D1984 wrote: ↑
Sat May 15, 2021 10:16 am
mathjak107 wrote: ↑
Sat May 15, 2021 9:23 am
i have used the growth model up until before retirement blowing away a total market fund .
my current models have been the income model PLUS the growth model for longer term money .
MOST dont use the income model for anything but current and near term income .
so that is where your comparison is not correct .
in fact there are instructions on the website for best using the models as no one model may fit the bill
But comparing the Growth model to TSM is clearly not fair....if it is a "growth" model then why shouldn't it be compared to the blend of the two growth funds I mentioned (which has also beaten the pants off of TSM over the period I talked about)? Come to think of it, that blend of the growth funds also beat the TSM even from 1-1-2000 to 12-31-2020 (I deliberately started at 2000 since while the 1990s would've had growth doing splendidly the 2000-2008 period was not exactly a wonder show for US growth stock performance) and was only a hair behind the Growth model portfolio from Fidelity Monitor & Insight (if you would've started with $914,529 on 12-31-99 in both of them the FM&I Growth portfolio would've left you with roughly $4.407 million at year-end 2020 while the 50/50 LCG/MCG blend would've left you with around $4.3 million....this is assuming both were in tax-advantaged accounts, of course. The advantage in MaxDD for 2000-02 was with the FM&I portfolio--a 30.8% loss vs a 39.7% loss--but this is to be expected given that the 50/50 blend portfolio was starting from a slightly higher peak due to its somewhat higher return over the 1987-1999 period; when it comes to the 2008 crash both portfolios had approximately the same loss of a bit over 42%). Theoretically the 50/50 blend might've (I can't be sure since I don't have monthly data for the FM&I Growth portfolio's returns) had a slight advantage from the early 2000s if you are doing investments every month vs lump sum since by 2002 or early 2003 the 50/50 MCG/LCG blend would've been starting from a lower point which meant that your monthly DCA's contributions would buy cheaper shares than the FM&I portfolio's equivalent if you were DCAing into it but even if this is true this difference is likely to have been minor.
Again, as I said in my earlier post there seems to not be much difference in the FM&I Growth portfolio's returns vs a LCG/MCG blend; that doesn't mean it's a bad portfolio (hey, it turned $100K into $4.4 million) but it does make me question why it can't seem to seriously outperform a basic growth fund index blend (and this isn't even starting to compare it to QQQ or RYOCX over this same time frame....for that matter had TQQQ existed over the whole 1987 to 2020 period you could've gotten a roughly 22%+ MWRR CAGR on your monthly DCA'd contributions--and that is even including the 96% + maxDDs in 2000-02 and 2008-09! ).
What I said about the Income model not beating Wellesley or the almost 80% STT ladder with a bit of stocks stands as well; both of those portfolios would be very "safe" low variance low maxDD portfolios that someone might use to take retirement distributions (as withdrawals in lieu of income) from if they didn't want to risk a lot of their money in the market and were willing to give up a good bit of potential upside in order to not take very much risk. They would not be good choices for all of someone's portfolio (not nearly enough growth potential IMO) but for near term income needs wouldn't be too bad.
If I wanted something for current and near term income I might be just a wee bit concerned if it lost almost 20% in 2008 which the Income model did. That kind of loss wouldn't sting nearly so badly if the model could've even kept up with a basic income fund like Wellesley but it didn't; you would've ended up with $990,000 with Wellesley and only $485,000 with the Income model.
The models are designed around use over specific time frames ….so the results are going to be a mix of portfolios….that is why to compare to other funds or portfolios one needs to compare exactly what they are using .
The income model is for short term cash , it is designed to do better than a money market with 75% less volatility than the s&p 500
The other models are for longer term money ..
Following Our Models
Model Portfolio Typical Use Long-Term Return Goal Risk Target Recommended Investment Horizon
Income Generating income with relatively low principal risk 4 - 5% 0.33 Less than 5 years
Growth & Income Balanced approach for staying ahead of inflation 6 - 7% 0.66 5 to 10 years
Growth Stock-oriented approach with market-level risk 8 - 9% 1.00 10 years or more
Select Aggressive approach using sector funds 10% 1.20 10 years or more
Unique Opportunities Aggressive approach using non-sector funds 10% 1.20 10 years or more