The Weird Portfolio - latest from Tyler/Portfolio Charts

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The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Tue May 09, 2023 9:14 am

For those who don't follow Portfolio Charts here's a new post that might inspire you to do so:

https://portfoliocharts.com/2023/05/08/ ... more-63571

Now I've only read the first few pages of the 98 page free book linked to in the article but I have to say I find it really inspiring to see a risk-averse investor - much like myself albeit younger - taking to heart the information provided by Harry Browne and the Portfolio Charts site and using the lessons learned to create a unique portfolio that works for them. The Weird Portfolio (really deserves a better name - "Weird & Wonderful?") strikes me as being a balanced "mash-up" of the Golden Butterfly, Larry Swedroe and PInwheel portfolios. It has the 5 x 20% symmetry (and operational/rebalanncing simplicity) of the GB, the strong tilt to SCV and international of the Larry and a big slice of real assets (REITS) a la the Pinwheel.

Anyway, not only does the portfolio's historical performance speak for itself but far more impressively it takes one of the cornerstone lessons from Mr. Browne - the importance of designing a portfolio based on its ability to respond to all economic conditions rather than being fooled by past performance/backtesting - and applies it in a way that at least at first glance looks to me to be as robustly defensive as anything out there - the PP, GB and All Seasons included.

Great stuff.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Mark Leavy » Tue May 09, 2023 11:44 am

Kevin K. wrote:
Tue May 09, 2023 9:14 am
Great stuff.
Yes indeed. Thanks for the tip.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by dualstow » Tue May 09, 2023 1:53 pm

This does not look computer-generated.
RIP Marcello Gandini
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Tue May 09, 2023 2:02 pm

dualstow wrote:
Tue May 09, 2023 1:53 pm
This does not look computer-generated.
Yeah it’s the exact opposite of “Portfolio Einstein” aka Portfolio Word Salad. ;)
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Dieter » Tue May 09, 2023 2:05 pm

Holy tracking error, Batman! 🙂
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Tue May 09, 2023 2:53 pm

Dieter wrote:
Tue May 09, 2023 2:05 pm
Holy tracking error, Batman! 🙂
Well yeah but unlike the Larry Portfolio or even (dare one say it?) the PP you at least get some return to go with your tracking error. 😏
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Dieter » Wed May 10, 2023 1:54 am

Kevin K. wrote:
Tue May 09, 2023 2:53 pm
Dieter wrote:
Tue May 09, 2023 2:05 pm
Holy tracking error, Batman! 🙂
Well yeah but unlike the Larry Portfolio or even (dare one say it?) the PP you at least get some return to go with your tracking error. 😏
True
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by D1984 » Wed May 10, 2023 3:54 am

Kevin K. wrote:
Tue May 09, 2023 2:53 pm
Dieter wrote:
Tue May 09, 2023 2:05 pm
Holy tracking error, Batman! 🙂
Well yeah but unlike the Larry Portfolio or even (dare one say it?) the PP you at least get some return to go with your tracking error. 😏
True enough....but in all fairness, neither the PP nor the Larry Portfolio (in its various incarnations with or without CCFs and/or the related "Minimize Fat Tails Portfolio" ) were designed as aggressive capital appreciation portfolios. They were meant as "preserve at what you already have at a fairly low risk of huge drawdowns and at least beat inflation decently over the long term" portfolios; Harry Browne even said as much (not sure of the exact words but to paraphrase it it was something like "you don't get rich by investing; you get rich by working hard and saving diligently) and so did Mr. Swedroe (in his interview in the early 2010s about his portfolio he said he had created a capital preservation portfolio because he had "already won" so to speak).

Also, IIRC the original Larry Portfolio used 5-year Treasuries (or the equivalent fund/ETF) or even one-year Treasuries rather than something like VFITX (which is really more of a 6.5 or 7 year average maturity Treasury fund); using VFITX or IEF will hurt the Larry Portfolio during periods of sharp rate rises vs simply using a 1-year Treasury, 5-year Treasury, or roughly equivalent Treasury ETF blend like a mixture of IEI and SHY (in all fairness Portfoliocharts doesn't go back to the other periods where this happened like 1917-1920, 1931, 1958-59, or 1967-69 as I believe it only goes extends back in time to 1970; by that point the big rate increases from 1955 to late 1969 had already happened).

