Another great article by Tyler

[Hal]

https://portfoliocharts.com/2020/10/28/ ... al-terror/

And as an aside, for Non-US readers, just consider a US-PP and replace the cash with your local currency.
Check out the Ulcer Index for your selection here ->https://portfoliocharts.com/portfolio/portfolio-matrix/

[yankees60]

This person was quite busy! Joined and within 2 minutes had 20 posts in 20 different topics??!!!

Vinny

[l82start]

This person was quite busy! Joined and within 2 minutes had 20 posts in 20 different topics??!!!

Vinny

spam bot.. very efficient

[blue_ruin17]

I liked that approach of that article in methodically building up to the final "reveal" of the HBPP.

One suggestion I would have for anyone who read that article and who is kicking the tires on the HBPP is to also study the worst case scenarios for the HBPP in countries besides the US. The US HBPP has performed particularly well compared to certain other countries. It is important to consider that the HBPP has historically had deeper and longer lasting drawdowns than that chart of the US HBPP in the article depicts.

[pors]

https://portfoliocharts.com/2020/10/28/ ... al-terror/

And as an aside, for Non-US readers, just consider a US-PP and replace the cash with your local currency.
Check out the Ulcer Index for your selection here ->https://portfoliocharts.com/portfolio/portfolio-matrix/

Shouldn't the LTT part also be in your currency/zone? I remember something like that from the PP book?
US stocks is always a good idea I think.

[Hal]

Welcome to the forum Pors. I see this is your first post.

Short answer to your query. Gold hedges US bonds better than bonds from other countries.

Let's follow Blue Ruins suggestion and run a simulation on portfolio charts. Pretend you are living in Spain
1. USA PP but with Spanish currency (cash) -> Ulcer Index = 6.6

2 PP with USA shares, but Spanish bonds and cash. (Note: Using 50% 10 year bonds as equivalent to 25% Cash, 25% LTT 20 year)
Ulcer Index is 9.0

Try Tylers site for different countries and allocations -> https://portfoliocharts.com/portfolio/my-portfolio/

Edit: For completeness, A purely Spanish PP consisting of 25% Spanish Shares, 50% Spanish 10 year bonds plus gold has an Ulcer Index of, wait for it, 17.3

[boglerdude]

25% Vanguard total world VTWAX
25% Long bonds (how long?) in currency X
25% Gold
25% Savings account in currency X

Anything wrong with this portfolio

[blue_ruin17]

25% Vanguard total world VTWAX
25% Long bonds (how long?) in currency X
25% Gold
25% Savings account in currency X

Anything wrong with this portfolio

Some remarks from the perspective of the orthodox PP:

1. Domestic TSM is preferable to 100% international stocks. The PP is essentially designed to work within the context of an individual domestic economy. Having no domestic stock market exposure means that the PP may not "work" as advertised. The component assets of the portfolio are selected because they individually zig as the others zag in response to macroeconomic dynamics present in the domestic economy of your country. If the 25% of the portfolio that was selected because it is related to the condition of domestic economic expansion is actually exposed entirely to the international economy, then your portfolio is going to encounter "tracking error".

2. Long Bonds in the PP are traditionally 20-30 years.

3. Treasury Bills are the most optimal way to hold "cash", and it is mostly a matter of counterparty risk. With T-Bills, you are the legal owner of the most liquid cash-equivalent security in the world. With bank deposits however, "ownership" of your cash is actually a surprisingly nebulous matter... there is a reason why there are stories of Wall Street bankers in 2008 phoning their wives and telling them to pull as much cash out of the ATM as they could.

[pors]

Welcome to the forum Pors. I see this is your first post.

Short answer to your query. Gold hedges US bonds better than bonds from other countries.

Let's follow Blue Ruins suggestion and run a simulation on portfolio charts. Pretend you are living in Spain
1. USA PP but with Spanish currency (cash) -> Ulcer Index = 6.6

2 PP with USA shares, but Spanish bonds and cash. (Note: Using 50% 10 year bonds as equivalent to 25% Cash, 25% LTT 20 year)
Ulcer Index is 9.0

Try Tylers site for different countries and allocations -> https://portfoliocharts.com/portfolio/my-portfolio/

Edit: For completeness, A purely Spanish PP consisting of 25% Spanish Shares, 50% Spanish 10 year bonds plus gold has an Ulcer Index of, wait for it, 17.3

Thank you Hal!

I see that this might not work for Spain indeed, but being in the Eurozone they can choose to hold German bonds, which will improve things substantially, right?

[Hal]

Welcome to the forum Pors. I see this is your first post.

Short answer to your query. Gold hedges US bonds better than bonds from other countries.

Let's follow Blue Ruins suggestion and run a simulation on portfolio charts. Pretend you are living in Spain
1. USA PP but with Spanish currency (cash) -> Ulcer Index = 6.6

2 PP with USA shares, but Spanish bonds and cash. (Note: Using 50% 10 year bonds as equivalent to 25% Cash, 25% LTT 20 year)
Ulcer Index is 9.0

Try Tylers site for different countries and allocations -> https://portfoliocharts.com/portfolio/my-portfolio/

Edit: For completeness, A purely Spanish PP consisting of 25% Spanish Shares, 50% Spanish 10 year bonds plus gold has an Ulcer Index of, wait for it, 17.3

Thank you Hal!

I see that this might not work for Spain indeed, but being in the Eurozone they can choose to hold German bonds, which will improve things substantially, right?

Sure! Purely Spanish PP with German Bonds gives an Ulcer Index of 6.8.

[Smith1776]

100% domestic PP allocations can often fail in the historical data. (Fail in the sense of not living up to the pillars of "simple, safe, and stable".)

I usually point to Japan, but Hal's post makes me even more confident in my consistent recommendations of globally diversifying a PP and adding factors. I know I sound like a broken record at this point, but I just believe it so strongly. Diversification is a free lunch, and we should be trying to get as much of it as possible.

Maybe it breaks literal PP principles, but I think it perfectly adheres to the spirit of it: more diversification and an acceptance of our ignorance of the future.

[Xan]

100% domestic PP allocations can often fail in the historical data. (Fail in the sense of not living up to the pillars of "simple, safe, and stable".)

I usually point to Japan, but Hal's post makes me even more confident in my consistent recommendations of globally diversifying a PP and adding factors. I know I sound like a broken record at this point, but I just believe it so strongly. Diversification is a free lunch, and we should be trying to get as much of it as possible.

Maybe it breaks literal PP principles, but I think it perfectly adheres to the spirit of it: more diversification and an acceptance of our ignorance of the future.

Are you referring to non-US PPs, or all?

[pors]

Living in the EU is somewhat special I think, you can invest in EMU funds and diversify over quite a few countries and still stick to a single currency.