Golden Butterfly Portfolio

[Smith1776]

Out of curiosity, how many forum members here are using the GB as their allocation of choice?

[flyingpylon]

I'm using the GB.

[joypog]

Out of curiosity, how many forum members here are using the GB as their allocation of choice?

I'm averaging into the GB for our taxable account.

For in our retirements I've added International small cap value so that our overall portfolio will be equally split six ways.

I settled upon this new AA a couple weeks ago, but we won't fully average out of our cash-heavy position into this new portfolio till middle of next year so I'd say I'm "decided" but with the adage that money talks bs walks I'm actually "uncertain".

[Smith1776]

Interesting to hear, guys. I've settled on the GB as the allocation of choice for my father's estate assets.

[whatchamacallit]

Discussion on Paul Merriman's favorite thing, small cap value

Rob Berger Interview with Paul Merriman | Live Q&A

https://www.youtube.com/watch?v=HI4kRHrWyh0

[Smith1776]

Discussion on Paul Merriman's favorite thing, small cap value

Rob Berger Interview with Paul Merriman | Live Q&A

https://www.youtube.com/watch?v=HI4kRHrWyh0

Merriman is great. Small cap value is also great.

[whatchamacallit]

Which small cap value funds are you using Smith?

I am having trouble staying the course with small cap value myself. As I have reviewed the different indexes and funds more and more I don't have the faith that they will outperform or lower risk. I am now contributing to larger stock allocation with total market index instead of small cap value.

[Smith1776]

Which small cap value funds are you using Smith?

I am having trouble staying the course with small cap value myself. As I have reviewed the different indexes and funds more and more I don't have the faith that they will outperform or lower risk. I am now contributing to larger stock allocation with total market index instead of small cap value.

I am Canadian so I am using the only decent SCV fund in literally the whole country: VVL

https://www.vanguard.ca/en/advisor/prod ... p/etfs/VVL

It has a strong value tilt and a moderate size tilt. The t-stat on the value factor being much larger. I would love it if the size tilt was stronger, but it is what it is. Can't ask for the moon, I guess.

Screen Shot 2022-08-10 at 9.11.06 PM.png (29.96 KiB) Viewed 9231 times

[Smith1776]

The more and more I reflect on it, the more I'm inclined to say that the GB is the best "default" portfolio out there.

[whatchamacallit]

That makes it easier having only one value fund option.


I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

I decided I don't like the stress of picking the best fund. I sympathize with ochotona on RSP but would rather just use FZROX with 0 expense ratio.

[Smith1776]

That makes it easier having only one value fund option.


I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

I decided I don't like the stress of picking the best fund. I sympathize with ochotona on RSP but would rather just use FZROX with 0 expense ratio.

I feel you. I remember once reading that one of the secret's of Costco's success was to avoid subjecting shoppers with the paradox of choice. Too many choices leads people to not make a decision at all. Sales improved when choices became more limited. People don't want to go through the cognitive work of comparing umpteen different options, so they just throw their hands up instead. At least, that's how the theory goes.

Have you considered the SCV funds offered by Avantis? They seem to be the bleeding edge option for U.S. investors right now.

[whatchamacallit]

Yes. AVUV has had quite the run and it is impressive how quickly it has increased it's assets under management. It is almost as big as SLYV now.

https://etfdb.com/etfdb-category/small- ... -equities/


Maybe it will continue to outperform but it is definitely market timing and history tells us it won't last forever.

[Smith1776]

For those of you who watch/listen to the excellent Rational Reminder podcast, I made a request for them to do an episode on strategies like the PP and GB. Who knows, maybe Harry Browne will get his due.

[joypog]

I’d hope, but I suspect gold is not going to fare well.

Though much better than their crypto series. Whohooo they are (very politely) taking a flamethrower to the edifice. Their episode 10 with Professor Hillary Allen cuts to the heart of the matter.

[boglerdude]

> I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

And can be front run, as they are forced to sell by rigid metrics. Paying Vanguard active managers to take a holistic look at a company, and decide if it's "value" isnt a crazy idea. Vanguard rather than a hedge fund celeb/guru because Vanguard is under heavy public scrutiny

[Smith1776]

> I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

And can be front run, as they are forced to sell by rigid metrics. Paying Vanguard active managers to take a holistic look at a company, and decide if it's "value" isnt a crazy idea. Vanguard rather than a hedge fund celeb/guru because Vanguard is under heavy public scrutiny

A good point. VVL, for instance, despite being highly systematic, is a fund that Vanguard considers to be active -- it doesn't follow an index. Nothing explicit to front run.

[vnatale]

That makes it easier having only one value fund option.


I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

I decided I don't like the stress of picking the best fund. I sympathize with ochotona on RSP but would rather just use FZROX with 0 expense ratio.

I feel you. I remember once reading that one of the secret's of Costco's success was to avoid subjecting shoppers with the paradox of choice. Too many choices leads people to not make a decision at all. Sales improved when choices became more limited. People don't want to go through the cognitive work of comparing umpteen different options, so they just throw their hands up instead. At least, that's how the theory goes.