In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Wed May 10, 2023 9:32 am

D1984 wrote:
Wed May 10, 2023 3:54 am
Kevin K. wrote:
Tue May 09, 2023 2:53 pm
Dieter wrote:
Tue May 09, 2023 2:05 pm
Holy tracking error, Batman! 🙂
Well yeah but unlike the Larry Portfolio or even (dare one say it?) the PP you at least get some return to go with your tracking error. 😏
True enough....but in all fairness, neither the PP nor the Larry Portfolio (in its various incarnations with or without CCFs and/or the related "Minimize Fat Tails Portfolio" ) were designed as aggressive capital appreciation portfolios. They were meant as "preserve at what you already have at a fairly low risk of huge drawdowns and at least beat inflation decently over the long term" portfolios; Harry Browne even said as much (not sure of the exact words but to paraphrase it it was something like "you don't get rich by investing; you get rich by working hard and saving diligently) and so did Mr. Swedroe (in his interview in the early 2010s about his portfolio he said he had created a capital preservation portfolio because he had "already won" so to speak).

Also, IIRC the original Larry Portfolio used 5-year Treasuries (or the equivalent fund/ETF) or even one-year Treasuries rather than something like VFITX (which is really more of a 6.5 or 7 year average maturity Treasury fund); using VFITX or IEF will hurt the Larry Portfolio during periods of sharp rate rises vs simply using a 1-year Treasury, 5-year Treasury, or roughly equivalent Treasury ETF blend like a mixture of IEI and SHY (in all fairness Portfoliocharts doesn't go back to the other periods where this happened like 1917-1920, 1931, 1958-59, or 1967-69 as I believe it only goes extends back in time to 1970; by that point the big rate increases from 1955 to late 1969 had already happened).

In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
Very well-said D1984.

Actually VFITX has an average duration of 5.3 years; unlike IEF and for that matter Total Bond Market they haven't extended the maturity out in a search for yield (which Is why I still use it, because as you pointed out 5 years is ths historic "sweet spot" for ITT's).

Portfolio Visualizer doesn't have data for either Total International Stock or Total Bond Market going back all the way to 1970 but going back as far as they allow here's a comparison of classic Boglehead's 3 fund 60/40, the PP and the GB:

https://www.portfoliovisualizer.com/bac ... tion7_3=20

You can see at a glance that it's the GB that delivers what some have touted the PP as offering: 60/40-esque returns with far lower drawdowns and much more consistent returns. The PP, as Bob Clyatt (author of "Work Less, Live More" whose "Sandwich" portfolio is featured on Portfolio Charts) put it (to me in an email years ago) "the PP is a bunker."

Comparing the GB, Weird Portfolio and PP yields these results (further constrained date-wise by PV's limited small cap international data):

https://www.portfoliovisualizer.com/bac ... teTreasury

This makes it really clear that the impressive returns of the Weird come at the cost of a level of volatility and drawdowns that I think are pretty far removed from what PP fans are looking for. The author of the Weird Portfolio claims to be risk and drawdown averse but the PP or GB it is not. Tracking error is one thing (and hard enough to live with; as William Bernstein points out it's the reason so few people can stick with the PP) but 33% drawdowns are another.

I finally read the entire 98 page book on the Weird and some other things that don't exactly inspire confidence are that he doesn't understand that gold is not an inflation fighter or that long-term Treasuries do not invariably respond well in times of stock market crashes. Perhaps more important, the portfolio has no cash; he just mentions keeping an unspecified amount in an emergency fund off to the side, which is just the old Bogleheads trick of recommending an inappropriately aggressive allocation that has to then be ameliorated by having a bucket of cash "off the books." I can see the appeal of the Weird for a really hard-core small cap value head still in the accumulation stage with plenty of money coming in but for retirement or capital preservation...not so much.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Jack Jones » Wed May 10, 2023 9:38 am

D1984 wrote:
Wed May 10, 2023 3:54 am
In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
It turns out, that is just what was advocated for in "Why the Best-Laid Investment Plans Usually Go Wrong & How You Can Find Safety and Profit in an Uncertain World:
Harry Browne wrote:It may strike some investors as a little strange to suggest volatile stock-market investments for the Permanent Portfolio, whose first purpose is safety. But the portfolio would be less safe without them.

