Simplifying fund choices for the PP/GB

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Kevin K.
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Simplifying fund choices for the PP/GB

Post by Kevin K. » Sat Apr 01, 2023 6:04 pm

I've been running a somewhat modified iteration of the Golden Butterfly for the past few years (having migrated there from a pure PP I held since 2008). Like many other Harry Browne fans I've tried to take his warnings about safety seriously and that has led me to what I fear may be an undue level of complexity in some parts of my portfolio.

Concerns about cyber-attacks possibly leading to being unable to access accounts for some weeks or months prompted me to diversify brokerages, so that's one level of perhaps-needless complexity. Then there's diversifying across fund families: I have Vanguard for my Total Stock Market (VTI), but use mostly Schwab bond ETFs and divide the GB's Small Cap Value allocation between VBR and AVUV. I know of course that physical gold is the preferred choice but after living outside the country for a few years I've long since gone with ETFs, splitting the allocation 50:50 between GLDM and IAUM, the two lowest-cost ETFs with good management and track records I have found. But do I need two funds in any or all of these categories? And it is really such a big deal to just be in one fund family and keep almost all assets at one brokerage, with 6-12 months in cash at a local credit union as the cyber-crime hedge?

I also have some "deep cash" in iBonds but as I read more about just what a nightmare Treasury Direct for account beneficiaries in the event of the primary holder's death (and how lousy their website security is) I'm thinking of closing those accounts as well, much as I've enjoyed making a decent return on a small chunk these past 4 years or so.

I know there are many who post here who've been involved with the PP and GB longer than I have and would appreciate any recommendations. Sooner or later my wife will probably be the one having to manage and rebalance our portfolio and I fear I've made something that should be simple into something else.
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Re: Simplifying fund choices for the PP/GB

Post by boglerdude » Sat Apr 01, 2023 7:26 pm

Fidelity and Vanguard are too big to fail, just save your statements. Are you as worried about your health. Hit the gym =)
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Re: Simplifying fund choices for the PP/GB

Post by joypog » Sun Apr 02, 2023 9:52 am

When I decided upon my asset allocation, I put together a little spreadsheet table simplifying it to the bare minimum of two funds (like Hal's 2-fund approach). It was a good exercise.

That said, it feels natural to split brokerages between tax advantaged versus taxable accounts, just for a little hedge against any craziness. I used vanguard and fido.
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Re: Simplifying fund choices for the PP/GB

Post by barrett » Sun Apr 02, 2023 5:10 pm

I share you concerns about complexity for my wife in the likely event that I kick well before she does. She has her Solo 401k and Solo 401k Roth with Etrade because Fidelity won't support the Roth side of those accounts. All of our other stuff is with Fidelity with the exception of bank accounts and I-Bonds (mostly paper but also some recent bonds with TD due to the fact that I-Bonds were far and away the best fixed-income investment for a time there). The plan is for the TD I-Bonds to only be a short to medium-term hold, again for simplicity.

I think holding everything with one brokerage is fine, with a decent amount of cash at a bank to tide you over in the event of a hack or whatever.

Even within accounts I try to keep everything simple. It's mostly FXAIX & IAU with Fidelity and SPY & IAU with Etrade. Plus a bunch of T-Bills. I am building a liability matching ladder of TIPS in my tIRA for some inflation-protected income before claiming SS at age 70. Even the complexity of TIPS I don't like from the standpoint of my wife figuring things out. I mean, it's not immediately apparent from the way they are listed in that Fido account that they are a different animal from T-Bills. They are all labeled as "United State Treasury" such & such.

I do try to keep explanations for everything in our one finance folder. Lastly, though, the simplicity is for me as well should I start to decline mentally.
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Re: Simplifying fund choices for the PP/GB

Post by boglerdude » Sun Apr 02, 2023 6:24 pm

If thats simple id hate to see complicated
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Re: Simplifying fund choices for the PP/GB

Post by vnatale » Sun Apr 02, 2023 6:43 pm

boglerdude wrote:
Sun Apr 02, 2023 6:24 pm

If thats simple id hate to see complicated


!!!!!!!!!!!!!!!!!!!
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Simplifying fund choices for the PP/GB

Post by barrett » Mon Apr 03, 2023 5:04 am

I assume boglerdude and Vinny are both reacting to my "simple" portfolio and not joypog's spreadsheet.

