I guessed that the push for retail sales of risky assets came from quite high up the financial food chain. Someone needs to be buying high and selling low in order to feed the gains of those who are buying low and selling high. I guess much of the buying high is done as stock buy backs by corporations but they also want retail customers who are likely to panic and sell low to create bargain buying opportunities. There is a big hunger for dumb money. The dumber the better I guessKevinW wrote:Do you understand why the financial industry has an interest in selling higher-risk investment products? They clearly do since practically every firm and advisor, even consumer-friendly ones like Vanguard and TIAA-CREF, push everyone to very risky portfolios. I've never understood this since the ERs on bond funds are generally comparable or higher than those on stock funds.melveyr wrote: The reason they get conflated is because financial institutions benefit from you thinking that you have a higher risk tolerance.
Backtesting for the Optimum HBPP Allocations
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Re: Backtesting for the Optimum HBPP Allocations
"Good judgment comes from experience. Experience comes from bad judgment." - Mulla Nasrudin
Re: Backtesting for the Optimum HBPP Allocations
They cannot compete on the lower end of the risk spectrum because of products like T-Bills, TIPS, or I-bonds. So the best course of action is to convince people that those products are innapropriate for their situation.KevinW wrote:
Do you understand why the financial industry has an interest in selling higher-risk investment products? They clearly do since practically every firm and advisor, even consumer-friendly ones like Vanguard and TIAA-CREF, push everyone to very risky portfolios. I've never understood this since the ERs on bond funds are generally comparable or higher than those on stock funds.
Additionally, they are in the business of selling dreams. You can't build dreams out of low risk investments.
Last edited by melveyr on Fri Mar 29, 2013 3:04 pm, edited 1 time in total.
everything comes from somewhere and everything goes somewhere
Re: Backtesting for the Optimum HBPP Allocations
To some extent it might be partly that the people actually doing the retail selling actually believe the hype themselves. I think the way compounding works is really quite counter-intuitive. People all too easily fail to grasp that a 50% loss needs a subsequent 100% gain to get even. That effect creates the illusion that it genuinely is a good idea to be taking goofy risks.
"Good judgment comes from experience. Experience comes from bad judgment." - Mulla Nasrudin
- MachineGhost
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Re: Backtesting for the Optimum HBPP Allocations
There is kickbacks in referring patients to diagnostic centers owned by the docs doing the referring. This is especially egregarious in Medicare. I trust no doctor's referral. I'll price shop myself, thanks!Slotine wrote: To be fair, medicine does have laws against direct-fees tied to the sales. Gifts, speaking presentations, research payments, advisory fees all borderline legitimate uses, which makes it so hard to combat.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
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Re: Backtesting for the Optimum HBPP Allocations
I stand corrected, sir!
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Backtesting for the Optimum HBPP Allocations
Best is multivariate testing where you not only change one parameter (the 25-25-25-25 allocation) but more than one parameter at the same time including the distribution of the stocks, bonds, cash and metals portfolio and the rebalancing bands or timings as well. All at the same time. This is how it is professionally done.
http://en.wikipedia.org/wiki/Multivariate_testing
We need a little more advanced programmer to do that, though.
http://en.wikipedia.org/wiki/Multivariate_testing
We need a little more advanced programmer to do that, though.
Last edited by hedgehog on Sat Jun 15, 2013 4:26 am, edited 1 time in total.
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Re: Backtesting for the Optimum HBPP Allocations
Ummmm.... k. Thanks for your feedback.hedgehog wrote:We need a little more advanced programmer to do that, though.
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Re: Backtesting for the Optimum HBPP Allocations
Peak2Trough - I note for gold you only have monthly data 1968-1972. You can go to http://www.perthmint.com.au/investment_ ... rices.aspx to download daily London fix data from jan 1968
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
Re: Backtesting for the Optimum HBPP Allocations
Peak2Trough:
Possibly could you or would you make your calculator able to calculate some gearing with the PP? Like 1.5x, 2x. Out if pure academic interest to see where it hits a margin call.