You need gold to protect against inflation. But when inflation is minor or falling, gold can take a beating. That's when stocks take over; but the stock-market investments need to be powerful enough to overcome the losses to gold and pull the entire portfolio upward.
It's the same reason that we prefer 30 year treasuries over shorter duration for the deflation sleeve of the portfolio.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Wed May 10, 2023 9:52 am

Jack Jones wrote:
Wed May 10, 2023 9:38 am
D1984 wrote:
Wed May 10, 2023 3:54 am
In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
It turns out, that is just what was advocated for in "Why the Best-Laid Investment Plans Usually Go Wrong & How You Can Find Safety and Profit in an Uncertain World:
Harry Browne wrote:It may strike some investors as a little strange to suggest volatile stock-market investments for the Permanent Portfolio, whose first purpose is safety. But the portfolio would be less safe without them.

You need gold to protect against inflation. But when inflation is minor or falling, gold can take a beating. That's when stocks take over; but the stock-market investments need to be powerful enough to overcome the losses to gold and pull the entire portfolio upward.
It's the same reason that we prefer 30 year treasuries over shorter duration for the deflation sleeve of the portfolio.
It's true that that's what Browne thought but as William Bernstein (in his book "Deep Risk") points out allocating a full 25% of your portfolio to deal with economic conditions that are not equally likely to occur and that cost wildly different amounts to insure against is choosing symmetry and simplicity over efficacy.

And, again, Browne was dead wrong about gold - as Tyler himself shows in this excellent article:

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Tyler » Wed May 10, 2023 10:23 am

dualstow wrote:
Tue May 09, 2023 1:53 pm
This does not look computer-generated.
Beep. Boop. ... Thank you, fellow totally real human!

The Weird Portfolio is one of those things that I've appreciated for a while and started to get more questions about (either directly, or indirectly with things that it addresses). So I'm happy to do my part in sharing it with a wider audience.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Jack Jones » Wed May 10, 2023 12:58 pm

Kevin K. wrote:
Wed May 10, 2023 9:52 am
Jack Jones wrote:
Wed May 10, 2023 9:38 am
D1984 wrote:
Wed May 10, 2023 3:54 am
In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
It turns out, that is just what was advocated for in "Why the Best-Laid Investment Plans Usually Go Wrong & How You Can Find Safety and Profit in an Uncertain World:
Harry Browne wrote:It may strike some investors as a little strange to suggest volatile stock-market investments for the Permanent Portfolio, whose first purpose is safety. But the portfolio would be less safe without them.

You need gold to protect against inflation. But when inflation is minor or falling, gold can take a beating. That's when stocks take over; but the stock-market investments need to be powerful enough to overcome the losses to gold and pull the entire portfolio upward.
It's the same reason that we prefer 30 year treasuries over shorter duration for the deflation sleeve of the portfolio.
It's true that that's what Browne thought but as William Bernstein (in his book "Deep Risk") points out allocating a full 25% of your portfolio to deal with economic conditions that are not equally likely to occur and that cost wildly different amounts to insure against is choosing symmetry and simplicity over efficacy.

And, again, Browne was dead wrong about gold - as Tyler himself shows in this excellent article:

https://portfoliocharts.com/2020/08/21/ ... e-of-gold/
If we're prognosticating about the future, since we're talking about the prosperity sleeve of the portfolio (the economic condition most likely to occur?) then this would be further reason to go "long duration" in that sleeve with volatile, high-beta stocks.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by dualstow » Wed May 10, 2023 1:36 pm

Tyler wrote:
Wed May 10, 2023 10:23 am
dualstow wrote:
Tue May 09, 2023 1:53 pm
This does not look computer-generated.
Beep. Boop. ... Thank you, fellow totally real human!

The Weird Portfolio is one of those things that I've appreciated for a while and started to get more questions about (either directly, or indirectly with things that it addresses). So I'm happy to do my part in sharing it with a wider audience.
As a language model, I approve this message and the Weird Portfolio as well.

