Golden Butterfly Portfolio

A place to talk about speculative investing ideas for the optional Variable Portfolio

Moderator: Global Moderator

User avatar
Xan
Administrator
Administrator
Posts: 4392
Joined: Tue Mar 13, 2012 1:51 pm

Re: Golden Butterfly Portfolio

Post by Xan » Thu Nov 19, 2015 10:07 am

So two layers of buckets are okay, and zero layers of buckets are okay, but the absolute worst is one layer, which happens to be what the PP has.  Right?
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:11 am

no the pp is 3 buckets too .

cash , bonds and gold/stocks .  bucket 3 is traditionally the volatile bucket . it can be equity's , commodity's , gold , private equity deals , reits  etc.  it is where your big risks and volatility  are .

the issue with the pp is the next layer ,  bucket 2 can be as volatile as bucket 3 .

if i owned TLT  it would b a bucket 3 investment .
Last edited by mathjak107 on Thu Nov 19, 2015 10:14 am, edited 1 time in total.
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Thu Nov 19, 2015 10:14 am

So you're complaining that using the PP cash is a negative for a retiree, and then argue for having the same proportion of cash in other portfolios? 

I actually think I understand the disconnect.  You appear to be thinking in terms of "volatile" stocks and "stable" bonds being the only two options.  With that paradigm, the bucket system makes perfect sense, and I can see why you'd want protection from being forced to sell your one volatile asset when that particular market tanks. 

The PP has three volatile uncorrelated assets.  It's extremely rare for all three to be down at the same time.  So when you do need to touch them, you're never forced to sell any of them low.  The PP achieves the same end of avoiding selling a volatile asset at a market bottom not by adding more low-volatility assets but by diversifying the volatile ones. 
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:17 am

from a stand point of spending down the risk is the next  group of assets can all be down together and if they are they can't counted on to be just down a little bit . rising rates may  hurt  stocks , gold and long term treasury's  , we don't know .

on the other hand short term bonds and intermediate term bonds will still provide a pretty low volatile income flow for  another 7 years in the example .
Last edited by mathjak107 on Thu Nov 19, 2015 10:20 am, edited 1 time in total.
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Thu Nov 19, 2015 10:19 am

mathjak107 wrote: from a stand point of spending down the risk is the next  group of assets can all be down together and if they are they can't counted on to be just down a little bit . rising rates may  hurt  stocks , gold and long term treasury's  , we don't know ..

on the other hand short term bonds and intermediate term bonds will still provide a pretty low volatile income flow for quite a few years .
...Which is why the PP has 25% short term bonds!  ;)
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:21 am

no it does not . it has 25%cash or  short term bonds . it is either or and once either or is spent there is no conservative bucket 2 .  it is the same  25% no matter how you divvy it up .

it is not 6 or 7 years cash , plus 6-7 years short -intermediate term bonds .  there is no 15 year time frame before volatile assets have to be hit .  there are few time frames any asset couldn't be sold 15 years later at a profit to refill.

most folks refill whenever markets are up and don't actually wait . but the more often you refill the more you hurt performance since you are never giving  bucket 3  that rising glide path .
Last edited by mathjak107 on Thu Nov 19, 2015 10:28 am, edited 1 time in total.
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Thu Nov 19, 2015 10:27 am

For most people here cash = short term treasuries. 

If you're arguing that a second bucket is required to mitigate the risk of Stocks, LTTs, and Gold all falling for more than 6 consecutive years, then I respectfully disagree with your pessimism.  In that economic scenario, no portfolios will be doing well and buckets will be the least of your worries. 

But hey, do what you think makes sense to you.  Just realize there are other approaches that also work well for many people. 
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:30 am

you could go 15 years depleting buckets 1 and 2 .  i know of only about 3 or 4  time frames  in history where you couldn't sell at a profit and refill  at some point over a 15  year period .  that is an awful lot of time frames where you would have sold at a profit . most of  those failed time frames did have interim high years where you could refill so more than likely we never had a point you couldn't refill at a profit .
Last edited by mathjak107 on Thu Nov 19, 2015 10:34 am, edited 1 time in total.
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Thu Nov 19, 2015 10:34 am

I think the bucket system makes perfect sense for your particular portfolio.  That does not mean it makes sense for every portfolio.

In any case, maybe we can take this topic somewhere else?  This thread is getting majorly sidetracked. 
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:37 am

but to some extent that is how the pp is used . you have the same 6 years in cash which you hear folks here say all the time gives them that cushion  when spending down . but  there is no 2nd level to provide a non volatile level of income  so your only choice is sell volatile assets that  can all be down and down a lot since they are so volatile at refill or rebalance time .

not a problem in the accumulation stage but a big issue when spending down .

personally if i used the pp i would want to have somewhere a less volatile source of funds  if needed
Last edited by mathjak107 on Thu Nov 19, 2015 10:42 am, edited 1 time in total.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 10:39 am

yes , great topic and worthy of its own discussion .

i am headed off on a hunting trip in the morning and back saturday night so we can kick it off then .
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Golden Butterfly Portfolio

