The Desert Looking Glass portfolio?

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The Desert Looking Glass portfolio?

Post by joypog » Fri May 13, 2022 10:58 pm

I've been on a slow trend towards becoming more and more agressive with my potential portfolio as I think about our final AA (going from our current 70% cash position to PP to GB to 50% stock).

This afternoon I got curious about intermediate term bonds (which seem to have half the safety of STT's and half the upside volatility of LTT's which could either be considered the best or worst of both worlds). Searching ITTs on this site lead me to Desert's Portfolio (60% ITT, 10%US, 10%SV, 10%Emerge, 10%Gold) - which looked like the mirror image of what I'm currently toying with as our final portfolio AA (we plan on averaging into the final position around the end of the year):

10% Gold
10% Cash
10% LTT's
---
10% flex (currently cash, for a potential house purchase...after pulling the trigger, we would push this last chunk towards US Stocks, REITs, ITT's, or emerging markets).
---
10% SV
10% Intl
40% US Stock
---

Because I have about 20 years left in my career with a government pension, I'm slowly getting more comfortable with the idea of going hard into the stock market - potentially through and past retirement.

On the other hand, if my career path veers outside of public work, then I may well transition over to the Desert portfolio near retirement.

The fun thing about this forum is that we have a mix of people who appreciate/disbelieve the PP. So it's fun to hash these half baked ideas here...thanks in advance for any thoughts. Cheers!
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Hal
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Re: The Desert Looking Glass portfolio?

Post by Hal » Sat May 14, 2022 2:30 am

Here's something to think about seeing you will have a government pension.
https://socialize.morningstar.com/NewSo ... eplySeq=41

If you took John Bogles advice, you would have a much higher share (& gold?) allocation than what you would normally have.
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Re: The Desert Looking Glass portfolio?

Post by joypog » Sat May 14, 2022 6:54 am

unfortunately the link just takes me to Morningstar's front page? Could you repost it?

As for the pension...I won't vest for a couple more years, so I wonder how my psychology will shift once I know that I've got it in the bag. Even though the percentage is small at first just knowing its coming will be a relief, and then the extra accrual just starts ramping up from there.

Thanks!
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Re: The Desert Looking Glass portfolio?

Post by joypog » Sat May 14, 2022 6:59 am

Another idea - Snow White and the Seven Dwarfs:
30% US Stock and then 10% each Intl, SV, Reit, Gold, LTT, Cash and Emgerging Markets
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Re: The Desert Looking Glass portfolio?

Post by Hal » Sat May 14, 2022 7:43 am

joypog wrote:
Sat May 14, 2022 6:54 am
unfortunately the link just takes me to Morningstar's front page? Could you repost it?

As for the pension...I won't vest for a couple more years, so I wonder how my psychology will shift once I know that I've got it in the bag. Even though the percentage is small at first just knowing its coming will be a relief, and then the extra accrual just starts ramping up from there.

Thanks!
Hmm... Dead link on the Morningstar page and the WayBack machine failed me...

Here we go
https://www.bogleheads.org/wiki/Asset_a ... te_note-11
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Re: The Desert Looking Glass portfolio?

Post by joypog » Sat May 14, 2022 7:49 am

hmm interesting.

Playing with round numbers...let's say I have 10,000/yr from a pension ...assuming that income is part of a 4% SWR would that count for $250k as a bond portion?

So if someone was shooting for a 60/40 split in a $1M portfolio one could go 850k stocks / 150k bonds?

edit: Alternately I could think of my 10k pension as reducing my living expenses from 40k to 30k.
Assuming a conservative 3% SWR, that would lead to a $1M portfolio that would be invested with whatever AA I finally settle upon.
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Re: The Desert Looking Glass portfolio?

Post by joypog » Mon May 16, 2022 12:48 am

btw I followed up with the same question on Bogleheads and was given good advice to not try and account for the pension as part of the AA. Just redeuce my assumed needed monthly income...and then invest according to my preexisting risk preference.

Which pushed me back to my AA.

Well after much more thought and conversation with my wife, we are:

25% Cash (if we ever get around to buying a house, this will cover the down payment)
10% LTT
10% Gold
10% SV Tilt
10% Intl
35% US Stock

If we ever buy the damn house we'll be
10x5 Cash, Gold, SV, Intl, LTT
50% Stock

Its basically a compromose portfolio with elements of HBPP, GB, Bernstein...but ultimately following the bogleheads directive of going heavy on US Stocks. There is definitely a sheeple element to this - if we screw up the results, at least it won't be from being too far out from standard recommendations (including the intl and sv tilts). But I'm keeping the LTT and Gold as "insurance" for the black swan financial moments if they ever show up. That plus the cash makes for a 70/30 portfolio - perfectly in line with current recommendations for people my age.

