Golden Technology Portfolio

[modeljc]

What would the forum think about:

20% QQQ

20% SPY

20% TLT

20% SHY

20% Gold

Returns look interesting. About +1.6% over 15 years and could not test for rebalancing. Might be winner if QQQ had a big correction. Wish there was a way to test over 50 years.

[Mark Leavy]

What would the forum think about:

20% QQQ

20% SPY

20% TLT

20% SHY

20% Gold

Returns look interesting. About +1.6% over 15 years and could not test for rebalancing. Might be winner if QQQ had a big correction. Wish there was a way to test over 50 years.

That's pretty solid. With that much equity, I would up the bonds a bit and drop the gold slightly. Overall, it should do well, regardless.
Full disclosure, I'm currently overweighted in the Nasdaq 100 as I think we're in an era where tech will outperform other equities.

Safety not guaranteed.

[pmward]

It's basically a golden butterfly just with QQQ instead of SCV. My initial thought is that the correlation between QQQ and SPY is so high that I would probably choose one or the other at a full 40% as you're not really gaining as much diversity as you think by going halfsies. QQQ is a bit more volatile, so it will generally lead SPY in times of prosperity and lag in recessions, of course this current recession had QQQ actually act both more defensive and offensive than SPY, which I find really interesting. Large cap growth seems to do really well in times of low interest rates and deflationary pressure, which has been the prevalent environment for 12 years now, and using Japan as the example (being that we are following their footsteps) it is likely going to stay the prevalent environment for quite awhile longer. I currently have 100% QQQ as the stock portion in my PP.

[Tyler]

Wish there was a way to test over 50 years.

QQQ has about 60% overlap by market weight with VUG (large cap growth). So while it's not perfect, you might try using LCG as a substitute for QQQ in the Portfolio Charts tools.

[modeljc]

It's basically a golden butterfly just with QQQ instead of SCV. My initial thought is that the correlation between QQQ and SPY is so high that I would probably choose one or the other at a full 40% as you're not really gaining as much diversity as you think by going halfsies. QQQ is a bit more volatile, so it will generally lead SPY in times of prosperity and lag in recessions, of course this current recession had QQQ actually act both more defensive and offensive than SPY, which I find really interesting. Large cap growth seems to do really well in times of low interest rates and deflationary pressure, which has been the prevalent environment for 12 years now, and using Japan as the example (being that we are following their footsteps) it is likely going to stay the prevalent environment for quite awhile longer. I currently have 100% QQQ as the stock portion in my PP.

Yes QQQ for 25% stock allocation does nice things. It about equal to the Golden Tech but the rebalance is going to win the day.

[modeljc]

Wish there was a way to test over 50 years.

QQQ has about 60% overlap by market weight with VUG (large cap growth). So while it's not perfect, you might try using LCG as a substitute for QQQ in the Portfolio Charts tools.

Thanks! VUG is interesting. Never looked at that being close to QQQ. Picks up about +2.0% over SPY

[modeljc]

What would the forum think about:

20% QQQ

20% SPY

20% TLT

20% SHY

20% Gold

Returns look interesting. About +1.6% over 15 years and could not test for rebalancing. Might be winner if QQQ had a big correction. Wish there was a way to test over 50 years.

That's pretty solid. With that much equity, I would up the bonds a bit and drop the gold slightly. Overall, it should do well, regardless.
Full disclosure, I'm currently overweighted in the Nasdaq 100 as I think we're in an era where tech will outperform other equities.

Safety not guaranteed.

Thanks! What is you weight for Nasdaq 100. Market is also thinking you are right on tech

[Mark Leavy]

Thanks! What is you weight for Nasdaq 100. Market is also thinking you are right on tech

I'm at 15% TQQQ counterbalanced with 15% TMF. (3x leveraged Nasdaq 100 and 3x leveraged long treasuries) The rest split between gold and cash while we see where this roller coaster goes. Who knows?

Basically a leveraged PP - using Nasdaq 100 for equities. 70% in cash and gold in case it all goes to hell.

[modeljc]

Thanks! What is you weight for Nasdaq 100. Market is also thinking you are right on tech

I'm at 15% TQQQ counterbalanced with 15% TMF. (3x leveraged Nasdaq 100 and 3x leveraged long treasuries) The rest split between gold and cash while we see where this roller coaster goes. Who knows?

Basically a leveraged PP - using Nasdaq 100 for equities. 70% in cash and gold in case it all goes to hell.

WOW! Some handsome returns! Even if you save only save 75% you still win.

[WhiteElephant]

It's been so long since people were suggesting to actively over-weight tech stocks.

The problem with tech is: everybody is expecting tech stocks to do very well. So in order to get a better return than the general market, tech has to do even better than expected. If you really want large tech/growth stocks, I would pick a Large Cap Growth fund, as that's something that Harry Browne actually advocated for quite a while for the PP.

[modeljc]

It's been so long since people were suggesting to actively over-weight tech stocks.

