Golden Butterfly Portfolio

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

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Dieter
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Re: Golden Butterfly Portfolio

Post by Dieter » Mon May 21, 2018 11:49 pm

Looking just at Vanguard funds, Small Cap Growth vs Value pretty much a wash over the last five years. Last 12 months through 4/30 has Growth way ahead: 16.1% vs 7.3.

S&P 500 12.9% last 5 years, so the tilt has hurt in short term. Ach well. SC, especially SCG, has done better than LCB YTD though :)

In my GBish IRA, I have stocks 1/3 TSM, 1/3 SCV, 1/3 ISB (VG International Explorer -- good in last 12 months - 20%; a wash last 5 years vs Small Cap.
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foglifter
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Re: Golden Butterfly Portfolio

Post by foglifter » Tue May 22, 2018 1:09 am

Tyler, you're not alone! I have 2 GB-ish (or should I say GB-esque :D ) portfolios, both in retirement accounts. I've become comfortable with using GB in lieu of classic HBPP and I do understand the differences. For me GB seems to be a decent compromise between classic PP and Bogleheads-type allocation which is easier to stick with for a long term.
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mrbk2fi
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Re: Golden Butterfly Portfolio

Post by mrbk2fi » Tue May 22, 2018 1:39 pm

I have all of my 401k in a GB style portfolio, except I use the Paul Merriman index fund allocation, which is worldwide instead of just US.
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mathjak107
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Re: Golden Butterfly Portfolio

Post by mathjak107 » Tue May 22, 2018 2:01 pm

i much prefer the gb to the pp . it makes more sense . i used it for a short while when the elections came up . but once it looked like rates were going to climb i ditched it for my regular models . i did not want gold and long term treasuries at that stage .
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williswine
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Re: Golden Butterfly Portfolio

Post by williswine » Wed Jun 20, 2018 7:10 pm

Tyler wrote:
Mon May 21, 2018 6:17 pm
Just thought I'd give a quick update on my own personal Golden Butterfly portfolio for anyone keeping track.

If you read back a ways you'll note that I have 100% of my money in the GB but (after an extended bout of analysis paralysis) chose to go with small cap blend over small cap value when first setting things up. While that has worked out very well, after updating my source data, studying it every way I can think of, and educating myself on the theory behind the value premium I finally decided to go all-in and convert my SCB allocation to SCV. I don't anticipate a huge change in performance or anything and still believe that other options are just fine, but I figured it was time to trust my data-driven instincts.

So for anyone reading along wondering if people really invest in the Golden Butterfly or if it's just some crazy idea on the internet, know that there's at least one guy happy to share his experience. :)
Tyler, would you mind sharing which fund or ETF you are now using for SCV? If you are investing in a taxable account, have you considered using Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX)? I recall reading at bogleheads that at least some people found it has a small cap value orientation. Of course some ETFs may be sufficiently tax-efficient there as well... thanks!
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Tyler
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Re: Golden Butterfly Portfolio

Post by Tyler » Wed Jun 20, 2018 9:05 pm

williswine wrote:
Wed Jun 20, 2018 7:10 pm
Tyler, would you mind sharing which fund or ETF you are now using for SCV? If you are investing in a taxable account, have you considered using Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX)? I recall reading at bogleheads that at least some people found it has a small cap value orientation. Of course some ETFs may be sufficiently tax-efficient there as well... thanks!
I personally use VBR, but there are several good SCV ETFs out there. I'm not familiar with VTMSX so don't have much to offer on that front.
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buddtholomew
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Re: Golden Butterfly Portfolio

Post by buddtholomew » Thu Jun 21, 2018 5:42 am

Personally I use IJS as my core holding and have been happy aside from the low trading volume. Prices can stay fixed for 10-15 minutes until they adjust if there is a large move in either direction.

