Pre-1972 PP Performance

[MachineGhost]

Yet as one goes abroad, there is an even older kind of money, true dynastic wealth that has existed in some families for 300 years or longer. This type of wealth has survived not only business cycles but also war, invasion, the collapse of empires, revolution, and natural disaster. In order for family wealth to persist through so many centuries and through such adversity, something more is needed than ordinary investment skill. This rare kind of success in wealth preservation requires a longer view, infused with a sense of history and a keen appreciation for worst-case scenarios that too frequently become real.

When one inquires of family members and representatives as to what it takes to preserve wealth over centuries and not just cycles, the frequent reply is "a third, a third, and a third." This is shorthand for dividing one's wealth into one-third land, one-third gold, and one-third fine art. Obviously some liquidity is needed for day-to-day expenses and some room can be made for a speculative portfolio, but the basic idea that land, gold, and art outlast and outperform riskier assets such as stocks, bonds, and cash seems sound when viewed from the perspective of centuries and not just years or decades.

http://www.usnews.com/opinion/blogs/eco ... its-riches

[kev_in_tw]

It gets even better if you add gold to the mix:



http://www.riskcog.com/portfolio-theme2 ... c74a74e748

Does this riskcog.com tool really work. E.g.

http://www.riskcog.com/portfolio-theme2 ... 000cmpe118



So a portfolio that is

79.9% SHY Short term treasuries

16.4% VTSMX Total stock market

3.7% GLD Gold

Manages 8% per year with a worst case year in 1994 of only -0.81%

Is that really true? It seems bizarre that essentially a cash (in PP terms) portfolio can do so well.

[Pointedstick]

So a portfolio that is

79.9% SHY Short term treasuries

16.4% VTSMX Total stock market

3.7% GLD Gold

Manages 8% per year with a worst case year in 1994 of only -0.81%

Is that really true? It seems bizarre that essentially a cash (in PP terms) portfolio can do so well.

Try it on ETFReplay. Here are the numbers since 2004 for that portfolio:



About 5% CAGR for the last 8 years, which is pretty much what the Riskcog graph shows.

Crazy, isn't it? T-bills are some of the most under-appreciated investment vehicles out there, IMHO. Keep in mind that for most of that time period, they were returning very good interest rates.

[Gosso]

So a portfolio that is

79.9% SHY Short term treasuries

16.4% VTSMX Total stock market

3.7% GLD Gold

Manages 8% per year with a worst case year in 1994 of only -0.81%

Is that really true? It seems bizarre that essentially a cash (in PP terms) portfolio can do so well.

I wouldn't do it.  That portfolio saw negative real returns throughout the 70's.  Then STT went on a magical run during the 80's and 90's, which is unlikely to be repeated in the near future...unless you can see short-term nominal rates increasing to 6%.  And then a real return of 1-2% over the past 12 years is not good enough, IMO.  And lets not forget that it is currently yielding a negative real return, and will continue to do so until at least 2015 (if the Fed is true to its word at keeping rates unchanged, and inflation stays at ~2%).