US GSGB - US Goldsmith Golden Butterfly

[ppnewbie]

Thats a mouthful! Howdy folks. Back on the forum. I dropped off after getting burnt out a bit on the finance money management world. Needless to say this forum is incredibly valuable. Two minutes after I jumped on again I read a post by @kbg about I Bonds paying 7.12 percent!

So now back to the subject of a US Goldsmith Golden Butterfly USGSGB

I started a thread about trying to replicate a US Goldsmith with IAU (or any other gold etf) and the Wellesley fund.

viewtopic.php?f=1&t=11920&p=223500&hili ... th#p223500

But I just started to play around with the Wellington Fund to try to replicate a GB. I believe the Wellington fund is essentially 60 / 40 (Stock / Bond) and the Wellesley (40 / 60). I was able to replicate the GB with a 65% Wellington 35% IAU mix. If folks are inclined, could you please take a look at this mix and see what you think. Ideally, I would love to be able to run this through @tyler 's portfoliocharts.com site to run it through the the gauntlet but understandably he has limitation on what he can do.

I am looking to build a simplified but still accurate representation of the GB for two reasons. Temperamentally, I need to find something I think about less. I get stressed out with zero rates and the fed and chicken little collapsatrians, BTC taking the place of Gold... Also, I want to set up a simple machine that works for my children.

Thoughts appreciated.

ps. I also built a 65%(60/40) portfolio plus 35% Gold for a sanity check and it correlated closely to the GB and USGSGB so I could run that through Tyler's portfolio charts and the portfolio shows significant differences in things like ulcer index, equalizer charts. If by some magic Wellington plus IAU closely correlated to the GB on all or most of Tyler's charts, that would be fantastic.

USGSGB2.png (286.99 KiB) Viewed 3500 times

USGSGB3.png (301.53 KiB) Viewed 3500 times

[Kbg]

Not sure where to start on this one...but see my i-bond comment on what you know vs. what you don't know.

An active fund is an active fund which means you take management risk on in addition to asset risk. The two funds mentioned have done well for a really long time...but there's no guarantee of that going forward. To boot, Wellington's allocation is 67/33 stock/bond and if you compare that with the equivalent in VOO/BND then you will see (at least superficially) you got worse performance, a higher drawdown and a worse sharpe ratio for your fees. (It may be an unfair comparison, but I have no desire to dive into the fund's management more to know.) Anyway...my main point is taking on a known risk when you don't need to.

From the data, 35% gold is probably WAY too much. Gold is a both a nice portfolio lifter and a big boat anchor, but completely and mysteriously cyclical in that it goes on extended runs both positive and negative. From the data, 15-25% is the sweet spot for an allocation and it probably doesn't matter much if you put it at those two extremes or anywhere in between.

With my kids I find that simplicity is more about the "app" than the allocation. Once you've given/recommended/whatever they accept as the allocation then optimally it is a set it and forget it approach with a rebalance from time to time that is easy for them to perform. To my unending sadness (or perhaps their good sense!), none of my kids have much an interest in financial stuff. I helped set them all up on M1 with a portfolio and literally said...see this button (rebalance) hit it once a year.

I was an early adopter of M1 for the above reason but was worried because they were pretty new at the time. They wouldn't be my personal first choice for a brokerage, but now they have over $1B in AUM I'm feeling much better about setting them up as I did. I have a very small account with them to force me to pay attention to the company and the tech for my kids

[ppnewbie]

Thanks @kbg -- Great points. I was aware that I was essentially trusting Wellington to keep doing what they do, which is a risk and trying to weigh that risk against my own behavioral limitations. The M1 thing sounds good for my children. I wish I could do that with a stalwart like Vanguard for my kids and know that when they turn 65 they could still be hitting a simple rebalance button with the same company. But still this is an excellent suggestion for them (and possibly me).

Also totally agree that 35% is a bit crazy for gold but am in a brainstorming phase to give myself more peace of mind. I actually started with 80 / 20 and then kept modifying the gold allocation to match the GB returns.

Anyway thanks. I appreciate you insights.

[Kbg]

If you are going dive into backtesting this is an excellent additional source.

https://www.bogleheads.org/wiki/Simba%2 ... preadsheet

[seajay]

I am looking to build a simplified but still accurate representation of the GB for two reasons. Temperamentally, I need to find something I think about less. I get stressed out with zero rates and the fed and chicken little collapsatrians, BTC taking the place of Gold... Also, I want to set up a simple machine that works for my children.