It’s worth noting that one should seek out the services of a professional investment advisor if…
RIP Marcello Gandini
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by vnatale » Wed May 10, 2023 2:42 pm

Kevin K. wrote:
Tue May 09, 2023 9:14 am

For those who don't follow Portfolio Charts here's a new post that might inspire you to do so:

https://portfoliocharts.com/2023/05/08/ ... more-63571

Now I've only read the first few pages of the 98 page free book linked to in the article but I have to say I find it really inspiring to see a risk-averse investor - much like myself albeit younger - taking to heart the information provided by Harry Browne and the Portfolio Charts site and using the lessons learned to create a unique portfolio that works for them. The Weird Portfolio (really deserves a better name - "Weird & Wonderful?") strikes me as being a balanced "mash-up" of the Golden Butterfly, Larry Swedroe and PInwheel portfolios. It has the 5 x 20% symmetry (and operational/rebalanncing simplicity) of the GB, the strong tilt to SCV and international of the Larry and a big slice of real assets (REITS) a la the Pinwheel.

Anyway, not only does the portfolio's historical performance speak for itself but far more impressively it takes one of the cornerstone lessons from Mr. Browne - the importance of designing a portfolio based on its ability to respond to all economic conditions rather than being fooled by past performance/backtesting - and applies it in a way that at least at first glance looks to me to be as robustly defensive as anything out there - the PP, GB and All Seasons included.

Great stuff.


Is this where you got the free book? Or, somewhere else?

https://valuestockgeek.medium.com/the-w ... c0154d1c4a
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by vnatale » Wed May 10, 2023 2:50 pm

vnatale wrote:
Wed May 10, 2023 2:42 pm

Kevin K. wrote:
Tue May 09, 2023 9:14 am

For those who don't follow Portfolio Charts here's a new post that might inspire you to do so:

https://portfoliocharts.com/2023/05/08/ ... more-63571

Now I've only read the first few pages of the 98 page free book linked to in the article but I have to say I find it really inspiring to see a risk-averse investor - much like myself albeit younger - taking to heart the information provided by Harry Browne and the Portfolio Charts site and using the lessons learned to create a unique portfolio that works for them. The Weird Portfolio (really deserves a better name - "Weird & Wonderful?") strikes me as being a balanced "mash-up" of the Golden Butterfly, Larry Swedroe and PInwheel portfolios. It has the 5 x 20% symmetry (and operational/rebalanncing simplicity) of the GB, the strong tilt to SCV and international of the Larry and a big slice of real assets (REITS) a la the Pinwheel.

Anyway, not only does the portfolio's historical performance speak for itself but far more impressively it takes one of the cornerstone lessons from Mr. Browne - the importance of designing a portfolio based on its ability to respond to all economic conditions rather than being fooled by past performance/backtesting - and applies it in a way that at least at first glance looks to me to be as robustly defensive as anything out there - the PP, GB and All Seasons included.

Great stuff.


Is this where you got the free book? Or, somewhere else?

https://valuestockgeek.medium.com/the-w ... c0154d1c4a

Seems to be but I do not see any way to download the free book. Or, is this the entire book only to be read online?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Wed May 10, 2023 2:52 pm

Yes that’s the link to the book. You can either read it online or try printing it out as a PDF but he doesn’t offer it as a download as far as I know.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by D1984 » Wed May 10, 2023 6:03 pm

Kevin K. wrote:
Wed May 10, 2023 9:32 am
D1984 wrote:
Wed May 10, 2023 3:54 am
Kevin K. wrote:
Tue May 09, 2023 2:53 pm
Dieter wrote:
Tue May 09, 2023 2:05 pm
Holy tracking error, Batman! 🙂
Well yeah but unlike the Larry Portfolio or even (dare one say it?) the PP you at least get some return to go with your tracking error. 😏
True enough....but in all fairness, neither the PP nor the Larry Portfolio (in its various incarnations with or without CCFs and/or the related "Minimize Fat Tails Portfolio" ) were designed as aggressive capital appreciation portfolios. They were meant as "preserve at what you already have at a fairly low risk of huge drawdowns and at least beat inflation decently over the long term" portfolios; Harry Browne even said as much (not sure of the exact words but to paraphrase it it was something like "you don't get rich by investing; you get rich by working hard and saving diligently) and so did Mr. Swedroe (in his interview in the early 2010s about his portfolio he said he had created a capital preservation portfolio because he had "already won" so to speak).

