Gyroscopic Investing

Curious if anyone has taken a closer look at the performance of any variety of options for a golden butterfly fifth asset class. I'm stuck between allocating to traditional US small cap value or going for international ex-US type exposure.

Over the last ten years the US small cap value option would have handily beaten the international diversification but that might not be the case going forward. At this moment it seems like international and emerging market equities offer greater value......perhaps flip flopping between the two as their valuations change would be best?

I'm pretty much in traditional PP at moment but have been giving thought to taking on a bit more equity exposure haven't formulated a plan on how to do that yet.

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InsuranceGuy wrote: ↑Fri Mar 05, 2021 8:35 am I seem to recall that the last time I looked at adding a fixed 5th asset: mid cap stocks, micro cap stocks, and corporate bonds were among the best.

I'm mostly trying to decide whether it makes sense to internationally diversify or not. I know almost 50 percent of SP 500 revenue comes from overseas...but I'm wondering if it might make sense to tap directly into emerging markets. I'm just curious if anyone else has insight into arguments for or against that approach....ideally the fifth asset would be negatively correlated with the traditional 4 of the PP

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Might not be bad time for

International value

https://www.ishares.com/us/products/239 ... -value-etf

I think I would prefer fund for countries I would willing to live in instead of emerging.

This question has arisen before and as luck would have it I kept a note with Tyler's response to it from a few years ago:


"One additional question: Have you considered a slice of international, for diversification? I realize that past returns show it's always been a return-reducer (with the exception of very high risk EM)."


"I've looked into it several times, and have yet to find a convincing evidence-based reason to add international stocks to a US-based PP. The biggest proponents of international diversification generally cite the very reasonable assumption that US stocks won't always perform so well and you'll need something else to pick up the slack. I completely agree, but the data indicates that gold already fills that role particularly well which is why adding international never seems to improve the numbers. And in the GB, the small caps also pitch in by greatly diversifying away from the relatively small number of large caps that drive returns of a total market fund due to how the index is weighted. There's more to stock performance than the country it's domiciled in.

I'll note, however, that due to macroeconomic forces the negative correlation of gold to stocks is more pronounced in the US than in other countries. If I was a PP investor outside of the US, international investing would look more appealing. And if gold ownership is ever outlawed again in the future or if an individual investor simply has a mental block on owning gold, international stocks are a logical backup choice to fill that role in a portfolio."

Perhaps Tyler will chime in here with any new insights. I've toyed with including some international stock in my GB myself but in the end, as a US investor, decided that the prescribed combination of TSM and SCV covers the equity side very well. When tempted to dabble further I just think of the gold as "international" since it is after all valued worldwide (and much more so outside the U.S. than within it).

I have sort of gone in a different direction. For the core stock application of the GB I do Mid and Small Cap stocks using ETF VXF which is essentially everything not in the S&P 500. Then for the additional 20% of the GB I did individual dividend stocks that I choose. Things that I really don't need to pay a fund to purchase like Johnson & Johnson or Colgate etc. And those I just buy and hold and collect the dividends. I know that to a certain extent they will move with the other 20% in stocks. But most total market funds these days are concentrated in technology. My individual stocks skew the other way with consumer staples and utilities etc. So it is a contrary pie to an extent.

vincent_c wrote: ↑Fri Mar 05, 2021 3:59 pm Can a fifth asset be variable?

Or does that just make it a PP with a VP.

Some of you do view the standard fifth asset as a PP with a SCV VP though right?

Yes, that's the way I view it as presented by Tyler.

Maybe other proposed variants could use the term PP+, or even PP++ if you want to go six assets.