When I read your replies I was reminded of a funny exchange I had with a friend years ago where we were both claiming that we did very little lawn maintenance. We then proceeded to list the "few" things that we did do and the more we talked about it, the longer our lists got. "I mean I DO follow the Scotts four-step fertilizer program, but that's a given, right? And, oh yeah, I put down pelletized lime in both the spring and the fall but you more or less have to do so here in New England. Oh, and GrubEx because I don't want those little suckers eating the grass roots and then having moles show up to eat the grubs. What about over-seeding in the spring after the first round of fertilizer has worked its way into the soil? And I water during dry spells and use X, Y, and Z products in other situations. And I try to aerate the soil twice a year." And so on. We both had this conversation with straight faces while acting like our obsessive attention to our lawns was the bare minimum for any self-respecting human. In retrospect it was hilarious.

But back to keeping finances simple. I am curious how others have things set up without veering too far away from Kevin's original post. In our case, my wife and I have both been self-employed our whole lives. We'd be fools to not take advantage of Solo 401ks and Solo 401k Roths because they allow one to get the largest amounts into tax-advantaged and post-tax accounts. I retired at 59.5 and rolled those accounts into my regular tIRA & Roth at Fidelity. But my wife is only 56 and can't do that until she reaches age 59.5, assuming that she is then also retired and no longer making annual contributions.

For the actual investments I have decided to skip long-dated treasuries, so in every account we hold similar percentages of one S&P 500 fund, some gold (physical or IAU) and a bunch of short-term treasuries. The I-bonds & TIPS are both a way to diversify fixed-income holdings AND to hopefully get broader inflation protection than gold alone provides. Once SS kicks in for both of us in six years, the TIPS ladder will be gone and we'll rely to some extent on COLA'ed SS to protect against inflation. And our sacred trove of 1999 to 2002 I-Bonds will be redeemed before RMDs kick in for me.

The TD I-Bonds and the TIPS are short to medium-term holdings that will run their course before I die from obsessing about our finances and my wife has to run things on her own.

We hold no individual stocks, no corporate bonds, CDs, REITs, options, crypto currencies, etc. We do use two different banks for living expenses but the recent bank drama has only made me more convinced that this is a wise move.

Does anyone else want to take a stab at honestly describing their own "simple" set up? I mean, I assume that many here hold at least four assets in three accounts that each have different tax treatment, correct?
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Re: Simplifying fund choices for the PP/GB

Post by vnatale » Mon Apr 03, 2023 7:06 am

barrett wrote:
Mon Apr 03, 2023 5:04 am

I assume boglerdude and Vinny are both reacting to my "simple" portfolio and not joypog's spreadsheet.




For clarification purposes I was reacting STRICTLY to boglerdude's comment...
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Simplifying fund choices for the PP/GB

Post by Hal » Mon Apr 03, 2023 7:53 am

barrett wrote:
Mon Apr 03, 2023 5:04 am
Does anyone else want to take a stab at honestly describing their own "simple" set up? I mean, I assume that many here hold at least four assets in three accounts that each have different tax treatment, correct?
Well... first the rationale!
1. Has to be easy for another family member to manage who has very little financial knowledge.
2. Has to be internationally diversified

Two separate PP's

1. Extended family PP. 25% Local Gold, 75% VDCO. This is in a joint self managed retirement account. Half hour maximum per year to manage.

2. Personal PP. 20% Overseas Gold, 5% Local (for rebalancing) which is not in retirement fund. In Industry retirement fund 50% VBND (Global Bonds), 25% VGS (Global Shares). Once again 1/2 Hr maximum to manage

I won't say this a perfect plan, but we can carry it out consistently. Remember Bismarcks quote 8)
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Re: Simplifying fund choices for the PP/GB

Post by Kevin K. » Mon Apr 03, 2023 10:13 am

Thanks barrett for your thoughtful post! It certainly sounds like every choice you've made has involved a lot of careful thought, so one could argue that the level of complexity involved is pretty much just what's necessary - just like with the lawn care protocols!