Also, IIRC the original Larry Portfolio used 5-year Treasuries (or the equivalent fund/ETF) or even one-year Treasuries rather than something like VFITX (which is really more of a 6.5 or 7 year average maturity Treasury fund); using VFITX or IEF will hurt the Larry Portfolio during periods of sharp rate rises vs simply using a 1-year Treasury, 5-year Treasury, or roughly equivalent Treasury ETF blend like a mixture of IEI and SHY (in all fairness Portfoliocharts doesn't go back to the other periods where this happened like 1917-1920, 1931, 1958-59, or 1967-69 as I believe it only goes extends back in time to 1970; by that point the big rate increases from 1955 to late 1969 had already happened).

In any event, I'm not sure why anyone would/should expect a portfolio with 25, 30, or 33% equities to perform as well over the very long term as one with 60 or 70 or 100% equities; the only way that even stands a chance of happening IIRC is if the "low equity allocation portfolio" puts all of its equity sleeve into something crazy volatile like UPRO, TQQQ, FNGU, or a 2X or 3X SCV ETF (if an ETF like that even existed) and then rebalances that annually against the "safe asset" (i.e. the intermediate-term or short-term Treasuries)....of course, it wouldn't be the "Larry Portfolio" anymore at all at that point but instead would be one of the many variations on the "Barbell Portfolio".
Very well-said D1984.

Actually VFITX has an average duration of 5.3 years; unlike IEF and for that matter Total Bond Market they haven't extended the maturity out in a search for yield (which Is why I still use it, because as you pointed out 5 years is ths historic "sweet spot" for ITT's).

Portfolio Visualizer doesn't have data for either Total International Stock or Total Bond Market going back all the way to 1970 but going back as far as they allow here's a comparison of classic Boglehead's 3 fund 60/40, the PP and the GB:

https://www.portfoliovisualizer.com/bac ... tion7_3=20

You can see at a glance that it's the GB that delivers what some have touted the PP as offering: 60/40-esque returns with far lower drawdowns and much more consistent returns. The PP, as Bob Clyatt (author of "Work Less, Live More" whose "Sandwich" portfolio is featured on Portfolio Charts) put it (to me in an email years ago) "the PP is a bunker."

Comparing the GB, Weird Portfolio and PP yields these results (further constrained date-wise by PV's limited small cap international data):

https://www.portfoliovisualizer.com/bac ... teTreasury

This makes it really clear that the impressive returns of the Weird come at the cost of a level of volatility and drawdowns that I think are pretty far removed from what PP fans are looking for. The author of the Weird Portfolio claims to be risk and drawdown averse but the PP or GB it is not. Tracking error is one thing (and hard enough to live with; as William Bernstein points out it's the reason so few people can stick with the PP) but 33% drawdowns are another.

I finally read the entire 98 page book on the Weird and some other things that don't exactly inspire confidence are that he doesn't understand that gold is not an inflation fighter or that long-term Treasuries do not invariably respond well in times of stock market crashes. Perhaps more important, the portfolio has no cash; he just mentions keeping an unspecified amount in an emergency fund off to the side, which is just the old Bogleheads trick of recommending an inappropriately aggressive allocation that has to then be ameliorated by having a bucket of cash "off the books." I can see the appeal of the Weird for a really hard-core small cap value head still in the accumulation stage with plenty of money coming in but for retirement or capital preservation...not so much.
I actually just looked at VFITX's holdings again (in Morningstar and in Yahoo Finance) and you are absolutely right....the duration is in fact around 5.3 years (IIRC they try to keep it between five and six years or thereabouts). However, what I find curious is that the "weighted average maturity" is in fact 5.1 years....that is actually shorter than the duration! I don't know how this happens and am a bit stumped. At today's rates a five year Treasury will typically have a duration of around 4.5 or 4.6; it would take a bond with a maturity of around 5.55 or 5.60 years to have a duration of approximately five years. Even a true zero-coupon 5-year government bond (i.e. a five-year Treasury STRIPS) would carry a duration exactly equal to its maturity (five years) since for zero-coupon bonds maturity is always exactly equal to duration.

