I've been playing around with some backtesting---Simba's spreadsheet and some other backtesting tools--and I'm wondering if some of this forum's more experienced investor's would comment on whether or not they think a portfolio with a Vanguard Wellesley (VWINX) core is a worthy alternative to PP. Specifically, 75% Wellesley, 10% LTT and 15% gold produces backtesting results very competitive with PP:
PP 4x25
1972-2011
CAGR Nominal 9.67 Real 5.10
SDEV Nominal 7.99 Real 7.21
SHARPE Nominal 0.57 Real 0.60
Max Drawdown 4.1%
$10,000 rebalanced grew theoretically $73,195 (real)
75% Wellesley + 10% LTT + 15% Gold
1972-2011
CAGR Nominal 10.27 Real 5.67
SDEV Nominal 7.24 Real 7.51
SHARPE Nominal 0.70 Real 0.66
Max Drawdown 4.4%
$10,000 rebalanced grew theoretically to $90,889 (real)
In addition to the active management risk associated with Wellesley, the fund's great track record notwithstanding, the credit risk associated with the fund's corporate bond holdings, and the slightly higher max drawdown, what drawbacks am I missing?
PP Alternative
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MachineGhost
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Re: PP Alternative
If it walks like a duck, quacks like a duck....In addition to the active management risk associated with Wellesley, the fund's great track record notwithstanding, the credit risk associated with the fund's corporate bond holdings, and the slightly higher max drawdown, what drawbacks am I missing?
Any combination of disparate economic assets will start performing like the PP or AWP. Sooo, I would say the issue is access, fees and taxes. What is the practical, lowest cost implementation?"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Re: PP Alternative
Short answer: One can implement the portfolio for 0.14-0.25%.
It depends how practical is defined, but with $50,000 at Vanguard one could hold and manage a simple version of the portfolio (75% VWINX 10% VUSTX 15% IAU) for an expense ratio of 0.25%, plus $7 per transaction to purchase/rebalance IAU. Starting at about $66,000 the Wellesley Admiral shares (VWIAX) become an option, and the portfolio expense ratio would drop to 0.19%. Using VWIAX and purchasing LTT directly drops the portfolio's expense ratio to 0.17%. And adding gold directly held instead of IAU drops it to 0.14%, although in this instance one really ought to amortize physical gold's acquisiton costs over some holding period.
With less than $50,000 the 0.25% expense ratio is still valid, but the transaction cost for IAU is a bit higher.
It depends how practical is defined, but with $50,000 at Vanguard one could hold and manage a simple version of the portfolio (75% VWINX 10% VUSTX 15% IAU) for an expense ratio of 0.25%, plus $7 per transaction to purchase/rebalance IAU. Starting at about $66,000 the Wellesley Admiral shares (VWIAX) become an option, and the portfolio expense ratio would drop to 0.19%. Using VWIAX and purchasing LTT directly drops the portfolio's expense ratio to 0.17%. And adding gold directly held instead of IAU drops it to 0.14%, although in this instance one really ought to amortize physical gold's acquisiton costs over some holding period.
With less than $50,000 the 0.25% expense ratio is still valid, but the transaction cost for IAU is a bit higher.
Re: PP Alternative
I think any conservative Boglehead portfolio can be turned into a PP pretty quickly. I have found that 60% TBM, 20% stocks, and 20% gold is the closest way to get a PP. I will probably do something like that once I enter the world of limited 401k options 
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