Supposedly it is more small and value oriented than most, which differs from others I’ve seen that include a healthy dose of mid-caps as well.
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williswine
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Re: Golden Butterfly Portfolio

Post by williswine » Thu Jun 21, 2018 3:43 pm

Indeed, the choices are many. VBR's E/R is appealing. IJS may have low trading volume but other offerings had even lower ones last time I checked: PXSV is one example, despite being considered by some bogleheads as having an ideal profile, perhaps better than even DFA US Small Cap Value. Of course, the difference in E/R (PXSV is at 0.39%) compared to VBR (0.07%) may take away any advantage PXSV may have over VBR in terms of "small-ness" and "value-ness"...
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Desert
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Re: Golden Butterfly Portfolio

Post by Desert » Sat Jul 21, 2018 3:59 pm

Here's yet another variation of the GB I was looking at today: retain the 20% in each of gold, STT and LTT, but go all value in the equity, including a slice of international. The rationale is to completely get away from the large growth dominated indices, go all in on value across the size range, and to globally diversify. To do so, split the 40% equity equally among:
Small Cap Value
Mid Cap Value
Large Cap Value
International Value

Past returns and withdrawal rates (from the BH spreadsheet), appear to be essentially identical to the standard GB. The pros include the addition of some international diversification to protect a bit against the Japan scenario, and also the complete departure from large growth dominated indices. Cons include more funds, and the risk of a full bet on the combination of value and foreign keeping up with TSM/SCV.

This variation may not be a significant enough change to be interesting to most, but I'm continuing to search for a portfolio that includes some international diversification without sacrificing returns. I won't be surprised if the U.S. outperforms in the future, but I'm increasingly uncomfortable making a full bet on that. I also believe that there are investor behavioral reasons that could cause the value premium to persist.
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sophie
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Re: Golden Butterfly Portfolio

Post by sophie » Sun Jul 22, 2018 9:42 am

What's wrong with large growth? That's basically the S&P 500, isn't it?

I actually think that the US stock market includes international diversification. Most of the big corporations operate internationally to a large extent. Plus, gold is a form of international diversification. Assuming you hold the stuff, or enough of it, as in around 20% not 5%.

I only bother with international stocks in my 403b portfolio, where I can't hold gold.
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Desert
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Re: Golden Butterfly Portfolio

Post by Desert » Mon Jul 23, 2018 8:42 am

Sophie, I don't think there's anything particularly wrong with Growth stocks, but value stocks have generally performed better in the past, probably for a variety of reasons. Some folks are also not real happy with the fundamental structure of large cap weighted indices like TSM or S&P500, since they tend to be dominated by a few large growth companies, inherently leading investors to "buy high" as those stocks occupy an increasing percentage of the index. I haven't totally bought into that theory, but I can see a bit of the point. The outperformance of the S&P 500 equal weighted index is often used to support this idea.

Anyway, I think my last post included backtesting that is probably getting too detailed/granular anyway. But I do think a foreign allocation could make sense, even though U.S. companies do a lot of business overseas. I think of Japan (and no, I don't think w'ere in a 1990 Japan-style bubble), with all their business overseas, and their status as the second largest economy in the world, and yet their stock market went into a multi-decade decline. So while I don't think it'll play out that way in the U.S., I wouldn't mind diversifying a bit just in case. Also, foreign stocks have underperformed domestic stocks pretty heavily in recent years. Foreign stocks and gold look the most interesting to me right now, since everyone hates them again. :)
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Re: Golden Butterfly Portfolio

Post by Kbg » Mon Jul 23, 2018 9:29 am

Desert wrote:
Mon Jul 23, 2018 8:42 am
Sophie, I don't think there's anything particularly wrong with Growth stocks, but value stocks have generally performed better in the past, probably for a variety of reasons. Some folks are also not real happy with the fundamental structure of large cap weighted indices like TSM or S&P500, since they tend to be dominated by a few large growth companies, inherently leading investors to "buy high" as those stocks occupy an increasing percentage of the index. I haven't totally bought into that theory, but I can see a bit of the point. The outperformance of the S&P 500 equal weighted index is often used to support this idea.

Anyway, I think my last post included backtesting that is probably getting too detailed/granular anyway. But I do think a foreign allocation could make sense, even though U.S. companies do a lot of business overseas. I think of Japan (and no, I don't think w'ere in a 1990 Japan-style bubble), with all their business overseas, and their status as the second largest economy in the world, and yet their stock market went into a multi-decade decline. So while I don't think it'll play out that way in the U.S., I wouldn't mind diversifying a bit just in case. Also, foreign stocks have underperformed domestic stocks pretty heavily in recent years. Foreign stocks and gold look the most interesting to me right now, since everyone hates them again. :)
I'm going to be a bit persnickety here...cuz it matters. What we can say is value and growth have periods where one outperforms the other and which is which is a function of the start and end dates (see the gold thread where I picked various dates of stocks vs. stocks...you can find exactly the same thing here.)
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