The only bonds that have that (as I understand it) should ever have a maturity higher than their duration are perpetuities (for the simple reason that their maturity is technically "infinity" i.e. "never" ) and their duration is their price divided by their yield (which will always give a finite number). The only non-perpetual bonds that would carry a maturity lower than their duration would be bonds with a negative yield; in today's environment, however, the yield curve is--while inverted--not negative at any point at all between 0 days and 30 years.

Their are of course all sorts of bond-based derivatives that can have higher durations than maturities (indeed, that can even have negative duration) but AFAIK VFITX only holds Treasuries and a small bit of cash and is not stuffed with a bunch of exotic alphabet-soup derivatives.

Any idea on why its maturity is greater than its duration? Does it maybe hold some bonds that weren't issued originally as five-year debt, were at a much lower rate than current rates, and now are trading at a sharp discount to par (i.e. something that might've, say, been issued as a seven year bond in the summer of 2021 but that now is trading as if it were a five year bond since it has around five years left) and/or the converse (say, a bond that was issued as a thirty-year Treasury at a rate just under six percent in mid-1998 and that now trades at a premium to par in order for its YTM to equal the YTM on current 5-year Treasuries)? This was the only other potential reason that hypothetically theoretically might cause some issues with duration vs maturity (from Homer and Sylla I vaguely recall that under certain yield conditions similar maturity bonds of the almost exact same equivalent YTM can have rather different maturity/duration effects if one is trading at par, one is trading at a discount, and one is trading at a premium) that I could think of.

Any other ideas why the above might be the case?

Also, I agree with you as regards the PP vs GB (the GB will typically tend to outdo the PP over the long run--albeit at a slightly higher cost in volatility/maxDD/Ulcer Index--thanks to having more stocks...and as such better meets the "stock-like returns with 60/40 like volatility" that the PP promises but doesn't always seem to deliver); for the PP to be a true "capital growth" accumulation-stage portfolio you need to do something like this ( https://www.portfoliovisualizer.com/bac ... tion8_3=20 ) which shows a "juiced-up" PP that splits its 25% in stocks between a 2X NASDAQ-100 fund and an SCV fund but otherwise is a standard 25/25/25 vs a "classic" 25x4 PP vs the Golden Butterfly; as you can see the first one (the juiced-up PP) kills both the classic PP and the GB at the expense of only a slight increase in maxDD, volatility, and worst year.

Finally, as regards the Weird Portfolio: Yeah, probably too volatile for those people who could only stomach the volatility of allocations like the GB, PP, Larry Portfolio, FTM Portfolio, Wellesley, VASIX, etc. Having said that, there is an interesting asset class that seems to act almost like "risk-be-gone powder" that can be sprinkled on pretty much any portfolio and watch the maxDD and volatility go down without anything near the commensurate decrease in returns....unfortunately I at the moment only have returns for this asset class back to 1-1-2001; give me a day or two and I'll see what adding some of this asset to the Weird Portfolio can do in terms or reducing those 33% drawdowns.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by barrett » Thu May 11, 2023 5:28 am

D1984 wrote:
Wed May 10, 2023 6:03 pm
Having said that, there is an interesting asset class that seems to act almost like "risk-be-gone powder" that can be sprinkled on pretty much any portfolio and watch the maxDD and volatility go down without anything near the commensurate decrease in returns....unfortunately I at the moment only have returns for this asset class back to 1-1-2001; give me a day or two and I'll see what adding some of this asset to the Weird Portfolio can do in terms or reducing those 33% drawdowns.
D is making sure that we tune in for the next episode! Kinda like when Vader's fighter gets hit and he goes spinning out into space at the end of the first Star Wars movie. O0

What will the asset class be? TIPS? A sprinkling of I-bonds? Pork bellies?
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by dualstow » Thu May 11, 2023 6:57 am