So yeah, its very much a go with the flow portfolio.

The one nagging question I have is the Intermediate Treasuries....I just don't see the value of it. I'd rather be in STT if I wanted the protection or in LTT if I wanted the potential deflation protection. ITT seems to be caught in a no-man's land.
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Re: The Desert Looking Glass portfolio?

Post by Vil » Mon May 16, 2022 3:46 am

Start to smell pinwheel-ish here... ;D you just miss some REIT ..
For me its too much of slice & dice. Only piece of international stocks I found that is not that much corelated to US stock market is EU small caps (and in EU we are good in having the small caps really small ;-)). For REITs I have read a lot, though their correlation to stocks increased in time, have thought of having APAC REITs, but was lazy enough to continue digging..
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Re: The Desert Looking Glass portfolio?

Post by joypog » Mon May 16, 2022 8:06 am

Vil wrote:
Mon May 16, 2022 3:46 am
Start to smell pinwheel-ish here... ;D you just miss some REIT ..
For me its too much of slice & dice. Only piece of international stocks I found that is not that much corelated to US stock market is EU small caps (and in EU we are good in having the small caps really small ;-)). For REITs I have read a lot, though their correlation to stocks increased in time, have thought of having APAC REITs, but was lazy enough to continue digging..
Hahah yes! I looked at the Pinwheel quite a bit as well.

Decided the political risk of emerging markets made it not worth the additional effort of keping another asset of the portfolio.

Strongly debated keeping or tossing the small caps. Ultimately, too many people like the tilt, so decided to follow the herd and throw a little money towards it.

And I purposely left out the REITs because I'm an architect. I currently work for the government, so I'm shielded from sudden shocks, but I thought its best to avoid personal investments in my own industry. If anything, I'd hedge against the construction industry...but I can't think of how!
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Re: The Desert Looking Glass portfolio?

Post by dualstow » Mon May 16, 2022 8:37 am

FYI, Hal’s initial link worked for me. Maybe it was a temporary glitch.
Bogle Says Count SS/Pension in Allocation
Splitter 01-01-2007, 11:25 AM | Post #190913 |
0


The "Is my Social Security/Pension a bond equivalent" question has gotten much debate on this board. But until now I hadn't seen Jack Bogle's opinion on the subject.

In this interview with Scott burns entitled Heeding Advice of an Elder, Bogle says you should count Social Security and Pension income in your allocation. (Annuitized/Discounted for age). He also says not to count your house in your allocation if you are living in it.

I find this very interesting. Not only in and of itself, but because Bogle also mentions the "Your age in bond" rule of thumb. Many people think that too conservative and think it should be reduced by 10 or 20. What I found intriguing, however, is that if you did indeed count your Social Security/Pension as a bond equivalent, then the 'Your age in bonds' rule of thumb makes much more sense because it reduces the bonds in your actual portfolio.

Of course, counting your Social Security/Pension in your allocation brings up an obvious question: At what rate should you annuitize it?
But, that's a whole other can of worms. The main question being should you count it in the first place.

Any opinions? Is Bogle on the mark or ready for the rocking chair?

Originally posted in thread: 55894
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Re: The Desert Looking Glass portfolio?

Post by Vil » Mon May 16, 2022 11:37 am

joypog wrote:
Mon May 16, 2022 8:06 am
Vil wrote:
Mon May 16, 2022 3:46 am
Start to smell pinwheel-ish here... ;D you just miss some REIT ..
For me its too much of slice & dice. Only piece of international stocks I found that is not that much corelated to US stock market is EU small caps (and in EU we are good in having the small caps really small ;-)). For REITs I have read a lot, though their correlation to stocks increased in time, have thought of having APAC REITs, but was lazy enough to continue digging..
Hahah yes! I looked at the Pinwheel quite a bit as well.

Decided the political risk of emerging markets made it not worth the additional effort of keping another asset of the portfolio.

Strongly debated keeping or tossing the small caps. Ultimately, too many people like the tilt, so decided to follow the herd and throw a little money towards it.

And I purposely left out the REITs because I'm an architect. I currently work for the government, so I'm shielded from sudden shocks, but I thought its best to avoid personal investments in my own industry. If anything, I'd hedge against the construction industry...but I can't think of how!
Stupid question - as the only bonds you (plan to) keep is LTT and is just 10% - is that worth at all ? I mean (conceptually) for the time being - its just a burden (even though with minor effect on your overall portfolio), but when the sun start to shine over LTTs (god knows when) - will it be worth holding it again in such small amounts - or you plan to buy in later on, when you decide the time has come ?
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Re: The Desert Looking Glass portfolio?

