Golden Butterfly Portfolio
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Re: Golden Butterfly Portfolio
By going "light" on gold vs PP, have less dollar diversification, so might look at (unhedged) international stocks to increase that diversification.
For example:
20% S&P 500 or US Total Stock Market
10% US Small Value
10% Total International, International Mid/Small Balanced, Emerging Markets, or ...
or 1/3 of stock in each to increase the tilt.
The stock in my PP-Ish portion is currently 1/3 TSM, 1/3 Sm (mid) Value, 1/3 Intl Small Balanced.
For example:
20% S&P 500 or US Total Stock Market
10% US Small Value
10% Total International, International Mid/Small Balanced, Emerging Markets, or ...
or 1/3 of stock in each to increase the tilt.
The stock in my PP-Ish portion is currently 1/3 TSM, 1/3 Sm (mid) Value, 1/3 Intl Small Balanced.
Re: Golden Butterfly Portfolio
Vanguard Internation Explorer. More a Mid/Small, and yeah, active.Desert wrote:That's a good point. EM and gold respond similarly to changes in the strength of the dollar. EM is also pretty strongly influenced by commodity prices.Dieter wrote:By going "light" on gold vs PP, have less dollar diversification, so might look at (unhedged) international stocks to increase that diversification.
For example:
20% S&P 500 or US Total Stock Market
10% US Small Value
10% Total International, International Mid/Small Balanced, Emerging Markets, or ...
or 1/3 of stock in each to increase the tilt.
The stock in my PP-Ish portion is currently 1/3 TSM, 1/3 Sm (mid) Value, 1/3 Intl Small Balanced.
What fund are you using for international small?
I used to split my ISB 50%/50% Intl Exporer & Vanguard FTSE AW xUS Sm-Cp Idx Inv, but simplified a short while ago and forgot why I picked Intl Exl -- probably because it had done better and thought that if active could do well anywhere would be international small....
So of course Vanguard FTSE AW xUS Sm-Cp Idx Inv has done much better since I sold it.
Re: Golden Butterfly Portfolio
Please buy Vanguard FTSE AW xUS Sm-Cp Idx Inv so it goes down and I feel better about my Intl Explorer purchase.Desert wrote:I think the Explorer fund is a fine fund for IS. But of course it will underperform immediately after purchase, as do all funds that I buy.
Re: Golden Butterfly Portfolio
Since I'm a Dual Momentum user, I've noticed that my mid-cap value fund has stopped racing ahead of my S&P500 fund on a 3 and 6 month basis, so I'm being tactical taking the profits today and moving the proceeds back to the S&P500 fund. I'm simplifying and de-risking a bit.
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Re: Golden Butterfly Portfolio
I am thinking of cutting back on the small cap 600 fund. It too has become not only extremely volatile but way over valued after last years 30% run up.
I think i will cut it to 10% from 20% and put the difference in the s&p 500. It acts leveraged most of the time moving 2 to 3x what the s&p 500 does so when it falls it weighs very heavy on things.
All great when things are going up , but i think with trumpmania pushing their valuations up so high the time has come to take some gains off the table and go more s&p 500
I think i will cut it to 10% from 20% and put the difference in the s&p 500. It acts leveraged most of the time moving 2 to 3x what the s&p 500 does so when it falls it weighs very heavy on things.
All great when things are going up , but i think with trumpmania pushing their valuations up so high the time has come to take some gains off the table and go more s&p 500
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Re: Golden Butterfly Portfolio
i had decided to cut the small caps by 5% before the drop the last few days making it 15% of the portfolio . it find so far 15% is a nice balance with 25% in the s&p 500. after such a big run up slyv was incredibly volatile running 2 to 3x the s&p 500 daily .
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Re: Golden Butterfly Portfolio
coincidentally the newsletter i subscribe to issued a swap last night for all models , selling off small cap funds which they felt were now way over valued and large caps were better deals . i wouldn't eliminate them from the butterfly but i do think a reduction to 10-15% is a good idea after the huge run up they had . the difference should go in to the s&p 500.
that almost leveraged like volatility from SLYV should still add plenty of ooomph .
that almost leveraged like volatility from SLYV should still add plenty of ooomph .
Re: Golden Butterfly Portfolio
In a new thread tell us what newsletters you like
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Re: Golden Butterfly Portfolio
i used the fidelity insight newsletter for just about 30 years
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Re: Golden Butterfly Portfolio
if small caps move up another 5% i will further reduce from 15 to 10% in the butterfly while increasing the s&p 500 to 30% . but i would not try to market time by going below 10% in slyv . .
sensibly reducing risk is one thing, which is what we do when i say dynamically nudging a portfolio but trying to predict what assets will do over all as in all or nothing rarely ends well .
sensibly reducing risk is one thing, which is what we do when i say dynamically nudging a portfolio but trying to predict what assets will do over all as in all or nothing rarely ends well .
