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ZGB would be more accurate as a one stop shop. It’s all govt (mixed fedd/prov) with a duration of 11 yrs, I think. xbb & zag, while I appreciate both for their simplicity, have 20% Corp bond which, I don’t think is part of Dalio or Brown’s plan.

Right now the true risks in Corp debt are not surfacing because the US Fed is buying Corp debt and thus has put a floor under it. Otherwise corp debt would have already hit the skids this year - this action alone would have negated most (if not all) of the long (govt) bonds benefits for your portfolio. Your bond portion (govt) is designed to do well in times of prosperity and deflation....

We happen to be in a period of deflation right now.... which is hard on companies and their debt.

corp bonds give a better yield but the offsets need to be weighed out, and there is no way to know if the Fed will continue to buy up Corp debt, in this cycle or the next.
MER on ZGB is 0.17%. Backtesting since the fund's inception in Jan 2010 shows no real performance gain over XBB in james4beach's AW portfolio (20% gold, 30% stock split US/Canada, 50% bond)

I'd still choose XBB with a MER of 0.10%
 

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I am not trying to poo-poo Corp Bonds, they do have their place, but right now in a deflationary time when debt levels are this high, there are some inherent risks with corp bonds. Trust me I am not saying not to buy them, I am just saying use caution and know what you are buying and how it will function vs the markets as the economy fluctuates. There is no way to predict any part of this rubric, let alone what the Fed will do in different settings...

I can envision a day when govts will have over printed debt and people will no longer want govt bonds, people will prefer corp bonds as the company (if it is sound) can generate money and the govts might be truly be broke, IE: the shoe is on the other foot.

Under normal market conditions Corp bonds are closer to equities than govt bonds... remember these assets are different...
 

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Under normal market conditions Corp bonds are closer to equities than govt bonds... remember these assents are different...
I agree, and corporates do act a bit more like equities.

In my RRSP, my bond allocation is entirely in XBB. This does contain some corporates, but very high grade ones and I am not overly concerned.

My non registered bond portfolio on the other hand is entirely in government bonds... no corps there. This held up much better during the recent bond market crash.
 

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Gov bonds are best for rebalancing, but corporates are likely to provide a slightly higher return in the long run. With interest rates so low, that incremental return may mean the difference between a decade of zero return vs a decade of negative returns. Personally, I don't own corporates, but see them as a valid choice. If the spread widens, I would consider diving in.
 

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Gov bonds are best for rebalancing, but corporates are likely to provide a slightly higher return in the long run. With interest rates so low, that incremental return may mean the difference between a decade of zero return vs a decade of negative returns. Personally, I don't own corporates, but see them as a valid choice. If the spread widens, I would consider diving in.

The yield difference from Govt to Corps is IMHO not worth the inherent risk right now....
 

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The yield difference from Govt to Corps is IMHO not worth the inherent risk right now....
The risk is definitely higher, but historically it has paid off. I believe the default rate for US investment grade corporates has been close to 0.2% per year. Canada is probably similar to that. Currently the spread is about 1 percentage point in Canada. This is not a lot in absolute terms, but in relative terms it means corporates are yielding roughly 100% more, so their return over a long time period would be roughly double the govs.
 

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The risk is definitely higher, but historically it has paid off. I believe the default rate for US investment grade corporates has been close to 0.2% per year. Canada is probably similar to that. Currently the spread is about 1 percentage point in Canada. This is not a lot in absolute terms, but in relative terms it means corporates are yielding roughly 100% more, so their return over a long time period would be roughly double the govs.
Comparing IEF to LQD, over 17 years I'm seeing 0.6% CAGR more performance in LQD but with significantly more volatility. Advantage shrinks to 0.4% over 15 years. That's a lot of real world data, for real (not theoretical) bond portfolios.

And looking at that, you must also consider that IEF has lower average maturity than LQD. So despite the corporate risk and the greater maturity, LQD only returned about 0.5% more.... that's pretty disappointing.

Maybe this shows that the theoretical advantage of corporates doesn't really play out once you consider practical concerns like fees and spreads. For me, 0.5% CAGR more performance isn't worth the greater volatility and drawdowns. And when you chart LQD versus IEF, you'll see that corporate total returns aren't regularly beating government, even over 17 years.