- http://gyroscopicinvesting.com/forum/va ... /#msg84425
- http://gyroscopicinvesting.com/forum/pe ... ting-a-pp/
I truly appreciate your tool.
Possibly could you or would you make your calculator able to calculate some gearing with the PP? Like 1.5x, 2x. Out if pure academic interest to see where it hits a margin call.
- http://gyroscopicinvesting.com/forum/va ... /#msg84425
- http://gyroscopicinvesting.com/forum/pe ... ting-a-pp/
I truly appreciate your tool.
Re: Backtesting for the Optimum HBPP Allocations
If I remember correctly Sharpe ratio was featured here: https://web.archive.org/web/20160324133 ... l-returns/
Is it removed with the new design? What's the aggregate Sharpe value?
Is it removed with the new design? What's the aggregate Sharpe value?
Re: Backtesting for the Optimum HBPP Allocations
Hello,
who is using different allocation than 25-25-25-25% ? And why?
Thank you and great 2015!
who is using different allocation than 25-25-25-25% ? And why?
Thank you and great 2015!
Live healthy, live actively and live life!
Re: Backtesting for the Optimum HBPP Allocations
Frugal, one might use a different allocation in order to cut down volatility. As an old timer, the most important thing for me is to do the best I can while keeping the draw-downs low.frugal wrote: Hello,
who is using different allocation than 25-25-25-25% ? And why?
Thank you and great 2015!
Here's a model of what I think can match the PP return but with lower draw-downs.
- 44% IEF: iShares 7-10 Year Treasury Bond
- 18% TLT: iShares 20+ Year Treasury Bond
- 13% IAU: iShares Gold Trust
- 25% IJH: iShares Core S&P Mid-Cap
Re: Backtesting for the Optimum HBPP Allocations
Hello !robtkatz wrote:
Frugal, one might use a different allocation in order to cut down volatility. As an old timer, the most important thing for me is to do the best I can while keeping the draw-downs low.frugal wrote: Hello,
who is using different allocation than 25-25-25-25% ? And why?
Thank you and great 2015!
Here's a model of what I think can match the PP return but with lower draw-downs.
- 44% IEF: iShares 7-10 Year Treasury Bond
- 18% TLT: iShares 20+ Year Treasury Bond
- 13% IAU: iShares Gold Trust
- 25% IJH: iShares Core S&P Mid-Cap
CAn you please post the backtest chart :-)
Live healthy, live actively and live life!
Re: Backtesting for the Optimum HBPP Allocations
Hi Frugal, here's the 10-year chart:
The backtesting software is called EzBackTest, and its free and easy to use! Google it and you'll be able to backtest for yourself.
Ozzy
The backtesting software is called EzBackTest, and its free and easy to use! Google it and you'll be able to backtest for yourself.
Ozzy
Re: Backtesting for the Optimum HBPP Allocations
Hello,ozzy wrote: Hi Frugal, here's the 10-year chart:
The backtesting software is called EzBackTest, and its free and easy to use! Google it and you'll be able to backtest for yourself.
Ozzy
thank you ozzy. The annualized returns are not so different from the standard allocation.
Unfortunately I already tested the software but it doesn't work with EUROPEAN ETFs
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Re: Backtesting for the Optimum HBPP Allocations
As long as Yahoo has the data, you might be able to get this to work: https://code.google.com/p/mypersonalindex/frugal wrote: Unfortunately I already tested the software but it doesn't work with EUROPEAN ETFs
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Backtesting for the Optimum HBPP Allocations
MachineGhost,MachineGhost wrote:As long as Yahoo has the data, you might be able to get this to work: https://code.google.com/p/mypersonalindex/frugal wrote: Unfortunately I already tested the software but it doesn't work with EUROPEAN ETFs
EzBackTest didn't work with me for European ETF's
Now I will test this new software. First test was also impossible...
Happy 2015 MG!
Live healthy, live actively and live life!
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Re: Backtesting for the Optimum HBPP Allocations
Happy 2015 to you too, frugal!frugal wrote: Happy 2015 MG!