Post by Cortopassi » Thu Nov 19, 2015 10:43 am

Golden Butterfly is

    20% Large Cap Blend
    20% Small Cap Value
    20% Long Term Treasuries
    20% Short Term Treasuries
    20% Gold

No emerging markets or any international until we started modifying it.  The mix I listed was from Desert, on page two of this thread:

-------------------------------
25% Gold
25% LTT
50% Equity, split equally between TSM, SCV and EM

This portfolio is essentially a hybrid between Larry's Minimize Fat Tails portfolio and the PP.  And, in case it looks like these returns were merely a result of historical excess returns from equity tilts that have long since disappeared, this mix returned 10% over the last 10 years.  Tilting even smaller, by substituting mid cap blend for TSM, bumped the CAGR to 12.6%.  Your withdrawal rate calculator shows one could have withdrawn more than 7% from this portfolio over the past 40 years. 

-------------------------------
I mentioned that appealed to me because I already have 25% in gold, 25% in TLT, and 25% in TSM.  All I need to do is drop the TSM down to 17% and with those proceeds and cash buy into 17% SCV and 16% EM.  Appealing for the limited # of trades, the small cap and international exposure, and the higher equity exposure, which I have been convinced is a good thing to do.

I understand it will likely come at the expense of higher drawdowns with the int'l and SCV, but I am prepared to live with that. 

Mathjak has convinced me that there is a bit too much tied up in "safe" portions of the PP with the bonds and cash.  And gold even.  If cash was paying 5% like the past, and bonds much higher as well, I don't think I'd even be considering this.  I think it is time to skew a little more on equity...cue massive stock market drop in 3/2/1... :D
Test of the signature line
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Thu Nov 19, 2015 10:55 am

Cortopassi wrote: Been playing all night with Tyler's calculators (put a donate button up, I WILL donate!), and this 17/17/16/25/25 TSM/SCV/EM/LTT/Gold really is shining for me.  I like the additional risk/reward of the stock split, while keeping my gold level to where I really like it (20-25%)

The only thing that is obvious in all these mixes is that there is no money market/cash component.  I need to mentally adjust for that, and just separate out a rainy day cash reserve separate from this.

I think Jan 1 I will start rebalancing to this allocation.  I also am open to thoughts.  I have no specific loyalty to the PP, it is still better than what I was doing, and this setup allows a lot of my current holdings to remain similar without having to trade out.
I can see why you like that AA.  Not bad at all!

Personally, I would first recommend to stay unquestionably loyal the PP.  ;D  Now that I've gotten that out of the way...

Even if you don't want to keep 25% cash, I still really like the general advice to keep a minimum of one year of expenses in cash.  Or maybe find a middle ground you're comfortable with.  Good money management is about a lot more than squeezing the last tenth of a percent out of your returns. 

BTW, I do like your plan to sleep on it until January.  Swapping funds impulsively is kinda like a one-night-stand.  Seems great and exciting at first, but sometimes you wake up the next morning and wonder what the hell you've done, with a clingy stranger now in your home rearranging the furniture and sizing up the curtains. 
dragoncar
Executive Member
Executive Member
Posts: 1111
Joined: Wed Aug 10, 2011 7:23 pm

Re: Golden Butterfly Portfolio

Post by dragoncar » Thu Nov 19, 2015 4:10 pm

my portfolio is buckets all the way down
User avatar
Greg
Executive Member
Executive Member
Posts: 1126
Joined: Sun May 20, 2012 6:12 pm
Location: Maryland

Re: Golden Butterfly Portfolio

Post by Greg » Thu Nov 19, 2015 6:16 pm

Toy back when I was a kid. Now seems dirty as I got older. https://www.youtube.com/watch?v=5oZa38GVD4w

Image Mr. Bucket
Background: Mechanical Engineering, Robotics, Control Systems, CAD Modeling, Machining, Wearable Exoskeletons, Applied Physiology, Drawing (Pencil/Charcoal), Drums, Guitar/Bass, Piano, Flute

"you are not disabled by your disabilities but rather, abled by your abilities." -Oscar Pistorius
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: Golden Butterfly Portfolio

Post by mathjak107 » Thu Nov 19, 2015 7:08 pm

I think tv shows were dirtier when i was a kid.  On leave it to beaver june was always telling ward he was a littlecto rough on the beaver last night .
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Golden Butterfly Portfolio

Post by ochotona » Thu Nov 19, 2015 7:13 pm

Cortopassi wrote: Golden Butterfly is

    20% Large Cap Blend
    20% Small Cap Value
    20% Long Term Treasuries
    20% Short Term Treasuries
    20% Gold

No emerging markets or any international until we started modifying it.  The mix I listed was from Desert, on page two of this thread:

-------------------------------
25% Gold
25% LTT
50% Equity, split equally between TSM, SCV and EM
15% LCV
15% SCV
7%  Intl SCV
3% EM
20% LTT  or 40% 10-T and 0% STT... makes little difference. Or 20% TBM and 20% 10-T. Again, no difference.
20% STT
20% Gold... or maybe 10% Gold and 10% Commodities (ex-Gold)

