Hedge against a 20% to 30% crash

[leastprime]

We too have squirreled away retirement assets in many places. As of today, 19 different accounts, not including checking accounts that give nonreportable 1099-int. TDAmeritrade becoming part of CS makes 2023 filing a little more challenging.
Why so many, because: we laddered the annuities; we keep our personal accounts separate; We use accounts to receive income; We use accounts to make payments; and I have an account that is not linked to anything, including the internet.

[mysticaltyger]

Originally Posted by ChessieMom

Apparently the returns have not been enough to put it in the black as I have a loss, after 4 years.
Investment + reinvested dividends = $12,401.15
Market value = $11,130.60

Not solid in my book, but obviously the timing of my purchase is what did it in for me.

I think Mathjak did a good job explaining it.

I don't know what you originally invested, but if it was 10k, and it's worth over 11k now, you didn't make much, but you didn't lose money. Reinvested dividends count toward your cost basis (also thought of as your average cost per share). But you wouldn't have gotten those dividends at all had you not invested the 10k in the first place.

Yeah, your timing wasn't great, but that can happen, especially over a relatively short time frame (as 4 years is still short-ish).

The thing is, people with bad timing have a way from moving from moving from one investment to another and timing the new one badly as well.

[ChessieMom]

Originally Posted by mysticaltyger

I think Mathjak did a good job explaining it.

I don't know what you originally invested, but if it was 10k, and it's worth over 11k now, you didn't make much, but you didn't lose money. Reinvested dividends count toward your cost basis (also thought of as your average cost per share). But you wouldn't have gotten those dividends at all had you not invested the 10k in the first place.

Yeah, your timing wasn't great, but that can happen, especially over a relatively short time frame (as 4 years is still short-ish).

The thing is, people with bad timing have a way from moving from moving from one investment to another and timing the new one badly as well.

There is no way to know the best time, even I know that. As much as I'd like to dump this monkey, I'll hold on to it as the interest rates should be reversing direction this year. At least I sure hope so.

[mysticaltyger]

Originally Posted by ChessieMom

There is no way to know the best time, even I know that. As much as I'd like to dump this monkey, I'll hold on to it as the interest rates should be reversing direction this year. At least I sure hope so.

In some ways, stable interest rates would be better in the long run. The bonds will pay decent interest and their underlying value will not rocket up and down with interest rate decreases/increases.

And if stocks tank, the dividend paying stocks it typically holds tend to hold up much better in a bad stock market.

But yeah, I know it's a bummer when you see a fund not performing well. But stocks are not really at cheap valuations right now. It's probably better to stay the course, unless you're really willing to take more risk.

[mathjak107]

what is interesting is the that while wellesley returned a mere 3% cagr since feb 2020 , fidelity balanced which is more equity laden at about 60% returned 9.67% so 100k in wellesly grew to 112,170 , 100k grew to 144,643….pretty good for fidelity balanced considering it was just 20% more equities yet more than 3x the return

spy being 100% equites grew to 159,935 a 12.67% return

so once again the fact we had rising rates not effect equities much while the portfolios that were designed to be defensive and mitigate these temporary dips did a lot worse

but what is interesting is that the sharpe ratio which is a measure of risk vs return has wellesly at a mere .16% while fidelity balanced fund was .55 and the s&p .93% .

the higher the number the better the risk vs reward so wellesly was barely worth the risk over that period .

like i said adding a bit of gold tends to help wellesley so a small 20% stake in gold , iau or gld helped things a wee bit bringing wellesley up to almost a 4% cagr and a sharpe ratio of .23 and it grew to 115,806


by itself gold grew to 126,862 6.13% cagr and sharpe ratio of .35% beating wellesly by itself in risk vs reward

but the big brother of defensive portfolios, the permanent portfolio

which is 25% spy

25% long term bonds

25% gold

25% short term treasuries

did about the same as wellesly , clocking in at 3.44% cagr , 114,492 and a sharpe ratio of .20


so wellesly did about the same as any other defensive portfolio over that terrible period for fixed income

[mathjak107]

here is more data on the fixed income returns

long term bonds TLT 100k fell to 72,293 minus 7.79% cagr

total bond fund BND fell to 95000. minus 1.27%

very short term bonds mint 106,735 up 1.64%

high yield hyg 108,230 up 2%

Those are yearly averages per year

so any balanced portfolio would have performed dismally from feb 2020 to today .

but even wellesly and the permanent portfolio beat hiding out in short term bonds like mint over those years

[mathjak107]

the bottom line is there is no such thing as any fund or portfolio that is going to be the best defensive play in every economic outcome .

in the case of 2022 wellesly averaged the same 3-4% a year cagr as all the other most defensive portfolios did like the harry brown permanent portfolio.

.

the exact same defensive portfolios that are considered low ulcer like the ray dalio all season or harry brown permanent portfolio did poorly in the rising rates


here were results historically vs 2022

historically the all season and permanent portfolio were some of the lowest ulcer portfolios there are .

yet 2022 hit them bad as 3 out of 4 asset classes were overly rate sensitive .

the best of the ulcer rated historically the ray dalio all season came in first historically yet second to last in 2022

HISTORICALLY




2022 RESULTS

[mrkool]

Mathjak is very gifted at explaining this stuff.

[mathjak107]

thank you