And BTW, I'm currently about 54.5% average cash between my two PP portfolios. I think you would be shocked at how much cash it actually takes to reduce the PP's -25% MaxDD to a more tolerable number. I don't believe you can reach your retirement goals and also have a low drawdown portfolio by increasing cash. It hurts the return too much, so it is one or the other. One thing that could work is to increase the cash to just enough so there is never a negative year historically.
Last edited by MachineGhost on Thu Jan 08, 2015 2:47 am, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Backtesting for the Optimum HBPP Allocations
MachineG,MachineGhost wrote:Happy 2015 to you too, frugal!frugal wrote: Happy 2015 MG!
And BTW, I'm currently about 54.5% average cash between my two PP portfolios. I think you would be shocked at how much cash it actually takes to reduce the PP's -25% MaxDD to a more tolerable number. I don't believe you can reach your retirement goals and also have a low drawdown portfolio by increasing cash. It hurts the return too much, so it is one or the other. One thing that could work is to increase the cash to just enough so there is never a negative year historically.
Howdy?
a) That I didn't know... you have 2 different PPs?
b) I've been doing rebalancements only by adding new cash to the assets and put it at 25% ? Why it is not good for retirement goals? Or you are saying that I am only adding to the asset CASH ?
c) Is that possible to increase the CASH part to the point of 0 negative years?
Harry Browne Permanent Portfolio
Start Date
End Date
Starting Capital
S&P 500 %
Gold %
T-Bonds %
Cash %
Cash Option
Long Bond Option
Rebalance
Reinvest Div/Int
Result View
Show Rebalancing
Show Component Returns
DD Count Threshold %
Date S&P500 Tbond Tbill Gold Total
1969 200 500 9,100 200 10,000 (+2.15%)
1970 204 511 9,295 204 10,215 (+8.57%)
1971 222 554 10,092 222 11,090 (+5.82%)
1972 235 587 10,679 235 11,735 (+5.54%)
1973 248 619 11,270 248 12,385 (+6.08%)
1974 263 657 11,955 263 13,137 (+7.66%)
1975 283 707 12,871 283 14,143 (+7.38%)
1976 304 759 13,820 304 15,187 (+6.91%)
1977 325 812 14,775 325 16,236 (+4.69%)
1978 340 850 15,467 340 16,997 (+7.24%)
1979 365 911 16,586 365 18,227 (+12.66%)
1980 411 1,027 18,686 411 20,534 (+11.63%)
1981 458 1,146 20,859 458 22,922 (+12.30%)
1982 515 1,287 23,425 515 25,742 (+15.40%)
1983 594 1,485 27,032 594 29,706 (+7.87%)
1984 641 1,602 29,159 641 32,042 (+9.52%)
1985 702 1,755 31,935 702 35,094 (+10.47%)
1986 775 1,938 35,279 775 38,768 (+9.14%)
1987 846 2,116 38,504 846 42,312 (+5.63%)
1988 894 2,235 40,674 894 44,697 (+6.41%)
1989 951 2,378 43,281 951 47,562 (+9.63%)
1990 1,043 2,607 47,452 1,043 52,145 (+7.45%)
1991 1,121 2,801 50,985 1,121 56,028 (+7.53%)
1992 1,205 3,012 54,825 1,205 60,247 (+4.08%)
1993 1,254 3,135 57,059 1,254 62,703 (+4.70%)
1994 1,313 3,283 59,742 1,313 65,650 (+2.45%)
1995 1,345 3,363 61,204 1,345 67,257 (+8.48%)
1996 1,459 3,648 66,396 1,459 72,963 (+4.98%)
1997 1,532 3,830 69,701 1,532 76,594 (+5.97%)
1998 1,623 4,058 73,859 1,623 81,163 (+6.50%)
1999 1,729 4,322 78,659 1,729 86,438 (+3.98%)
2000 1,797 4,494 81,786 1,797 89,875 (+6.05%)
2001 1,906 4,766 86,738 1,906 95,316 (+5.31%)
2002 2,008 5,019 91,344 2,008 100,378 (+2.36%)
2003 2,055 5,137 93,499 2,055 102,747 (+2.19%)
2004 2,100 5,250 95,544 2,100 104,994 (+1.64%)
2005 2,134 5,336 97,108 2,134 106,712 (+3.21%)
2006 2,203 5,507 100,223 2,203 110,135 (+4.86%)
2007 2,310 5,774 105,094 2,310 115,487 (+5.95%)
2008 2,447 6,118 111,351 2,447 122,364 (+4.53%)
