rocketdog wrote:
Thomas Hoog wrote:
I have also been playing around (great data) with set of allocations with round figures 0, 10, 20 etc. and the 40 years periode and the 30 years period. In the 30 years period the HP allocation performs less compared to the 40 years period. However the final conclusion was a 10 % (cash), 20 % (Gold), 30 % (Bonds), 40 (Stocks) allocation for me. It give a slightly better CAGR and some more risk in MAXDD. And that is ok for me.
It also makes sense. The HP 25 % allocation presume an equal duration of the period a favourite asset. However in the past the period of prosperity (stock) endures longer then p.e. recession (cash) or panic (gold).
I'm surprised that it falls out of your range
Could you run your allocations in the 30 years period ?
Your findings gave me a chuckle, because before I even started this I thought about a 10/20/30/40 allocation like the one you describe. The reason it fell out of my findings is that the StdDev and MaxDD are in the bottom 50% of such an allocation, and I restricted my data set to only the top 50% in each criteria. That's because I was trying to find the "sweet spot" between risk and reward, not simply mazimize my reward.
For those who don't really care about one or more of the criteria, then they can exclude that criteria from their filter. For instance, if I have more than 20 years before retirement, I might care more about CAGR than either StdDev or MaxDD, so I could exclude StdDev and MaxDD from my filtering criteria.
You can data mine different scenarios all day long. My objective was merely to see if I could find reasonable reward at a tolerable risk.
Ok, now I understand your method. And yes it has a StD below 50 % average.
Using your method and some logical allocations (C= Cash, B= Bonds, G=Gold, S = Stocks)
you get the folowing results
C B G S CAGR StD MAXDD Sharpe SharpeMDD
10 30 20 40 9,8 7,6 19,9% 0,54 20,60
25 25 25 25 9,3 6,8 20,2% 0,52 16,21
20 30 20 30 9,4 6,8 18,8% 0,54 15,35
15 35 15 35 9,5 7,0 17,4% 0,54 26,47
10 40 20 30 9,7 7,3 20,1% 0,55 19,90
and now to put them in your "order". The % means p.e first row 19 % in CAGR that there are 18 % better and 81 % less allocations
Red means last, Green best
C B G S CAGR StD MAXDD Sharpe SharpeMDD
10 30 20 40
19% 57% 31% 2% 4%
25 25 25 25
45% 29%
33% 5% 22%
20 30 20 30 39%
28% 26% 1% 9%
15 35 15 35 35% 32%
19% 2%
1%
10 40 20 30 23% 37% 32%
0% 7%
So you can choose according to your whishes.
The last one: 10 % TBills, 40 % Bonds, 20 % Gold, 30 % Stocks has a great Sharpe ratio