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You should look back and see how this hypothetical portfolio would have performed during the 2008/9 recession.
Quote:
Originally Posted by Mr. Zero
Yup. Would be interesting to see some back testing.
I can't back test with the foreign holdings but if you equal weight the us stocks and then hold 12/12/12% for the fixed income it did lag the S&p 500
It underperformed from q4 2006 until q3 of 2008 where it ran with the S&p until close to halfway through 2010 where the outperformance begain and nearly doubled the return of the S&p to date
I can't back test with the foreign holdings but if you equal weight the us stocks and then hold 12/12/12% for the fixed income it did lag the S&p 500
It underperformed from q4 2006 until q3 of 2008 where it ran with the S&p until close to halfway through 2010 where the outperformance begain and nearly doubled the return of the S&p to date
I take it that this is for current holdings. Is it possible to backtest over a longer period?
I know you can't answer this, but it would be great if the OP could talk about backtesting that also accounts for their asset selection and rebalancing approaches.
Why only 12% in bonds - and all of that in HYD (a high yield/junk muni bond fund)?
By the way - in response to other messages - I gave up back testing a loooooooong time ago (if I did one back test - must have done half a million). Like they say - past performance is no guarantee of future results. Robyn
if they have a very long term view and want to go aggressive they do not need much in bonds . bonds in that case are as i say " a short term answer for a temporary dip that permanently effects long term gains
Why only 12% in bonds - and all of that in HYD (a high yield/junk muni bond fund)?
By the way - in response to other messages - I gave up back testing a loooooooong time ago (if I did one back test - must have done half a million). Like they say - past performance is no guarantee of future results. Robyn
While past performance is no guarantee of future results I'd rather have more data than less. Looking at 1 years worth of performance is not that great of an indicator after all it too is past performance
... I gave up back testing a loooooooong time ago (if I did one back test - must have done half a million). Like they say - past performance is no guarantee of future results. Robyn
It seems to me, that indeed back-testing isn't useful for gauging a potential trading strategy, as some risky venture might have been spectacularly successful in the past, only to equally spectacularly explode in the future. But back-testing is a useful examination of broad ideas, like the relative performance of asset-classes. After all, it's back-testing that allows us to say that short-term CDs tend to underperform the S&P 500, or that residential real-estate just slightly (if at all) edges out inflation, or that gold might be a storehouse of value (despite substantial fluctuations) but not properly an investment.
Quote:
Originally Posted by mathjak107
if they have a very long term view and want to go aggressive they do not need much in bonds . bonds in that case are as i say " a short term answer for a temporary dip that permanently effects long term gains
I don't disagree, but I'd add that bonds are a palliative for nauseating fluctuations that can last for a decade or more, and not merely the sudden but evanescent gasps to which the stock market is sporadically subject. Bonds are also a skeptic's hedge against the poor profit-growth of corporations, or against irrational valuations, without becoming a beans-and-bunker doomsday advocate.
a flat market or decline lasting a decade is not an issue when talking decades of a typical accumulation stage .
all the bonds are doing are mitigating a shorter term drop in the longer term picture most of the time if not all of the time and in doing so they cut your long term gains permanently .
i doubt there is any 25-40 year typical accumulation stage where bonds did not lag way behind the markets and if there was one it is rare .
you maywant bonds when your time frame grows shorter and is no longer open ended . that is why we diversify towards retirement . with limited time those declines can be permanent , but rarely so when you have 20 years or more to go .
While past performance is no guarantee of future results I'd rather have more data than less. Looking at 1 years worth of performance is not that great of an indicator after all it too is past performance
I have *lots* of data. Like complete price histories of the SP500 - tbond futures - various ETFs (which I currently trade) - and all the Fidelity sector ("Select") funds (which I used to trade). I also have long/complete histories of various indicators (like both daily and weekly advance/decline numbers for the SP500 and the Nasdaq). I also have the software to back test. I think the most important things about having lots of data (at least for me these days) are being able to look at shorter and longer term trends/trend lines - being able to see how various securities have performed in prior bull and bear markets - etc.
So - although I enjoy having the data - and do use it - I'm just not a big fan of back testing in terms of developing trading systems. OTOH - back testing is a useful exercise. If nothing else - it forces you to look at your data and familiarize yourself with the securities you're trading. And it can also raise lots of issues that require some thought/figuring out (like why did this security do that then). Robyn
It seems to me, that indeed back-testing isn't useful for gauging a potential trading strategy, as some risky venture might have been spectacularly successful in the past, only to equally spectacularly explode in the future. But back-testing is a useful examination of broad ideas, like the relative performance of asset-classes. After all, it's back-testing that allows us to say that short-term CDs tend to underperform the S&P 500, or that residential real-estate just slightly (if at all) edges out inflation, or that gold might be a storehouse of value (despite substantial fluctuations) but not properly an investment...
I'm not sure what kind of data you would use to determine something like the return from short term CDs - or where you would get it. I suppose you could dig into Barron's and come up with something like the average return on a six month CD (reported weekly) and input it manually for years and years. I do input some data from Barron' manually - like weekly advance/decline numbers - but they're much more "concrete" than some "average" six month CD yield. Because - as anyone who has ever shopped for a CD knows - rates can be all over the place. And consumers don't buy "average" rates - they shop for the best deals. Which may be at their local credit union. I think that the same applies to residential real estate. Yes - there are "averages". But the averages are just the tip of lots of individual markets (many of which are far from "average").
FWIW - when I've run across articles/studies that purport to use this kind of "soft" data - I've often found that if I scratch the surface - the data that's used to support the conclusions is pretty questionable.
BTW - I don't disagree that short term CDs are generally a poor bet (although longer term CDs can be good ones). OTOH - a short term CD is a "cash equivalent" IMO. A place for "spending money" - emergency fund money - a place to park money between investments - etc. IOW - it's not an investment at all.
I think the same when it comes to owner-occupied residential real estate. I've never thought of my house as an "investment". It's a consumption item - a place to live. And - when it comes to "investment" residential real estate - well how do you measure that in terms of "averages"? Something as simple as having one owner who can fix toilets while another owner has to hire a plumber can make a big difference in the bottom line. Robyn
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