2009 2,558 6,395 116,391 2,558 127,902 (-0.12%)
2010 2,555 6,387 116,250 2,555 127,747 (+1.51%)
2011 2,593 6,484 118,000 2,593 129,670 (+2.03%)
2012 2,646 6,615 120,398 2,646 132,305 (+0.60%)
2013 2,662 6,655 121,126 2,662 133,105 (-0.50%)
2014 2,649 6,622 120,514 2,649 132,433 (+1.73%)
2015 2,695 6,737 122,605 2,695 134,730 (+0.45%)
2015-01-08 2,651 7,060 122,863 2,761 135,335
Years 46.05
CAGR 5.82%
Starting Capital 10,000
Ending Capital 135,335
Total Return 1253.35%
Max Drawdown 2.14% (1980-01-21 - 1980-03-27)
DD > 10% Count 0
Annualized Std. Dev 3.67%
Sharpe Ratio 0.10
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Re: Backtesting for the Optimum HBPP Allocations
I meant that if you did more than 25% cash to reduce the portfolio risk, it will will reduce the return and increase retirement shortfall risk. I can't remember, but I think even at 50% cash the PP still had a moderate MaxDD, maybe -15% or so. In other words, raising the cash level isn't quite as efficient as using trendfollowing.frugal wrote: b) I've been doing rebalancements only by adding new cash to the assets and put it at 25% ? Why it is not good for retirement goals? Or you are saying that I am only adding to the asset CASH ?
It certainly is. I did it before a few years ago using Simba's spreadsheet and Excel Solver. I actually did it so the net return after inflation was at least 0% each and every year.c) Is that possible to increase the CASH part to the point of 0 negative years?
It didnt put 2009 and 2013 to 0%+ but whos being nitpicky? What was the cash % for this? And BTW you should start from 4/1/1968.Years 46.05
CAGR 5.82%
Starting Capital 10,000
Ending Capital 135,335
Total Return 1253.35%
Max Drawdown 2.14% (1980-01-21 - 1980-03-27)
DD > 10% Count 0
Annualized Std. Dev 3.67%
Sharpe Ratio 0.10
Last edited by MachineGhost on Thu Jan 08, 2015 9:38 am, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Backtesting for the Optimum HBPP Allocations
MG,
as I remember the Cash was 90%
Maybe I'm going to add some INTERNATiONAL STOCK INDEX and increase a bit the STOCKS... later in a downleg...
Hug.
as I remember the Cash was 90%
Maybe I'm going to add some INTERNATiONAL STOCK INDEX and increase a bit the STOCKS... later in a downleg...
Hug.
Live healthy, live actively and live life!
Re: Backtesting for the Optimum HBPP Allocations
What is the method for trend-following?MachineGhost wrote: I meant that if you did more than 25% cash to reduce the portfolio risk, it will will reduce the return and increase retirement shortfall risk. I can't remember, but I think even at 50% cash the PP still had a moderate MaxDD, maybe -15% or so. In other words, raising the cash level isn't quite as efficient as using trendfollowing.
[ ... ]
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Re: Backtesting for the Optimum HBPP Allocations
Simple MA, etc..robtkatz wrote: What is the method for trend-following?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: Backtesting for the Optimum HBPP Allocations
Is there a reference that explains this in detail? I don't know much about it.MachineGhost wrote:Simple MA, etc..robtkatz wrote: What is the method for trend-following?
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Re: Backtesting for the Optimum HBPP Allocations
I would not recommend doing it since you're a neophyte, but heres a white paper about it:robtkatz wrote: Is there a reference that explains this in detail? I don't know much about it.
http://papers.ssrn.com/sol3/papers.cfm? ... _id=962461
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!