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Re: Golden Butterfly Portfolio
what a crazy day today . with assets lately acting more correlated than uncorrelated it was a hell of a day for the butterfly , except to the upside for a change .
my portfolio moved far greater than even a 100% equity model i track . with the exception of a downward move my portfolio made pre butterfly during brexit this was the 2nd biggest move ever dollar wise that i had . at one point the butterfly was up more than 30k in this one afternoon .
great when all assets act correlated and move upward for you but it gives you an idea of the downside damage that it can inflict as well under these new conditions of correlation for all the assets that we seem to have lately . .
my portfolio moved far greater than even a 100% equity model i track . with the exception of a downward move my portfolio made pre butterfly during brexit this was the 2nd biggest move ever dollar wise that i had . at one point the butterfly was up more than 30k in this one afternoon .
great when all assets act correlated and move upward for you but it gives you an idea of the downside damage that it can inflict as well under these new conditions of correlation for all the assets that we seem to have lately . .
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Re: Golden Butterfly Portfolio
One day does not make a trend.mathjak107 wrote:what a crazy day today . with assets lately acting more correlated than uncorrelated it was a hell of a day for the butterfly , except to the upside for a change .
my portfolio moved far greater than even a 100% equity model i track . with the exception of a downward move my portfolio made pre butterfly during brexit this was the 2nd biggest move ever dollar wise that i had . at one point the butterfly was up more than 30k in this one afternoon .
great when all assets act correlated and move upward for you but it gives you an idea of the downside damage that it can inflict as well under these new conditions of correlation for all the assets that we seem to have lately . .
Is 30K a lot or a little? We usually use percentages to communicate gains or losses.
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Re: Golden Butterfly Portfolio
funny you should talk about percentages . after a while percentages mean little . the reason is a move when you are just accumulating money is very different from the same move 30 years later when fuel tanks are full .
30 years ago a 7% move may have represented a years ira contribution . today a 7% move represents 9 years of maxing out my 401k at catch up not even regular max's .
so the dollars really are what become an emotional big deal eventually not the percentage move . moving up or down a year or two withdrawals in a few sessions can be quite an experience .
part of my toning down my portfolio through the years is about volatility in dollars not percentages . today's move was 1.15% which at this stage is a pretty big move for a retirement oriented portfolio if you want to the number and that is for a portfolio 20% in cash that is really designed to have something going up -or down on those big up or down days ... as they say if on those big up days nothing else is going down you are not diversified enough .
but the last few months opposing asset classes have become more bed fellows than not . so the flip side is that today these supposedly low volatility portfolio's are really not turning out to be that low. i don't consider any of my portfolio's low volatility when the can add or subtract 30-35,000.00 bucks in an afternoon from my portfolio .
30 years ago a 7% move may have represented a years ira contribution . today a 7% move represents 9 years of maxing out my 401k at catch up not even regular max's .
so the dollars really are what become an emotional big deal eventually not the percentage move . moving up or down a year or two withdrawals in a few sessions can be quite an experience .
part of my toning down my portfolio through the years is about volatility in dollars not percentages . today's move was 1.15% which at this stage is a pretty big move for a retirement oriented portfolio if you want to the number and that is for a portfolio 20% in cash that is really designed to have something going up -or down on those big up or down days ... as they say if on those big up days nothing else is going down you are not diversified enough .
but the last few months opposing asset classes have become more bed fellows than not . so the flip side is that today these supposedly low volatility portfolio's are really not turning out to be that low. i don't consider any of my portfolio's low volatility when the can add or subtract 30-35,000.00 bucks in an afternoon from my portfolio .
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Re: Golden Butterfly Portfolio
speaking in percentages enables the reader to assess impact to their individual portfolio. So, your portfolio is slightly under 3M for the portion allocated to the GB. Seems reasonable to have 30K fluctuations with that amount invested. My 70/30 allocation moved around 50K.
