I thought I'd start a new thread because it looks like
we had hijacked another thread but had some material that would be good to discuss in more detail.
I've always been interested in diversification, and had wandered on my own towards a strategy that turned out to be a lot like Browne's Permanent Portfolio which is equal weights of stocks, government bonds, gold, cash. I'm also interested in reading about other diversification approaches.
Here's some data I have for a permanent portfolio, Jan 2006 to today (10+ years) using 25% XIC, 25% XGB, 25% MNT, 25% XSB. Some of the numbers are imperfect because data wasn't available for the full range.
Performance for the full 10+ years: 5.8%, worst year -2.9%
Benchmark: 50/50 XIU and XBB: 4.3%, worst year -12.6%
Annual returns:
2006: 11.5%
2007: 6.6%
2008: 2.9%
2009: 11.7%
2010: 12.3%
2011: 4.4%
2012: 3.8%
2013: -2.9%
2014: 7.5%
2015: 0.8%
2016: 3.0%
This looks pretty appealing to me. Not only is the long term performance greater, but the volatility and risk is less.
Others had the following comments to this:
I would highly recommend you read Global Asset Allocation by Meb Faber. It's pretty cheap as an e-book and he regularly has promotions on his website where you can get it for free or even cheaper.
He compares various 'famous' portfolios with different asset allocations including Browne's permanent portfolio. From what I recall, the permanent portfolio is actually the worst performing of the bunch but the ultimate conclusion is that they all beat the index over long periods and many end up actually having similar exposure once you simplify the asset classes.
Why compare what is essentially a balanced portfolio containing mix of fixed income and equity with XIU (an all equity etf)?? The comparison should be with a balanced fund or etf.
10 yrs is not really a long enough period to use to make a decision. But sometimes longer term data may be harder to find.
I don't think there is any magic allocation that will work for all times. Those are just for those who do not have time or inclination to adjust portfolios for changing times.
"I don't think there is any magic allocation that will work for all times."
Yup - depending upon the timeframe you pick, to measure that allocation performance, you could look like a hero or a goat.
You need to compare apples to apples as much as possible. I'm not a huge fan of Browne's Permanent Portfolio but that's because my approach is different. Doesn't make it right or wrong, just is