My wife and I have a simpler tax-deferred account situation: just a couple of regular IRAs, and mine is the only one with significant assets in it (about half of our total). So I just keep a big chunk of bonds in it (including all of our TIPS - I use a "barbell" of short (VTIP) and intermediate (SCHP) TIPS and another of short (SCHO) and intermediate (SCHR) nominals in lieu of the PP/GB long/short nominals - plus our Total Stock Market position in that account. At 66 I'm long past the minimum age to be able to withdraw from that account without penalties if need be, but it's something I have to do judiciously because my wife at 60 is still on an ACA plan and we have to manage our taxable income in order to keep to the subsidy "sweet spot." As far as I'm concerned, TIPS funds (rather than ladders) held in a tax-deferred account (and not at TD) are the only way I want to own them. I've read the epic threads on Bogleheads featuring the likes of Allan Roth and William Bernstein talking about their TIPS ladders and that's convinced me that something that even the pros have a hard time managing is not the right thing for me to either take on or ask my wife to deal with.

The other GB assets (gold, small cap value and additional cash/short-term Treasuries) are mostly in our taxable account. We have a slug of iBonds too but unlike you have only had them for 3 years and will probably redeem them soon and reinvest them in STT's. I have read too many nightmare stories on Bogleheads of what it's like for a surviving spouse or any other designated beneficiary to get access to TD accounts upon death of the owner. And of course the TD website is notoriously funky and cumbersome. So closing out our TD account is one way I can simplify.

I've decided to keep the two gold ETFs and the two SCV ones. It makes sense to me not to have all of the gold in one fund and managing two of them is certainly far easier than dealing with physical gold - at least for me. As for the SCV split, I guess I partly look at it, since I have no speculative portfolio/gambling money on the side, as a way to see how one of the most value-y and carefully-crafted Avantis (ex DFA guys) SCV funds does vs VBR which is almost more of a mid-cap/small cap mix by comparison - and whether AVUV's returns make up for its much higher ER and volatility. If it does - and I expect it to - I could see using it exclusively for SCV exposure and reducing the 20% allocation to SCV by 5% or more at some point.

I agree with you wholeheartedly barrett about the bank situation. In our case we decided pretty early on during the pandemic to keep a slug of cash at our local credit union (well under the NCUA limits, of course) in lieu of splitting assets between two brokerages as we used to do. Other than that though we have nothing but T-Bills for cash, including 13 and 26 month ones bought at auction through Schwab on auto-rollover - a very cool way to do a "roll your own" MM fund with no expense ratio at all. I certainly wouldn't want to have a big chunk of cash at one of the big banks (online or otherwise) right now.

I've heard nothing but good things about Fidelity but we use Schwab instead and have had great service from them for many years. IMHO using only (or at least primarily) brokerages like Fido or Schwab that have brick-and-mortar offices a financially less savvy spouse can visit at any time is another reason (in addition to their awful customer service and website) to avoid Vanguard (though I am happy to hold mostly Vanguard ETFs at Schwab - their funds and ETFs are as excellent as the rest of their operation is awful).

Anyway, we have an IPS (investment policy statement) with our allocation percentages, specific funds and rebalancing bands. Our local Schwab office will happily take on monitoring and rebalancing for us at no charge if at some point down the road one or the other of us feels the need. My wife has far less interest in finance and investing than I do but I've gotten her to read a couple of basic books on investing and familiarize herself with the Portfolio Charts site and that should be enough.
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Re: Simplifying fund choices for the PP/GB

Post by stuper1 » Mon Apr 03, 2023 2:12 pm

I've been thinking about how to simplify things for my wife to be able to handle when I'm gone and still keep some of the benefits of the PP/GP philosophy. She's a smart, professional-career woman, but she doesn't have a lot of interest in maintaining financial stuff. I can teach her how to handle the important stuff, but I have doubts that things like annual rebalancing would get done, so I'm trying to build a portfolio that won't go to pieces if it isn't maintained regularly.

Below is my current plan to be held at Vanguard. I would love to get any positive/negative feedback from you folks. In addition to the below, we keep some cash in our bank and some physical gold in our safe deposit box (I will show her where the reputable local gold dealer is, but tell her the physical gold is only for last-resort purposes and most likely should just go to our children when she dies).