The problem with tech is: everybody is expecting tech stocks to do very well. So in order to get a better return than the general market, tech has to do even better than expected. If you really want large tech/growth stocks, I would pick a Large Cap Growth fund, as that's something that Harry Browne actually advocated for quite a while for the PP.

Even with a 40% correction in tech stocks they are probaby overvalued. Low interest rates have all asset classes distorted. No one can see the future but i'm in the camp that a global debt collapse is probable. Just don't know when.

[dualstow]

I’ve been adding to VUG in my vp.
Solid portfolio, as Mark said.

[modeljc]

How about this as a Tyler Teck growth golden Portfolio:

33% VUG

17% SHY

25% TLT

25% GLD

One year is 24.9% and two years is 14.9% and three years is 11.8%. Ten years is 9.6% and 15 years is 8.4%.

All with a maximun drawdown of -19%.

No promise going forward but looks better than Golden butterfly.

If we can only get a correction I might JUMP at that one at age 83.

[Kevin K.]

Good thread on VUG vs VTI on Reddit. The first response with the link to a backtest on Portfolio Visualizer is especially interesting to me:

https://www.reddit.com/r/investing/comm ... m_bets_on/

I could see replacing some or all of the SCV in the regular Golden Butterfly with VUG but I'd want the small-cap and value exposure of VTI too (modest as it may be). YMMV

[jalanlong]

I have been doing something similar but instead of using QQQ I have been using aggressive growth etfs:

ARKK-Ark Innovation ETF
XITK - SPDR Innovative ETF
XT - Ishares Exponential Technologies
IHI - Ishares Medical Devices

[Kevin K.]

Resurrecting this thread to share this WaPo article and to suggest that perhaps instead of holding QQQ maybe just replace some or all of the SCV in the GB with TSM, since our COVID 19 world seems to be doing a fine job of turning the the total market into a landscape entirely dominated by megacap tech all on its own.

I just don't see a scenario in which SC or SCV soar here.

https://www.washingtonpost.com/outlook/ ... rc404=true

[modeljc]

Resurrecting this thread to share this WaPo article and to suggest that perhaps instead of holding QQQ maybe just replace some or all of the SCV in the GB with TSM, since our COVID 19 world seems to be doing a fine job of turning the the total market into a landscape entirely dominated by megacap tech all on its own.

I just don't see a scenario in which SC or SCV soar here.

https://www.washingtonpost.com/outlook/ ... rc404=true

I did sell my SPY and went with VUG on May 26th. I know it is the top of the market for technolgy when I get in. I still remember the beating I took in 2000.

For the non-believers here are some buzz words: e-commerce boon, consumer habits to purely a digital world, entertainment and shopping from home, rapid cloud computing, big data, Internet of things, wearable, VR headset, drones, virtual reality, artifical intellgence, machine learning, self driving car, 5G technology and X box gaming.

[modeljc]

Resurrecting this thread to share this WaPo article and to suggest that perhaps instead of holding QQQ maybe just replace some or all of the SCV in the GB with TSM, since our COVID 19 world seems to be doing a fine job of turning the the total market into a landscape entirely dominated by megacap tech all on its own.

I just don't see a scenario in which SC or SCV soar here.

https://www.washingtonpost.com/outlook/ ... rc404=true

I did sell my SPY and went with VUG on May 26th. I know it is the top of the market for technolgy when I get in. I still remember the beating I took in 2000.

For the non-believers here are some buzz words: e-commerce boon, consumer habits to purely a digital world, entertainment and shopping from home, rapid cloud computing, big data, Internet of things, wearable, VR headset, drones, virtual reality, artifical intellgence, machine learning, self driving car, 5G technology and X box gaming.

I failed to mention that I have a history of chasing performance. With a PP of 33% VUG and 17% cash, 25% TLT and 25% GOLD the 15 year performance is 8.9% vs 100% SPY at 8.8%. The past is not the future but the drawdown is only 20%.

[jalanlong]

Resurrecting this thread to share this WaPo article and to suggest that perhaps instead of holding QQQ maybe just replace some or all of the SCV in the GB with TSM, since our COVID 19 world seems to be doing a fine job of turning the the total market into a landscape entirely dominated by megacap tech all on its own.

I just don't see a scenario in which SC or SCV soar here.

https://www.washingtonpost.com/outlook/ ... rc404=true

I did sell my SPY and went with VUG on May 26th. I know it is the top of the market for technolgy when I get in. I still remember the beating I took in 2000.

For the non-believers here are some buzz words: e-commerce boon, consumer habits to purely a digital world, entertainment and shopping from home, rapid cloud computing, big data, Internet of things, wearable, VR headset, drones, virtual reality, artifical intellgence, machine learning, self driving car, 5G technology and X box gaming.

I failed to mention that I have a history of chasing performance. With a PP of 33% VUG and 17% cash, 25% TLT and 25% GOLD the 15 year performance is 8.9% vs 100% SPY at 8.8%. The past is not the future but the drawdown is only 20%.

Are there a lot of circumstances where tech would go down (or stay flat) while the rest of the market goes up? Given technology’s dominance in the market and our lives I just have a hard time envisioning that world. Plus if stocks are meant as the growth component of the PP, wouldn’t you want heavy growth stocks instead of utilities and consumer staples? In a market led by utilities and staples, wouldn’t another of the PP assets be carrying the portfolio?