XCB has also returned about the same as XBB since inception, but with more downside/volatility.

I don't see the big appeal of corporates. Theory says that they should boost returns, but I'm just not seeing that boost in past results.
 

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Comparing IEF to LQD, over 17 years I'm seeing 0.6% CAGR more performance in LQD but with significantly more volatility. Advantage shrinks to 0.4% over 15 years. That's a lot of real world data, for real (not theoretical) bond portfolios.

And looking at that, you must also consider that IEF has lower average maturity than LQD. So despite the corporate risk and the greater maturity, LQD only returned about 0.5% more.... that's pretty disappointing.

Maybe this shows that the theoretical advantage of corporates doesn't really play out once you consider practical concerns like fees and spreads. For me, 0.5% CAGR more performance isn't worth the greater volatility and drawdowns. And when you chart LQD versus IEF, you'll see that corporate total returns aren't regularly beating government, even over 17 years.

XCB has also returned about the same as XBB since inception, but with more downside/volatility.

I don't see the big appeal of corporates. Theory says that they should boost returns, but I'm just not seeing that boost in past results.
I agree with you that the difference may not be worth the risk, at least on the fixed income side of the portfolio.

Currently, IEF has a YTM of 0.57%. LQD has a YTM of 2.15%. So in theory LQD could outperform by 1.5 percentage point going forward, but with more volatility.
 

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lets all be honest.... it’s hard to look in the mirror at times, but a loss is a loss. Lipstick on a pig ? It’s still a pig, yields right now are below inflation, FI is losing. Spreads are tight and risk does get a better return, but is the risk worth it ??

I’ll eat an effective loss vs tax and then inflation and it is what it is....

The sad part is that you need to ask yourself why we are here, zero bound.....

DEBT, Social Programs, Automation, Globalization, the American Dream being enjoyed by lots of people that really don’t qualify, but’s it’s hard to say, hey not you in our world.

Regretably this will get worse over time but we just might be at a point when it accelerates....

When yields on govt hit zero, I’m contemplating selling and just sitting in cash.... BUT I want to see if the Fed goes neg.... cause if I can make CG on neg rates I might hold a bit....
 

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Here is an article from Bridgewater about how they developed the All Weather portfolio:

Nowhere do they actually mention gold or asset allocation percentages. That seems to have been developed by Tony Robbins after his interview with Dalio.

As for gold, here is an interesting video from Ben Felix of PWL Capital about why gold does not deserve a place in your portfolio. Of course, this runs counter to gold advocates but somewhere in the comments he mentions that he'd just allocate more to bonds if he wanted to counter volatility.

Interesting stuff.
 

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Nowhere do they actually mention gold or asset allocation percentages. That seems to have been developed by Tony Robbins after his interview with Dalio.
Robbins spoke with Dalio directly, and the percentages in his book are from Dalio. That includes the % gold weight... this is all Dalio's guidance. Robbins did not design the portfolio.

As for PWL's advice, I admire Ben Felix and usually agree with him. But you have to remember that he is a product of a financial education system that heavily values stocks and bonds. The financial knowledge that Ben is trained in is based heavily on the 1980s and 1990s and there is a bias towards stocks and bonds (which performed great in this period) and against gold (which was in a chronic bear market).

Think of all the people in that field writing books and giving university lectures. It's all based on what they experienced during their prime years, when gold was out of favour.

Finance/investing is NOT a science. It is not based on fundamental laws of nature (physical laws), but is rather a pseudoscience -- just like economics in general. There is a weak basis for everything in this field. Therefore, the field is heavily influenced by human beliefs and stories.

Today, the official position is that gold is not a worthwhile asset class to invest in. Later, you'll hear something different, and there will be some story to explain why.

By the way, gold has outperformed stocks over the last 23 years. Pretty good for a crummy, pointless asset to invest in.

23 year chart of gold vs S&P 500 total return
 

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Plus remember that gold prices used to be openly contrived which means backtesting is useless.....
Well not quite useless, but countries went long periods with one gold price until they were forced to update and reset the price.

We have about 150 years of gold price history. Gold has provided about 1% real return (keeping up with inflation) making it, in my view, a reasonable place to store money.
 
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