Taxable account (about 5% of our portfolio, unless she gets some insurance or inheritance money):
- 50% in money-market settlement fund, hopefully earning a reasonable interest rate.
- 50% in total stock market index fund, such as VTSAX.
- When you need money to your checking account, take it from whichever of the two funds has the most money in it at that time.
- Rebalance to 50/50 once a year in January (hopefully she will remember, but if she doesn't the withdrawals will hopefully keep things somewhat in balance).

Roth IRA (I will give her separate instructions to combine our two Roth IRAs on my death, this will be about 25% of our portfolio):
- 100% in Vanguard Balanced Index Fund (VBIAX)
- Hopefully won't need to tap this account, so it can just go to our children, but if needed tap this one before selling physical gold.

Rollover IRA (will contain the money from my current 401k, this will be about 70% of our portfolio):
- 10% in IAUM (paper gold)
- 45% in VWENX (Wellington Fund)
- 45% in VWIAX (Wellesley Fund)
- When you need money from this account, including RMDs after a certain age, take it from IAUM if the amount in IAUM is greater than 10% of the total, otherwise take it from whichever of VWENX or VWIAX currently has the larger balance. When you are taking RMDs, just move the money first to the taxable account, rebalance the taxable account, and then take money from the taxable account as needed.
- Rebalance once a year if possible, but it should work fine even without rebalancing.

She will also have income from a pension and Social Security that will probably cover all her expenses anyway, and our house will be paid off soon, so the above is not super critical. Maybe it's over-complicated given the pension and Social Security. Maybe we should just put the Rollover IRA fully in a single fund such as VWENX. I will try getting her more involved with this stuff, and see how well she takes to it, and then decide accordingly.

Let me know if you guys/gals have any suggestions.
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Re: Simplifying fund choices for the PP/GB

Post by Kevin K. » Mon Apr 03, 2023 3:24 pm

stuper1 wrote:
Mon Apr 03, 2023 2:12 pm
I've been thinking about how to simplify things for my wife to be able to handle when I'm gone and still keep some of the benefits of the PP/GP philosophy. She's a smart, professional-career woman, but she doesn't have a lot of interest in maintaining financial stuff. I can teach her how to handle the important stuff, but I have doubts that things like annual rebalancing would get done, so I'm trying to build a portfolio that won't go to pieces if it isn't maintained regularly.

Below is my current plan to be held at Vanguard. I would love to get any positive/negative feedback from you folks. In addition to the below, we keep some cash in our bank and some physical gold in our safe deposit box (I will show her where the reputable local gold dealer is, but tell her the physical gold is only for last-resort purposes and most likely should just go to our children when she dies).

Taxable account (about 5% of our portfolio, unless she gets some insurance or inheritance money):
- 50% in money-market settlement fund, hopefully earning a reasonable interest rate.
- 50% in total stock market index fund, such as VTSAX.
- When you need money to your checking account, take it from whichever of the two funds has the most money in it at that time.
- Rebalance to 50/50 once a year in January (hopefully she will remember, but if she doesn't the withdrawals will hopefully keep things somewhat in balance).

Roth IRA (I will give her separate instructions to combine our two Roth IRAs on my death, this will be about 25% of our portfolio):
- 100% in Vanguard Balanced Index Fund (VBIAX)
- Hopefully won't need to tap this account, so it can just go to our children, but if needed tap this one before selling physical gold.

Rollover IRA (will contain the money from my current 401k, this will be about 70% of our portfolio):
- 10% in IAUM (paper gold)
- 45% in VWENX (Wellington Fund)
- 45% in VWIAX (Wellesley Fund)
- When you need money from this account, including RMDs after a certain age, take it from IAUM if the amount in IAUM is greater than 10% of the total, otherwise take it from whichever of VWENX or VWIAX currently has the larger balance. When you are taking RMDs, just move the money first to the taxable account, rebalance the taxable account, and then take money from the taxable account as needed.
- Rebalance once a year if possible, but it should work fine even without rebalancing.

She will also have income from a pension and Social Security that will probably cover all her expenses anyway, and our house will be paid off soon, so the above is not super critical. Maybe it's over-complicated given the pension and Social Security. Maybe we should just put the Rollover IRA fully in a single fund such as VWENX. I will try getting her more involved with this stuff, and see how well she takes to it, and then decide accordingly.