Thoughts appreciated.

Stop worrying. If gold or long dated treasuries or cash ... whatever is on a downer that's business as usual, should be rejoiced as likely other assets will be up and rebalancing has you cost averaging more into the down asset, that pays dividends when it rebounds. Stock/Gold 50/50 across the 1980's/1990's saw ounces of gold being held expanded ten-fold. If as many seem to be anticipating long dated treasury dip/dive, great, you'll add to them, average in until over another period they reward well and are reduced to cost average into another asset at relatively low/down prices. The alternative is to try and time exit/entry ... which more often is less productive than simply staying the course.

BTC is just a fad, somewhat comparable to a 7.5x leveraged stock plus a will it survive or fail side bet on top. Speculation that has worked well since 2010 due to the 15% annualized that stocks have put on since then. Gold will endure, even if just for its enduring, physical, no counter party risk qualities.

Use two stock indexes, not just TSM alone, even single index have their own risk, perhaps at times being too excessively tilted into a single sector. GB uses TSM and small cap value ... appropriate for Americans. For non-Americans a broad/main domestic stock index and US S&P500 is appropriate IMO.

The equal weightings are appropriate. Consider it as five runners each year where who wins or who comes last varies from year to year. Ideally you want to have started with equal amounts invested in each. All assets might broadly be expected to pace inflation over the long term so if one dips 20% one year, it might rebound 25% another year to get back to break-even, compound average 0%, simple average +2.5% and the PP/GB's equal weightings captures some of that positive bias.

[johnnywitt]

belangP on YT @ evidence based wealth Channel would beg to differ on the merits of 35% gold bullion. He makes a pretty good case for a 65/35 Equity Gold Portfolio.
It's not for me, but he's a pretty sharp & compelling Guy and his channel is pretty cool.

[Hal]

belangP on YT @ evidence based wealth Channel would beg to differ on the merits of 35% gold bullion. He makes a pretty good case for a 65/35 Equity Gold Portfolio.
It's not for me, but he's a pretty sharp & compelling Guy and his channel is pretty cool.

Have to agree with Johnny,
BelangP's YouTube channel (and his new website) are great resources. Almost,,, almost.. pulled the trigger on implementing his 65/35 portfolio. But if the Stockmarket really took a greater then 50% dive, could I still hold. Being retired, the answer is no.

As a VP, I think this would be a great approach.

As to the Goldsmith Golden Butterfly, how about the Vanguard US version of this allocation?
The US forum members may be able to advise on a VDBA equivalent as I live in Australia.

20% Gold. 80% VDBA (https://www.vanguard.com.au/personal/pr ... s/32109/AU)

The 50/50 Vanguard ETF investment has Ben Grahams seal of approval. Also I never consider Gold as an investment, just savings.

[ppnewbie]

Im a big fan of BelangP (Paul Belagner) as well. Currently reading some chapters of his book available at evidencebasedwealth.com. I was just trying to match the GB with two funds and literally adjusting numbers to make the charts match, which is why the gold portion ended up at 35 percent. It's interesting the charts matched at a 65 / 35 allocation. Wellesley is 40 percent stocks and 60 percent bonds. If you add 35 percent gold into that mix it comes out to:

26% Stocks
39% Bonds
35% Gold

Strange numbers to match a 40% stock, 20 LTT, 20 Cash, 20 Gold portfolio.

[Kbg]

If you're a data guy, it is really had to justify gold north of 25% of a portfolio. Pull out the 70s and it's tough to even get to 20%...more like 10-15%.

After studying it for while...wind in your sails or boat anchor. Not much in between.

Statistically it is trendy so I'm looking at how one might go at a trend approach for when and when not to hold. The problem is it is also quite volatile which makes it difficult to use in a trend system.

[ppnewbie]

That’s one reason I was testing with Wellington which is 60 stocks and 40 bonds. If you throw in 25 gold it ckk comes out to:

45 stocks
30 bonds
25 gold

35 gold is too much in my opinion as well.

[ppnewbie]

Here is a link to another thread about the same topic:

viewtopic.php?f=10&t=9633

[Hal]

Merk study
https://www.merkinvestments.com/insight ... -12-10.php