Post by joypog » Mon May 16, 2022 12:18 pm

Vil wrote:
Mon May 16, 2022 11:37 am
Stupid question - as the only bonds you (plan to) keep is LTT and is just 10% - is that worth at all ? I mean (conceptually) for the time being - its just a burden (even though with minor effect on your overall portfolio), but when the sun start to shine over LTTs (god knows when) - will it be worth holding it again in such small amounts - or you plan to buy in later on, when you decide the time has come ?
My cash is also held in a short term 52-week bond ladder...but the question is a good one.

First, I'm only dong US treasuries because I'm taking all my corporate risk in the equity market. Second I looked at ITT's and the loss from even the smallest interest rate rise is brutal relative to any gains one might get from the coupons, so I'm passing on those.

As for the LTT's...I treat it as purely speculative insurance (like gold) to slightly blunt the pain of deflation in the rare occurance it. As insurance, I don't want to make money off it, just hopefully make things less bad if/when it hits.

However, I don't plan on timing the market so I only expect to buy up based on the AA, but given HBPP's 40% relabancing bands, it might not even happen that often.

Ultimately the money needs to be stashed somewhere and I don't want all of it in stocks. The value of STT's as almost-ready cash is evident, and LTT's at least provide a speculative value. ITT's feel like a no-man's land with the worst of both worlds. So without any better options, it seems like a good enough option. But will it be a good bet? I don't know...maybe as a security blanket that pays 3% a year?

When I get closer to retirement, I might transition out of these LTTs to buy some TIPS to cover necessary expenses above my pension and SSN...(like I'm currently doing with our kid's college funds).
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Re: The Desert Looking Glass portfolio?

Post by boglerdude » Mon May 16, 2022 4:49 pm

Cool story. Did you buy that portfolio yet =)
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Re: The Desert Looking Glass portfolio?

Post by joypog » Mon May 16, 2022 5:32 pm

boglerdude wrote:
Mon May 16, 2022 4:49 pm
Cool story. Did you buy that portfolio yet =)
Hahah good question! Last weekend we started moving money into position, but we're going in over 10 months. We got to our crazy cash position due to our hyper-conservativeness and see no compelling reason to suddenly change....

And yeah, it was fun trying to convince my wife it was time to buy into small value stocks with the current market turmoil. She agreed to go in halfway and revisit the question in two weeks. :P
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Re: The Desert Looking Glass portfolio?

Post by D1984 » Mon May 16, 2022 6:16 pm

joypog wrote:
Mon May 16, 2022 5:32 pm
boglerdude wrote:
Mon May 16, 2022 4:49 pm
Cool story. Did you buy that portfolio yet =)
Hahah good question! Last weekend we started moving money into position, but we're going in over 10 months. We got to our crazy cash position due to our hyper-conservativeness and see no compelling reason to suddenly change....

And yeah, it was fun trying to convince my wife it was time to buy into small value stocks with the current market turmoil. She agreed to go in halfway and revisit the question in two weeks. :P
Just curious, which small value stock fund are you going with? AVUV? Royce? Aegis Value? Towle Deep Value? One of the DFA SCV funds? Something from Bridgeway? RZV? Wasatch? S&P 600 Value? Russell 2000 Value? Something else entirely? Some choices are smaller and more value-loaded than others (and consequently have higher expected returns).
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Re: The Desert Looking Glass portfolio?

Post by joypog » Mon May 16, 2022 6:34 pm

D1984 wrote:
Mon May 16, 2022 6:16 pm
joypog wrote:
Mon May 16, 2022 5:32 pm
boglerdude wrote:
Mon May 16, 2022 4:49 pm
Cool story. Did you buy that portfolio yet =)
Hahah good question! Last weekend we started moving money into position, but we're going in over 10 months. We got to our crazy cash position due to our hyper-conservativeness and see no compelling reason to suddenly change....

And yeah, it was fun trying to convince my wife it was time to buy into small value stocks with the current market turmoil. She agreed to go in halfway and revisit the question in two weeks. :P
Just curious, which small value stock fund are you going with? AVUV? Royce? Aegis Value? Towle Deep Value? One of the DFA SCV funds? Something from Bridgeway? RZV? Wasatch? S&P 600 Value? Russell 2000 Value? Something else entirely? Some choices are smaller and more value-loaded than others (and consequently have higher expected returns).
We're not thinking too hard about it...so just the Vanguard VSIAX since our IRA's are both with the big V. Maybe at some point I'll jump into the details and see if there is an ETF that might squeeze a little more performance out for us. The percentages are such that the only holding in a taxable account will be the US market fund and I suspect that will just be Fido since that's our taxable brokerage.
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