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Re: Golden Butterfly Portfolio
the models i used previously , my insight models were a mix of the conservative income and capital and preservation model with a beta of .38 and the growth and income model with a beta of .70 .
returns were very good but swings were much less than now . the swings i see since the correlations seem to move together are more on par with their growth model which is 100% equity.
not exactly the change i was hoping for , so i guess that is more my point . i hope things uncorrelate again as that is the reason i made the switch .
if i wanted 100% equity action in retirement i would have just stayed in the growth model and had excellent returns , but that is not my goal . that model has returned 11% a year cagr since i started using their models in 1987 . even the growth model saw less of a swing yesterday at .91% on the day
returns were very good but swings were much less than now . the swings i see since the correlations seem to move together are more on par with their growth model which is 100% equity.
not exactly the change i was hoping for , so i guess that is more my point . i hope things uncorrelate again as that is the reason i made the switch .
if i wanted 100% equity action in retirement i would have just stayed in the growth model and had excellent returns , but that is not my goal . that model has returned 11% a year cagr since i started using their models in 1987 . even the growth model saw less of a swing yesterday at .91% on the day
Re: Golden Butterfly Portfolio
As a purely philosophical aside, I've come to the conclusion that the Golden Butterfly Portfolio and the traditional Permanent Portfolio aren't really two different portfolios. During my recent read through of Why the Best Laid Plans..., I came across a section where Harry Browne actually does allow for adjustments to the weightings of the various asset classes, so as long as it is not too extreme. In addition, the Golden Butterfly's greater weighting to equity can be considered to be part of a Variable Portfolio. Since the rationale behind the Golden Butterfly is that prosperity is the most common of the economic conditions, this would also be in keeping with Browne's logic that the Variable Portfolio is good for any non-neutral outlooks that the investor has in mind.
🛞 The All-Terrain Portfolio 🛞
Re: Golden Butterfly Portfolio
It's kinda fun to see how many moving parts you can remove from the machine before it stops working. I think there is much to be said for a 40/60 allocation, but then swap some of the bonds for gold.Desert wrote:Tyler, I've been thinking more about your GB portfolio. The more I look at it, the more I like it. The 20% gold & 40% equity combination have performed really well throughout many varying periods since 1970. I believe you decided to go with the GB for your entire ERE portfolio, is that correct?
While messing around with some spreadsheets this morning (it's dangerous, I know), I tried a variation of the GB with 40% ITT rather than 20/20 LTT/Cash (bullet vs. barbell). The past performance appears just a tiny bit better, but roughly equivalent. Then I substituted TBM for the treasuries, and the max drawdown was a bit worse (as expected), but the performance was still very similar. This could be useful for some with a 401k that doesn't provide a good LTT or ITT fund.
Then finally, just for fun I looked at 80% Wellesley and 20% gold, and it has performed very similarly as well. That darn Wellesley fund has been awesome. :)
Just random thoughts on a Memorial Day.
Re: Golden Butterfly Portfolio
It is. I've tried countless allocations on Tyler's site, just to see how they might have performed. They all kind of lead into the same direction of something very similar to PP, but with minor tweaks to get more equity exposure. It's surprising how well the PP has performed past its creation. I do worry that fine tuning to the past will end up being detrimental in the future.ochotona wrote:It's kinda fun to see how many moving parts you can remove from the machine before it stops working.
Don't agree with me too strongly or I'm going to change my mind
Re: Golden Butterfly Portfolio
Me too! But about the only negative thing I can think to say about the GB is that it would seem to have a higher sequence of returns risk than the PP. The following is deliberately cherry picked to illustrate my point. Say, for example, that a person retired at the beginning of 2000 with a GB allocation. It would have lagged the PP for quite a few years because the 2000s were such a mediocre decade for stocks. Of course it's very tempting to enter the GB now because the stock market just keeps churning out gains.eufo wrote:I do worry that fine tuning to the past will end up being detrimental in the future.
Desert, one of the things I liked that you said a while back about your own allocation is that you found it relatively easy/convenient to hold 10% of your wealth in physical gold. A lot of the 'gold' that I have currently is in ETFs in my retirement accounts. It's not ideal but so far it's the only way that I can get close to a 4 X 25.
Lastly, Desert, what would we call your portfolio if you abandon it? POFKAD? Portfolio Formerly Known As Desert?
Re: Golden Butterfly Portfolio
Thanks for all that, Desert. My wife and I are so close to retirement that I'm hoping not to fiddle with percentages too much. But, gosh, it sure is tempting sometimes. One of the things that I DO like about holding, say, 10% in a gold ETF in retirement accounts, is that it should help smooth out how much one can withdraw from those accounts. Make sense?
Desert, I have a question for you. I get what you are saying about the 1970s but to what do you attribute gold's outperformance in the 2000s? The USD was clearly weaker during that period but I'm not sure if that accounts for a seven-fold rise in gold's price. It's not a trick question... it just seems to be something that people on this forum skirt around quite a bit. I remember (I hope correctly!) that Medium Tex felt gold had gone up so much during that decade because people's expectation was for high inflation. I get how that could push the price up but I don't find that answer totally satisfying. The gain was too sustained and dramatic for that to be the only factor. Any ideas? Thanks.