[mathjak107]

Before the Civil War, financial stocks were more 90% of the market

By the 1880s the railroads replaced them as railroads were 70% of the market , today they are less than 1%

By the early 1920s oil company valuations hit 25% of the market cap .


that happened again in the 1980's .

Led by IBM, information technology took off in the 1960s. today it's about 25%

And, of course, health care: over the last century, it
grew (rather steadily) from zero to 15%.


The S&P 500’s increased exposure to technology along with tech disruptors in other sectors, now gives it a similar weighting to the nasdaq in the 1980's .

[Kevin K.]

[/quote]Are there a lot of circumstances where tech would go down (or stay flat) while the rest of the market goes up? Given technology’s dominance in the market and our lives I just have a hard time envisioning that world. Plus if stocks are meant as the growth component of the PP, wouldn’t you want heavy growth stocks instead of utilities and consumer staples? In a market led by utilities and staples, wouldn’t another of the PP assets be carrying the portfolio?
[/quote]

Yeah I've asked this question on the Bogleheads forum and predictably the small-cap and small-cap value fans trotted out the "this time it's different" meme and reminders of the decades when value soared and growth languished.

But what these articles are pointing to are structural changes in the economy that got going in earnest during and after the peak of the Great Recession that have gone into warp speed during this pandemic. I like the charts in thie Marketwatch article:

https://www.marketwatch.com/story/inves ... 2020-07-12

The author of that piece seems to be freaking out at the lopsided dominance of the 5 megacorps and thinking that government regulation will somehow burst their bubble, but (a) that seems unlikely; and (b) what's going to replace them as the engine of growth. Certainly not utilities and consumer staples in a world with Great Depression+ levels of unemployment.

Sure some decade or other the tide is bound to turn, but as has often been said what matters to the individual investor isn't a hundred years or more of backtesting but their own investment horizon usually measured in a few decades. Personally I think TSM is plenty heavy in tech so I don't see the need to amplify things with QQQ, but I'm comfortable letting my ratio of TSM to SCV in the GB drift towards 2:1 without rebalancing.

[Kbg]

QQQ and a small cap index are a much better mix than QQQ and SPY. I think pairing QQQ and an S&P600 index fund is an excellent option. They do a good job of zig zagging with each other in terms of performance. A 50/50 QQQ/IJR portfolio beats a 100% allocation to either in every performance metric there is and trashes the S&P 500.

The SP600 is a much better small cap index than the Russell 2000...the selection criterion of the S6 avoids a lot of crap.

[WhiteElephant]

It's pretty easy to make behavioral mistakes when you start to deviate from the total market.

It seems clear that a lot of people just added SCV to their portfolio because of backtesting. To switch from SCV to LCG right when LCG is outperforming seems like pure performance chasing to me. You can always find articles that'll say that 'this time it's different', 'the economy has changed' etc etc, but the good thing about a total market index is that if it really is different this time (probably not though), a total market index will reflect that change. And you can already see that happening. The big tech companies are starting to dominate the total market index. How much do you expect to profit by adding even more tech on top of that?

One of the reasons I'm sticking with total market is that I know I don't have what it takes to hold on to a under-performing subsector/style of the total market. What will all those 'Growth' investors do the moment QQQ starts under-performing? There will be articles saying 'Value is back', 'The tech bubble is bursting' etc etc. You don't have to worry about all this with a total market index. If you want to increase your expected return, you just increase your stock allocation.

[jalanlong]

It's pretty easy to make behavioral mistakes when you start to deviate from the total market.

It seems clear that a lot of people just added SCV to their portfolio because of backtesting. To switch from SCV to LCG right when LCG is outperforming seems like pure performance chasing to me. You can always find articles that'll say that 'this time it's different', 'the economy has changed' etc etc, but the good thing about a total market index is that if it really is different this time (probably not though), a total market index will reflect that change. And you can already see that happening. The big tech companies are starting to dominate the total market index. How much do you expect to profit by adding even more tech on top of that?

One of the reasons I'm sticking with total market is that I know I don't have what it takes to hold on to a under-performing subsector/style of the total market. What will all those 'Growth' investors do the moment QQQ starts under-performing? There will be articles saying 'Value is back', 'The tech bubble is bursting' etc etc. You don't have to worry about all this with a total market index. If you want to increase your expected return, you just increase your stock allocation.

My question from earlier still stands though. If stocks are for the growth part of the economic cycle, wouldn't you want growth stocks as your 25%? In a scenario where value stocks like consumer staples or utilities are leading the market, wouldn't that mean we are in a recession and other parts of the PP carry the load for that. I could be wrong but are there times when stocks are pulling the PP and those stocks are value stocks?

[Tyler]

My question from earlier still stands though. If stocks are for the growth part of the economic cycle, wouldn't you want growth stocks as your 25%?

In theory, that makes sense. But what if I told you "growth stocks" is just a really good marketing term for "overpriced stocks"?