These pretty much kicks butt, on backtesting. Very diversified; yet, if you want, it can hold a big chunk of lower default, lower counterparty risk assets. Tons of growth. Tyler, great framework. Really good.
Last edited by ochotona on Thu Nov 19, 2015 7:36 pm, edited 1 time in total.
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Golden Butterfly Portfolio

Post by Cortopassi » Thu Nov 19, 2015 7:55 pm

See below.  1st compares A -- what I will call the Desert Modified with the split Ocho just outlined, 2nd compares the Desert Modified (A) with the Juicy portfolio which Desert referenced (http://www.tightwadweb.com/customportfolio.html), 3rd Desert Modified against the PP.  4th is the SWR for the Desert Modified.  The Desert Modified seems to handily beat all.

Image


Image


Image


Image
Last edited by Cortopassi on Thu Nov 19, 2015 8:03 pm, edited 1 time in total.
Test of the signature line
User avatar
ochotona
Executive Member
Executive Member
Posts: 3353
Joined: Fri Jan 30, 2015 5:54 am

Re: Golden Butterfly Portfolio

Post by ochotona » Thu Nov 19, 2015 8:36 pm

Desert Modified tests great... but so much Emerging Markets. So much Petrobras, Lukoil, Rosneft, China National Something-or-Other,...  :-\
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Golden Butterfly Portfolio

Post by Cortopassi » Thu Nov 19, 2015 9:47 pm

I'll be honest and say I do not know exactly what defines EM vs. other international breakdowns, but since my 401k doesn't have too many funds, the one I was targeting for EM was VINEX.  As I see, it is only very minimally an EM fund, and mostly small cap international.

https://personal.vanguard.com/us/funds/ ... IntExt=INT

Are you talking about a specific fund with the holdings you mention, and I'd be interested if your take is any different on VINEX?

Swapping the 16% EM in the Desert Modified to 2% EM and 14% Int'l Small still pulls a 7.4% CAGR, if that is a decent approximation of VINEX.
Test of the signature line
User avatar
MachineGhost
Executive Member
Executive Member
Posts: 10054
Joined: Sat Nov 12, 2011 9:31 am

Re: Golden Butterfly Portfolio

Post by MachineGhost » Fri Nov 20, 2015 9:11 am

ochotona wrote: Desert Modified tests great... but so much Emerging Markets. So much Petrobras, Lukoil, Rosneft, China National Something-or-Other,...  :-\
Emerging today is NOT emerging of yesterday.  It is frontier. 

And ETF's that focus on value don't focus on true value just buying all the dreck on the bottom of the barrel which are now all overpriced.

The past is not predictive of the future. 

Use your brain.
"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!
bedraggled
Executive Member
Executive Member
Posts: 705
Joined: Sat Sep 13, 2014 4:20 am

Re: Golden Butterfly Portfolio

Post by bedraggled » Fri Nov 20, 2015 9:56 am

Tyler,

Do you plan to put "Desert Modified" on Portfoliocharts.com?

That site is excellent!
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 3338
Joined: Mon Feb 24, 2014 2:28 pm
Location: https://www.jwst.nasa.gov/content/webbL ... sWebb.html

Re: Golden Butterfly Portfolio

Post by Cortopassi » Fri Nov 20, 2015 10:06 am

MachineGhost wrote: Use your brain.
Meaning watch out, holy crap that stuff is too risky?
Test of the signature line
User avatar
Tyler
Executive Member
Executive Member
Posts: 2066
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: Golden Butterfly Portfolio

Post by Tyler » Fri Nov 20, 2015 10:27 am

bedraggled wrote: Tyler,

Do you plan to put "Desert Modified" on Portfoliocharts.com?

That site is excellent!
Thanks!

I don't really have a system for evaluating what makes the cut and what does not, but I'm kinda selective to keep the right tone for the site.  Popular well-known options are easy calls, as I like to be able to compare the results side by side in a neutral setting.  Some original ideas (like the Desert and Golden Butterfly portfolios) to offer diversity and expand the examples in a new direction are also helpful, and noting in the various descriptions (Desert, PP, Three-fund, etc) how some people do modify the original portfolios is fine.  I want to be careful about making a dedicated page for every idea I receive, though, as that could dilute the content and distract people from the core messaging.

The calculators are there for people to play with as many combinations as they like, and I love to see people use them to explore new ideas. 
Last edited by Tyler on Fri Nov 20, 2015 11:08 am, edited 1 time in total.
Jack Jones
Executive Member
Executive Member
Posts: 522
Joined: Mon Aug 24, 2015 3:12 pm

Re: Golden Butterfly Portfolio

Post by Jack Jones » Fri Nov 20, 2015 10:30 am

MachineGhost wrote: And ETF's that focus on value don't focus on true value just buying all the dreck on the bottom of the barrel which are now all overpriced.
What's the new value? Shareholder yield?
Post Reply