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i don't see much effectiveness in a total bond fund for off setting stock losses in a flight to safety .
like i try to convey all the time , our balance in a bull market is not our balance until the cycle is completed . like day follows night our balances 80% of the time are somewhere between the last low and the last high .
our balances from this bull will definitely , yes definitely take a hit , we just don't know when or how much but you can bet on it at some point . no political party has found away to abolish the recession portion of a business cycle ..
so just like i saw my 60-70% growth and income model take a hit in 2008 , the amount of gains needed to claw back again was tremendous .
that simple portfolio with 25% cash , 25% long term treasuries ,25% gold and 25% equities beat me by a bit even with 300% market gains in the recovery .
so yes , a total bond fund does not have lifting power . but the long term treasuries and cash that acted as a stock option made all the difference in the world . so these are not just ordinary asset classes in that mix . they respond very powerfully when it is their day in the sun , .
here is year by year with a hypothetical 100k ,, me compared to that model i love to hate since with 25% equities it has no business beating a 60-70%equity model .
this starts in 2007 and ends january 1 2018 . would i use it for all my money ? nope . but i can see taking the portion near and dear to you that you want to preserve your growth in while still taking part in the upside , and then using what is called the variable portfolio to go for the alpha .
i find 2/3's in the pp today and 1/3 in the 100% equities insight portfolio gives you a 40-45% allocation to stocks but in an unconventional manner gives you a lot of gain potential still in down markets where it makes up lost ground in the bull ..
Not sure if an 11 year comparison that includes 1 tsunami year has any relevance moving forward. Would love to see a comparison over 20 and 30 years if that data is available.
there is a 40 year history on that model, it has averaged about 8-9% cagr . which for the amount of volatility and having it's worst losing years in the 3% range is pretty good .
rember it is not for growth , it is for preserving that wealth so depression ,recession ,inflation or prosperity really don't devastate you
Last edited by mathjak107; 07-20-2018 at 08:08 AM..
i don't see much effectiveness in a total bond fund for off setting stock losses in a flight to safety .
like i try to convey all the time , our balance in a bull market is not our balance until the cycle is completed . like day follows night our balances 80% of the time are somewhere between the last low and the last high .
our balances from this bull will definitely , yes definitely take a hit , we just don't know when or how much but you can bet on it at some point . no political party has found away to abolish the recession portion of a business cycle ..
so just like i saw my 60-70% growth and income model take a hit in 2008 , the amount of gains needed to claw back again was tremendous .
that simple portfolio with 25% cash , 25% long term treasuries ,25% gold and 25% equities beat me by a bit even with 300% market gains in the recovery .
so yes , a total bond fund does not have lifting power . but the long term treasuries and cash that acted as a stock option made all the difference in the world . so these are not just ordinary asset classes in that mix . they respond very powerfully when it is their day in the sun , .
here is year by year with a hypothetical 100k ,, me compared to that model i love to hate since with 25% equities it has no business beating a 60-70%equity model .
this starts in 2007 and ends january 1 2018 . would i use it for all my money ? nope . but i can see taking the portion near and dear to you that you want to preserve your growth in while still taking part in the upside , and then using what is called the variable portfolio to go for the alpha .
i find 2/3's in the pp today and 1/3 in the 100% equities insight portfolio gives you a 40-45% allocation to stocks but in an unconventional manner gives you a lot of gain potential still in down markets where it makes up lost ground in the bull ..
I like the chart. I take it the Golden Butterfly would have done even better?
yes because we have more prosperity times . which is why i like the pp model for about 2/3's and the 100% equity model for the 1/3 . the whole thing is basically the butterfly but with a very diversified equity portion instead of just an index .
This is the crux of the issue. Putting a high allocation in total bonds means you miss out on the growth of equities. This is a very, very expensive insurance policy with limited coverage. Using long term treasuries might have more "lifting" power but the cost is still very high.
It is easy to make a case for 100% equities for long term investing. Most of us cannot stomach the potential variation. Having cash and bond allocations gives us the ability to react to a market crash. Buying in at the bottom of the market can help offset the insurance costs and helps flatten short and intermediate term volatility.
it is always fun to look at older posts ..
well we now have TLT and long treasury bonds as the years best performing asset up 13% eclipsing equities . ...
Is it too late to buy a long term treasury fund? Signs point to steady interest rates or them falling. I'm looking for safety, I will be moving some cash into capital one CD at 2.7. MM are earning about 2.4. Looking for a good bond fund for capital preservation. If not total bond index, then what?
if anyone could answer that question they would put every penny in them and reap the rewards ... my own opinion is the low hanging fruit already happened as far as the long term treasury bonds .. i think going forward you may see just a bit better then the interest rate . but a recession could see them soar ....
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