Let me know if you guys/gals have any suggestions.
You've thought this through really well, IMHO. The only further simplification that occurs to me would be to consider the brilliant suggestion from Tyler (of Portfolio Charts) that I (without his permission) call "Golden Wellesley," as your only holding in the rollover IRA. Historically it has had returns and shallow, short-lived drawdowns very much like those of the Golden Butterfly. But it's not like your current W + W+ gold portfolio isn't arguably an equally elegant solution (though of course with the proviso that you're all-in on active management with essentially no international diversification and only corporate bonds).

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Re: Simplifying fund choices for the PP/GB

Post by barrett » Mon Apr 03, 2023 3:39 pm

stuper1, that is a really nice set up if one of your concerns is your wife not rebalancing. Those three funds (VBIAX, VWENX & VWIAX) all have a good mix of stocks & bonds. They kick off a lot of dividends & interest but there are obviously no tax consequences as they are all in either tax-deferred or Roths.

I guess a potential concern for folks who hold gold in a safe deposit box is that an aging, semi-interested, surviving spouse may eventually just forget (or be physically unable) to visit/check the box. At a certain point we'll probably put our daughter's name on our safe deposit box as well. But I plan on being sharp as a tack for another 20 years so that can wait!!

It also looks like your directions will ensure that assets going to your children will basically be tax-free to them. We've been trying to up our Roth percentage in recent years but it's a long, slow process. 25% in Roths is great.
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Re: Simplifying fund choices for the PP/GB

Post by stuper1 » Mon Apr 03, 2023 3:55 pm

Kevin K, you identified one thing that I'm not comfortable with, which is too much active management and corporate bonds in the Rollover IRA. I think this might be a better plan for the IRA:

10% IAUM (paper gold)
45% VBIAX (Vanguard Balanced Index Fund)
45% VWENX (Wellington Fund)

With this idea, the stock allocation would be about 57%, rather than 45% with the previous idea, which is a bit higher than I'd like to be, but maybe it's okay.

If I do that, though, I don't know what to put in the Roth IRA as a single-fund solution. I want something that's stock heavy and doesn't duplicate what is in the Rollover IRA, but maybe that's stupid since VBIAX already includes 60% of total stock market, so basically all stocks already. Maybe I should just keep VBIAX as the fund for the Roth IRA also. I don't really like the LifeStrategy funds because international stocks seem like they have been a drag on returns, but maybe that will turn around. I'd like to stay with mutual funds, rather than ETF options such as the iShares Core multi-asset ETFs, because withdrawals from mutual funds can be done as a one-step process rather than having to sell the ETF and wait for the money to show up in the settlement fund before withdrawing to the checking account, and besides the iShares offerings have the international stocks and bonds also.

Barrett, that's a good reminder to have an exit plan for the safe deposit box.
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Re: Simplifying fund choices for the PP/GB

Post by Kevin K. » Mon Apr 03, 2023 4:09 pm

stuper1 wrote:
Mon Apr 03, 2023 3:55 pm
Kevin K, you identified one thing that I'm not comfortable with, which is too much active management and corporate bonds in the Rollover IRA. I think this might be a better plan for the IRA:

10% IAUM (paper gold)
45% VBIAX (Vanguard Balanced Index Fund)
45% VWENX (Wellington Fund)

With this idea, the stock allocation would be about 57%, rather than 45% with the previous idea, which is a bit higher than I'd like to be, but maybe it's okay.

If I do that, though, I don't know what to put in the Roth IRA as a single-fund solution. I want something that's stock heavy and doesn't duplicate what is in the Rollover IRA, but maybe that's stupid since VBIAX already includes 60% of total stock market, so basically all stocks already. Maybe I should just keep VBIAX as the fund for the Roth IRA also.

Barrett, that's a good reminder to have an exit plan for the safe deposit box.
stuper1 it seems to me that active management and the narrow bet on small sectors of both the stock and bond markets are issues with both Wellesley and Wellington - mitigated of course by their many decades of excellent performance and lots of wealthy old people watching them like a hawk! Nonetheless, several very savvy friends who are long-time W investors have been telling me how sick they are of poring through their annual reports and reading about their manager's latest ideas for generating alpha - while knowing that they and their spouse will have to continue to be vigilant about changes in managers and/or investment styles as long as they own those funds.

