today was the day I finally sold out of my old positions and rebalanced my portfolio. I ended up going with: 50% Equities (Half large-cap blend, half small-cap value) 20% Gold 20% Bonds 10% Cash So I took the Golden Butterfly and re-allocated 10% from cash to equities. I mainly did this fo...

Even though I don't want to derail this into a cash discussion since there is a forum for that, it seems like that is the most contentious asset class in terms of where to hold it. Really, we need to get down to the bottom of "Why are we even holding cash in this portfolio"? If it is becau...

Just to clarify gold's taxation: IIRC, it's taxed at your marginal rate for income up to a maximum of 28%. Fair point. I would be paying 28%+, so for me it is not ideal for a taxable account. Hello FF For your cash component, please don't overlook I-Bonds. When inflation comes back in the future, a...

FWIW, for anyone tracking this thread or reading it in the future, I decided on the Golden Butterfly as the most appropriate portfolio in terms of both back-testing results & theoretical rationale for my needs. Next step is to figure out how to allocate the assets across taxable and tax-free acc...

I have settled on using the Golden Butterfly as my long-term portfolio, with a variable portfolio of speculative tech stock investments that I believe in (<10% of total investable assets). The GB is: 40% equities (1/2 large-cap blend, 1/2 small-cap value) 20% Gold 20 LTT 20% Cash Easy ones first: LT...

MachineGhost wrote: The annual data from Simba is of low quality, so don't draw strong conclusions from it.

And I would run your PP2 against the Golden Butterfly.

What are sources other than Simba to get total returns of each asset class that are higher quality? Why is Simba low qualiy?

8.22 to 9.89 for 10 year CAGR using the iShares S&P 600 ETFs...the reality is growth/value and large/small cap outperformance is cyclical. Sometimes the cycles last a very long time. Personally I just use the vanilla version ETFs and split large and small caps 50/50. The main point to all of th...

There's been quite a bit written about the value effect debating whether it will last/has been significantly reduced. I would probably put more faith in value vs. total market numbers in the post investable ETFs/indexes time periods. You REALLY need to be careful when interpreting value performance...

Update - I ran the PP vs. two adjusted PPs for all 7-year periods between 1972 and 2015. Here is how the three portfolios are allocated. Note that PP2 strays from using the Total Market and splits its holdings in value stocks. http://i66.tinypic.com/20avuky.png Here is how the three did over every p...

What is your trend-following system, exactly? Could not find it on the forum spelled out anywhere. It is an enhanced 200-day absolute momentum. InsuranceGuy runs his own PP portfolio using both absolute and relative momentum. I am a headless chicken about downside risk so I focus overwhelmingly on ...

Here's the 300-year Monte Carlo backtest on the PP and nine other portfolios: http://www.wallstreetcourier.com/v/data_download/WallStreetCourier_Research_The_Most_Rewarding_Portfolio_Construction_Techniques.pdf This was the paper that got me interested in Most Diversified Portfolio since it outperf...

The real issue is that we are not able to back-test the PP against periods prior to 1972 due to gold. Even LTT can be back-tested further back, given the 92% correlation between LTT and ITT from 1972-2015 - so ITT could be used as a substitute. If there were a proxy for gold pre-1972, we could easil...

And to answer what would happen if the PP went from 25/25/25/25 to 30 in Equity and 20 in Gold, see Blue vs. Red below.

Real Returns

I have updated the data to be inflation-adjusted. When looking at real returns, you can see that the "decreasing CAGR" for the PP goes away. http://i64.tinypic.com/2v8jvaa.png http://i65.tinypic.com/oppjeb.png I have to say, if I was looking at this objectively, I would have to ask why PP ...

I feel like we are speaking the same language, Tyler. Savings is the primary driver of my quest towards Financial Independence. I am a big fan of MMM. While I can't (or rather, choose not to) live his frugal lifestyle given that I live in NYC, I am about as frugal as possible given my situation and ...

Good question - what am I trying to learn? I ask myself that sometimes. ;D In a nut shell, I have very specific financial goals and I want to pick the portfolio that gets me to my goals within a set period of time with a ~99% confidence interval. Now, of all portfolios that get me to my goal in 99% ...

Thanks for the feedback, guys! Good stuff for me to build on. FYI, the reason I like building my own models in Excel is that I like custom views that are not always offered on the admittedly much better versions (such as Tyler's) and that I honestly just love making models. Weird, I know. =P Kbg - I...

Both portfolios have a similar goal and approach. I've assessed the portfolios against each other over several periods, using a stochastic bootstrapped model, which I explain below. Harry Browne's Permanent Portfolio: 25% VTSMX (Total Stock Market) 25% VUSTX (Long-term government bonds) 25% VUSXX (T...

Source: http://www.advisorperspectives.com/dshort/guest/BP-120828-Permanent-Portfolio-Shakedown-Part-2.php The 25/25/25/25 PP makes sense both from a back-testing perspective and a theoretical perspective, which is about as much as we can ask for from a portfolio strategy. It's a great starting poin...

MachineGhost wrote:I stumbled across this invaluable thread:

http://discuss.morningstar.com/NewSocia ... 70831.aspx

The risk/reward of the guy's portfolios is unbelievable.

Fascinating, and he is strongly influenced by HB. Now I need to create a spreadsheet to backtest myself...

Great points, guys. I admit I forgot about the LTT + Cash = ITT duration match but with incremental benefits in different economic scenarios.

Interesting hypothetical, but at the end of the day, if I am in a horrendous car crash that changes my life forever, 25/25/25/25 vs. 35/25/10/25 will be the least of my worries. I am trying to focus on non-doomsday scenarios. I am quite risk-averse, but not so risk-averse that I am willing to financ...

Another question - I understand that a large part of the reason that HB recommends 25% in cash/T-bills is in case of deflation. Fair point. However, I understand that another reason he believes in 25% cash is that it can represent an "emergency fund". I personally do not subscribe to the n...

Thanks for all the great replies, guys. I really appreciate the helpful and intelligent discussion. I'm excited about joining the community, although honestly I hope I am very inactive since that would mean that my money is safely growing slowly and off my mind. :D Since yesterday, I have gone on a ...

I've read a lot about the PP and am strongly considering using it for the bulk of my assets. But a few things haven't made sense to me and so I wanted to check in with the PP experts. Why the 25/25/25/25 allocation? I understand the concept - be in a good place to handle any of the four types of eco...