Have you considered the SCV funds offered by Avantis? They seem to be the bleeding edge option for U.S. investors right now.

It is more than a theory. I have read of this many times. The usual example is that people buy more when presented with only five choices of jellies than when confronted with 24 choices of jellies.

[Smith1776]

That makes it easier having only one value fund option.


I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

I decided I don't like the stress of picking the best fund. I sympathize with ochotona on RSP but would rather just use FZROX with 0 expense ratio.

I feel you. I remember once reading that one of the secret's of Costco's success was to avoid subjecting shoppers with the paradox of choice. Too many choices leads people to not make a decision at all. Sales improved when choices became more limited. People don't want to go through the cognitive work of comparing umpteen different options, so they just throw their hands up instead. At least, that's how the theory goes.

Have you considered the SCV funds offered by Avantis? They seem to be the bleeding edge option for U.S. investors right now.

It is more than a theory. I have read of this many times. The usual example is that people buy more when presented with only five choices of jellies than when confronted with 24 choices of jellies.

I think my favourite is three types of pizza rather than ten.

[vnatale]

That makes it easier having only one value fund option.


I became more discouraged as I reviewed value funds. They all have their own little way to try to market time.

I decided I don't like the stress of picking the best fund. I sympathize with ochotona on RSP but would rather just use FZROX with 0 expense ratio.

I feel you. I remember once reading that one of the secret's of Costco's success was to avoid subjecting shoppers with the paradox of choice. Too many choices leads people to not make a decision at all. Sales improved when choices became more limited. People don't want to go through the cognitive work of comparing umpteen different options, so they just throw their hands up instead. At least, that's how the theory goes.

Have you considered the SCV funds offered by Avantis? They seem to be the bleeding edge option for U.S. investors right now.

It is more than a theory. I have read of this many times. The usual example is that people buy more when presented with only five choices of jellies than when confronted with 24 choices of jellies.

I think my favourite is three types of pizza rather than ten.

As a vegetarian (when eating outside of home) and I am choosing pizza by the slice I'm happy for many, many choices as I'm first automatically excluding any that have meat on them. So I'm happy to have more than one choice of just cheese pizza.

[Smith1776]

As a vegetarian (when eating outside of home) and I am choosing pizza by the slice I'm happy for many, many choices as I'm first automatically excluding any that have meat on them. So I'm happy to have more than one choice of just cheese pizza.

Stuffed crust for the win!

[seajay]

For reference, the thing that eventually pushed me over the top on my own SCV vs SCB debate (I settled on SCV) was when I realized just how different the sector makeup is for SCV vs LCB. Large caps are dominated by tech and healthcare, while small cap value is heavily weighted towards financials and industrials (SCB is a lot more similar to LCB in sector makeup than you'd think). Balance them equally and you get a nice amount of sector diversification on top of the other economic diversification in the portfolio.

Small cap tend to lag during the lead up to a recession, because the recession measure is a lagged measure (a recession is two consecutive quarters of declining GDP [*A]). By the time the (lagged) recession indicator actually fires SC tend to start rebounding. SC are more of a real-time recession indicator. As you say a nice additional element of economic diversification.

[*A] As of September 2022 US GDP has fallen for two consecutive quarters, 1.6% during the first quarter of 2022, and 0.6% the next. In most countries, that's a recession, but just not in the US. The official recession call is made by the Business Cycle Dating Committee - a group of eight economists chosen by the National Bureau of Economic Research, a non-profit organisation. And so far, the committee has refused to declare a recession.

[seajay]

The more and more I reflect on it, the more I'm inclined to say that the GB is the best "default" portfolio out there.

GB is a form of 40/60 stock/bond comprised of SCV/TSM for the stock and LTT/TBill/Gold for the 'bonds'.

Compared to Wellesley and 40/60 TSM/TBM and since 2003 the GB out-ran the other two PV
However compared to further back and 1987 to 2002 and GB lagged 40/60 PV

But broadly you'd be in good company with many others in opting for a 40/60 albeit via TSM/TBM, Wellesely or the GB.

[TomWexler]

To any holders of the GB, or anyone really, what is your review of its performance in 2022, and how do you see it going forwards? How did it do vs the PP?

[seajay]

To any holders of the GB, or anyone really, what is your review of its performance in 2022, and how do you see it going forwards? How did it do vs the PP?

PV indicates similar outcomes, GB -11.5% compared to -12% for the PP. In the scale of 20 or 30 years a short term single point to point 365 day measure will just fade into insignificance. But such a measure is suggestive of a possible good time to buy or add to either a GB or PP.

[Dieter]

To any holders of the GB, or anyone really, what is your review of its performance in 2022, and how do you see it going forwards? How did it do vs the PP?

If Quicken isn’t lying to me, Gold, LTT, and SCV have all beaten the S&P500 for the last three months (up 18-11%!) and YTD, so, looking better so far!

I Shoulda rebalanced in September (although didn’t hit any rebalance bands)

Future returns may vary