Desert, I have a question for you. I get what you are saying about the 1970s but to what do you attribute gold's outperformance in the 2000s? The USD was clearly weaker during that period but I'm not sure if that accounts for a seven-fold rise in gold's price. It's not a trick question... it just seems to be something that people on this forum skirt around quite a bit. I remember (I hope correctly!) that Medium Tex felt gold had gone up so much during that decade because people's expectation was for high inflation. I get how that could push the price up but I don't find that answer totally satisfying. The gain was too sustained and dramatic for that to be the only factor. Any ideas? Thanks.
Re: Golden Butterfly Portfolio
Yes, although I personally went with small cap blend instead of small cap value. I went back and forth on that for a while and eventually decided on the more "neutral" approach to evenly fill out the Morningstar 3x3 grid using VTI and VB. Either way, the results are pretty similar.Desert wrote:Tyler, I've been thinking more about your GB portfolio. The more I look at it, the more I like it. The 20% gold & 40% equity combination have performed really well throughout many varying periods since 1970. I believe you decided to go with the GB for your entire ERE portfolio, is that correct?
Good point about bullets vs barbells, as that's definitely a reasonable iteration for those with limited bond options. And it's funny -- I also ran the numbers for 80% VWINX and 20% gold a while back and really liked it!
Re: Golden Butterfly Portfolio
IMHO, the simple answer is that gold is negatively correlated to US stocks. Read the example in the middle of this article, and pay particular attention to the side-by-side heat maps. https://portfoliocharts.com/2016/01/25/ ... at-a-time/barrett wrote: Desert, I have a question for you. I get what you are saying about the 1970s but to what do you attribute gold's outperformance in the 2000s? The USD was clearly weaker during that period but I'm not sure if that accounts for a seven-fold rise in gold's price. It's not a trick question... it just seems to be something that people on this forum skirt around quite a bit. I remember (I hope correctly!) that Medium Tex felt gold had gone up so much during that decade because people's expectation was for high inflation. I get how that could push the price up but I don't find that answer totally satisfying. The gain was too sustained and dramatic for that to be the only factor. Any ideas? Thanks.
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Re: Golden Butterfly Portfolio
a shift to small cap growth now may be a good idea . it looks like value peaked out after it's big run up .
Re: Golden Butterfly Portfolio
I've looked into it several times, and have yet to find a convincing evidence-based reason to add international stocks to a US-based PP. The biggest proponents of international diversification generally cite the very reasonable assumption that US stocks won't always perform so well and you'll need something else to pick up the slack. I completely agree, but the data indicates that gold already fills that role particularly well which is why adding international never seems to improve the numbers. And in the GB, the small caps also pitch in by greatly diversifying away from the relatively small number of large caps that drive returns of a total market fund due to how the index is weighted. There's more to stock performance than the country it's domiciled in.Desert wrote: One additional question: Have you considered a slice of international, for diversification? I realize that past returns show it's always been a return-reducer (with the exception of very high risk EM).
I'll note, however, that due to macroeconomic forces the negative correlation of gold to stocks is more pronounced in the US than in other countries. If I was a PP investor outside of the US, international investing would look more appealing. And if gold ownership is ever outlawed again in the future or if an individual investor simply has a mental block on owning gold, international stocks are a logical backup choice to fill that role in a portfolio.
Re: Golden Butterfly Portfolio
Good info, Desert.
https://en.wikipedia.org/wiki/Gold_Reserve_Act
UPDATE: It turns out that I was wrong on this point. I later learned that the legalization of gold certificates was about them as collectibles rather than any relationship with physical gold. So Desert is correct that gold was illegal to hold in the US from 1934-1975.
I just wanted to point out that this is only partially true. 1975 was the first year that Americans could own or trade physical gold, but gold certificates were legal for individual investors since 1964. People just couldn't personally redeem those certificates for the physical product. Think of it as a simple version of modern gold ETFs.Desert wrote:I start in '75 since that was the first year gold was legal to own in the U.S.
https://en.wikipedia.org/wiki/Gold_Reserve_Act
UPDATE: It turns out that I was wrong on this point. I later learned that the legalization of gold certificates was about them as collectibles rather than any relationship with physical gold. So Desert is correct that gold was illegal to hold in the US from 1934-1975.
Last edited by Tyler on Thu Jun 17, 2021 11:07 pm, edited 1 time in total.