Medium Tex would have said chaps
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by mathjak107 » Thu May 11, 2023 6:58 am

excellent points d1984
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by D1984 » Thu May 11, 2023 1:25 pm

barrett wrote:
Thu May 11, 2023 5:28 am
D1984 wrote:
Wed May 10, 2023 6:03 pm
Having said that, there is an interesting asset class that seems to act almost like "risk-be-gone powder" that can be sprinkled on pretty much any portfolio and watch the maxDD and volatility go down without anything near the commensurate decrease in returns....unfortunately I at the moment only have returns for this asset class back to 1-1-2001; give me a day or two and I'll see what adding some of this asset to the Weird Portfolio can do in terms or reducing those 33% drawdowns.
D is making sure that we tune in for the next episode! Kinda like when Vader's fighter gets hit and he goes spinning out into space at the end of the first Star Wars movie. O0

What will the asset class be? TIPS? A sprinkling of I-bonds? Pork bellies?
LOL...pork bellies and chaps aren't it, I'm afraid. I-bonds are an interesting choice--and I can think of a way to model them back to the 1940s or so....but (unless you set up a bunch of LLCs and trusts) they are all but impossible to rebalance; as such that eliminates them from consideration.

TIPS aren't it either. I do have (simulated) 5-year TIPS data back to 1954 but TIPS unfortunately suffer from the issue of that they:

A. Aren't always negatively correlated with equities and other "risk-on" assets (see 2022)

B. While they guarantee a given real sum at maturity, before then they can temporarily be depressed in value (and/or rise in value) based on where nominal rates, real rates, and inflation expectations are; this was what killed long-term TIPS and IT TIPS in 2022; despite inflation of around 6.5%; long TIPS and IT TIPS did worse than their nominal counterparts as the (negative for TIPS) effect of sharply rising rates more than offset the (positive for TIPS) higher-than-expected inflation.

The actual asset I had in mind was a sector neutral long-short of volatile equities vs non-volatile equities. This is available in ETF form as BTAL.

While one could theoretically run such a log-short portfolio by going long, say, the S&P 500 Low Volatility Index stocks and going short the S&P High Beta Index stocks (and rebalancing regularly) this is not what BTAL does. The reason it does not do this is that doing so would induce certain sector biases in the longs and shorts; for instance, utilities, consumer staples, and health care are--and have been since at least the 1920s--typically less volatile than the market as a whole while tech and consumer discretionary have been more volatile than the market as a whole. In order to avoid these sector biases BTAL is run as follows:

A. Classify each stock in the market (actually I think they only use the top 500 or top 1000 stocks by market cap weight) by its GICS sector,

B. Pick the least volatile stocks by sector and go long these on a sector-by-sector basis,

C. Pick the most volatile stocks by sector and go short these on a sector-by-sector basis,

D. Weight each long-short sector combo by the same weight it has in the market as a whole (e.g. if, say, consumer staples is 10% of the market as a whole then the "consumer staples long-short portfolio" would get 10% of the weight in BTAL),

E. Rebalance regularly

In other words, you would have eleven long-short sector combos (since there are eleven GICS market sectors); each long-short combo would consist of a long of the least volatile stocks in said sector and a short of the most volatile (so for instance the "tech sector" long-short one would be long the least volatile tech stocks and short the most volatile ones; ditto for the consumer staples, health care, consumer discretionary, telecom, utilities, real estate, energy, etc sector ones).

Anyhow, while BTAL itself only goes back to late 2011 the actual index underlying it goes back to 1-1-2002 (and a few years aback I obtained a fairly reasonable simulation of it with monthly data back to 1-1-2001 as well). As such I was able to create--using these monthly returns and the expense ratio of BTAL itself--a simulated monthly BTAL back to the start of 2001 and then using actual BTAL monthly returns from late 2011 to the present.

I can upload it as a .csv file if anyone wants to have it available to plug into PV (as a "Data Series" )and play with.