Personally I would be more comfortable with something just as dead simple but far more diversified and 100% indexed, such as an iteration of Jonathan Clement's portfolio idea: the whole stock allocation in VT (Vanguard World Stock) and the bonds entirely in Treasuries (either a barbell of VTIP and VGSH or 100% VGSH). That gets you an infinitely more diversified equity portfolio and nothing but the highest quality bonds.

As for gold, Ern @ Early Retirement Now (see link below) has shown pretty conclusively (IMHO) that 15% is the minimum required to provide meaningful sequence-of-returns risk (and he doesn't like gold but has the integrity to follow the numbers where they lead). But you could easily do all VT and VGSH in your Roth and have a bit of gold in your regular IRA and call it a day. Your expense ratio would also be cut in half vs. even Admiral shares of Wellesley or Wellington and over time that's not nothing. YMMV and you already have a great portfolio.

https://earlyretirementnow.com/2020/01/ ... s-part-34/
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Re: Simplifying fund choices for the PP/GB

Post by ppnewbie » Thu May 11, 2023 7:20 pm

For a Golden Butterfly...
VTI
VBR
BIL (Interested in hearing what others do, I actually use SCHO but I would not recommend it).
VGLT
IAUM (JP Morgan Custodian)

Or to Simplify further your wife could just not ever rebalance and only withdraw, just withdraw whatever is up at the time. And if she she did want to add to the investment portfolio, always add to VTI.

Also thanks for the Karsten Jeske site.
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Re: Simplifying fund choices for the PP/GB

Post by mathjak107 » Fri May 12, 2023 1:15 pm

i like sgov for cash i am not utilizing
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Re: Simplifying fund choices for the PP/GB

Post by Kevin K. » Sat May 13, 2023 9:09 am

OK, so as the OP here's where I ended up after getting a clearer idea of what my spouse's actual comfort level is should she ever have to manage the portfolio.

20% VTI - self-explanatory

20% VBR - a "good enough" SCV choice - admittedly more of a small + mid-cap play vs. AVUV, etc.

20% GLDM (the lower ER [.10%] counterpart to GLD, which I prefer to IAUM due to the latter having so little AUM that liquidity could be an issue during market turmoil)

35% SCHR: Schwab's IT Treasury ETF - tracks same index as VGIT but is even cheaper (.03% ER)

5% cash: 13 & 26 week T Bills bought at auction set for automatic rollover plus a slug of SNSXX (Schwab's not-so-great Treasury MM fund).

Weighted average ER of this portfolio is .05%.

So it's a modified GB with the modification being using ITT's instead of the long/short barbell. Historical returns essentially identical but for obvious reasons owning a big slug of 30 year Treasuries is far from appealing.

Also maybe worth noting is that I chose to diversify across reputable fund families by having all of the equities in Vanguard ETF's and all of the bonds in Schwab's. Would be even better if the actual accounts were held ~50:50 at those two brokerages (or either one of them plus Fido) but that's too much hassle at this point.
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Re: Simplifying fund choices for the PP/GB

Post by whatchamacallit » Mon May 15, 2023 2:35 pm

Here are my current preferred funds.

Stock

fzrox and vti


Gold

iaum and gldm

It has been interesting watching the price between these two funds. Gldm seems to get higher gains at first and then iaum will catch up a day or two later.

Cash

cltl and sgov

I feel like cltl will beat sgov in the long term since it has maturities up to 12 months. Plus sgov is supposedly raising their expense ratio from .05 to .12 at end of June. I am curious to see if it happens.

Bonds

govt

This would be the controversial one. It has bonds from 1 year to 30 years based on market cap of available maturities. Ends up being close to intermediate fund but not quite. Best way I think to describe it is it is like a total us bond fund but it only has treasuries.
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Re: Simplifying fund choices for the PP/GB

Post by mathjak107 » Tue May 16, 2023 7:39 am

i wanted sgov just because it’s very short .. i also have shy so i wanted something close to a cash equivalent
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