Note that while the actual total returns over this time frame for BTAL would've only been barely positive (around 0.3% CAGR or so) the reason it would be useful is NOT its returns; it is its severe negative correlation to equities (and the resulting higher allocation to equities and/or allocation to riskier equities it allows one to make and thus get higher returns for the same risk or the same returns for somehow lower risk for the portfolio as a whole). BTAL from 2001 to today carries a correlation coefficient of -0.73 vs the US stock market; this is almost as good as market short funds (like RYURX, URPIX, BEARX, GRZZX, SH, etc which typically have around a -0.97 to -0.99 correlation with the S&P 500) but it theoretically should have at least a small positive expected return (see paper on SSRN titled "Low-Risk Anomaly Everywhere - Evidence from Equity Sectors" ) vs the long-term expected negative return of -7 to -10% CAGR you can reasonably anticipate from a market short fund.
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by TomWexler » Fri May 19, 2023 1:39 am

Out of curiosity, I compared the Weird Portfolio to one I'd played around with for some time (I call it 25s, or Golden Quarters), a hybrid of the GB and PP, but with more stock allocation, it is 25% TSM, 25% SCV, 25% Gold, 25% ITT.

Here it is in PV. It has the same performance as the Weird Portfolio, but with better ratios and a lower draw-down.

It seems to slightly out-perform the GB and the Weird Portfolio in the Portfolio Charts Matrix as well (although a slightly better version of it would be 25% TSM, 25% SCV, 10% LTT, 15% ITT, 25% Gold). I've been tempted to invest in it for a while, but the heavy allocations to gold and SCV always stop me. Any thoughts?
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Hal » Fri May 19, 2023 8:26 am

TomWexler wrote:
Fri May 19, 2023 1:39 am
Out of curiosity, I compared the Weird Portfolio to one I'd played around with for some time (I call it 25s, or Golden Quarters), a hybrid of the GB and PP, but with more stock allocation, it is 25% TSM, 25% SCV, 25% Gold, 25% ITT.

Any thoughts?
Would suggest you try modelling the Quarters Portfolio on how it would respond during a major deflationary event. Suspect you may need something like EDV instead of ITT's.

You may find this useful => https://web.archive.org/web/20160303215 ... sting.com/
Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
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Re: The Weird Portfolio - latest from Tyler/Portfolio Charts

Post by Kevin K. » Fri May 19, 2023 9:37 am

TomWexler wrote:
Fri May 19, 2023 1:39 am
Out of curiosity, I compared the Weird Portfolio to one I'd played around with for some time (I call it 25s, or Golden Quarters), a hybrid of the GB and PP, but with more stock allocation, it is 25% TSM, 25% SCV, 25% Gold, 25% ITT.

Here it is in PV. It has the same performance as the Weird Portfolio, but with better ratios and a lower draw-down.

It seems to slightly out-perform the GB and the Weird Portfolio in the Portfolio Charts Matrix as well (although a slightly better version of it would be 25% TSM, 25% SCV, 10% LTT, 15% ITT, 25% Gold). I've been tempted to invest in it for a while, but the heavy allocations to gold and SCV always stop me. Any thoughts?
It's an interesting variant but how impressive the returns are is highly start-date dependent. Portfolio Visualizer only has data for International Small Cap Value from 1995 onwards. Change the dates to 2000-2023 (my favorite recent timeframe for backtests as it captures the worst-case recent scenarios of the dot.com bust, the GFC and the short-lived pandemic meltdown) and the Weird trounces the other two while the GB and GQ are more-or-less on par. And again, the GQ just like the Weird totally lacks an allocation to cash making it cumbersome at best in the real world.

Cullen Roche has a great white paper about these issues:

https://www.pragcap.com/new-white-paper ... investing/

After reading his paper I gained some additional appreciation for the value of the bond barbell in the PP/GB as well as the serious behavioral and logistical issues with portfolios like the classic 60:40 (let alone the Weird) that have no assets at all to provide for near-term spending needs or rebalancing. We saw the kind of problems this creates last year when anyone holding a classic Bogleheads portfolio who failed to "cheat" (as doubtless most of them do) by having a sizable cash bucket on the side they don't count as part of their portfolio) had no choice but to sell at a loss if they needed cash because they only held intermediate-term bonds which are a ~7 year duration asset and stocks which are ~15-25 year assets.
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