Anyone here have a golden butterfly portfolio?

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zetsui
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Anyone here have a golden butterfly portfolio?

Post by zetsui »

How long have you had it? What is your asset allocation? How is gold held (physcically or in an index)?

I want to do this with my father's IRA, which his spouse and children will inherit, since it seems to be since 1970 one of the best risk adjusted portfolios but low interest rates and having such a large percent in gold worry me. Time horizon is 40-50 years from now to compound. I am thinking 20% gold and 80% S&P at least in the next 10 years
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retiredjg
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Re: Anyone here have a golden butterfly portfolio?

Post by retiredjg »

80% stock and 20% gold for the entire portfolio?

Is there more than one golden butterfly portfolio? I'm asking because what you mentioned looks nothing like the golden butterfly portfolio mentioned here.

https://www.optimizedportfolio.com/gold ... NUEALw_wcB

Not meaning to be rude, just trying to understand.
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Re: Anyone here have a golden butterfly portfolio?

Post by willthrill81 »

retiredjg wrote: Sun Oct 25, 2020 5:26 pm 80% stock and 20% gold for the entire portfolio?

Is there more than one golden butterfly portfolio? I'm asking because what you mentioned looks nothing like the golden butterfly portfolio mentioned here.

https://www.optimizedportfolio.com/gold ... NUEALw_wcB

Not meaning to be rude, just trying to understand.
The Golden Butterfly was created by poster Tyler9000 and is 20% small-cap value, 20% total stock market, 20% long-term Treasuries, 20% short-term Treasuries, and 20% gold. There's only one Golden Butterfly portfolio.
Last edited by willthrill81 on Mon Nov 02, 2020 10:17 am, edited 1 time in total.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

retiredjg wrote: Sun Oct 25, 2020 5:26 pm 80% stock and 20% gold for the entire portfolio?

Is there more than one golden butterfly portfolio? I'm asking because what you mentioned looks nothing like the golden butterfly portfolio mentioned here.

https://www.optimizedportfolio.com/gold ... NUEALw_wcB

Not meaning to be rude, just trying to understand.
You are right, but I wonder if anyone has actually put their 20% into gold and 20% into LTTreasuries.... Seems like a risky thing these days
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Re: Anyone here have a golden butterfly portfolio?

Post by dru808 »

I agree with the others, 80/20 is not the goldenbutterfly. 20/20/20/20/20 is the proper GB allocation.

If you need answers that you cannot find on the forum you can pm Tyler.
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Tyler9000
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

zetsui wrote: Sun Oct 25, 2020 4:41 pm How long have you had it? What is your asset allocation? How is gold held (physcically or in an index)?

I want to do this with my father's IRA, which his spouse and children will inherit, since it seems to be since 1970 one of the best risk adjusted portfolios but low interest rates and having such a large percent in gold worry me. Time horizon is 40-50 years from now to compound. I am thinking 20% gold and 80% S&P at least in the next 10 years
You came to the right place. :D Since it's my idea I'm happy to share my experience.

I've used the Golden Butterfly for a while now and have been very happy with the results. Personally I use IAU for the gold holding. And while there's nothing wrong with a portfolio of 80% stocks and 20% gold if that's what works for you, I agree with the observations that it's not really a Golden Butterfly because the recipe is missing several important ingredients.

For more information, here are a few pages worth a read:

Portfolio overview with historical data
The theory behind the Golden Butterfly

Since you mentioned worrying about gold and low interest rates, these articles on gold and bond convexity may help with some of those fears. And I'd also recommend seeking out Permanent Portfolio investors and the books by Harry Browne, as the Golden Butterfly is a spinoff of the same philosophy.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

Tyler9000 wrote: Mon Oct 26, 2020 12:33 am
zetsui wrote: Sun Oct 25, 2020 4:41 pm How long have you had it? What is your asset allocation? How is gold held (physcically or in an index)?

I want to do this with my father's IRA, which his spouse and children will inherit, since it seems to be since 1970 one of the best risk adjusted portfolios but low interest rates and having such a large percent in gold worry me. Time horizon is 40-50 years from now to compound. I am thinking 20% gold and 80% S&P at least in the next 10 years
You came to the right place. :D Since it's my idea I'm happy to share my experience.

I've used the Golden Butterfly for a while now and have been very happy with the results. Personally I use IAU for the gold holding. And while there's nothing wrong with a portfolio of 80% stocks and 20% gold if that's what works for you, I agree with the observations that it's not really a Golden Butterfly because the recipe is missing several important ingredients.

For more information, here are a few pages worth a read:

Portfolio overview with historical data
The theory behind the Golden Butterfly

Since you mentioned worrying about gold and low interest rates, these articles on gold and bond convexity may help with some of those fears. And I'd also recommend seeking out Permanent Portfolio investors and the books by Harry Browne, as the Golden Butterfly is a spinoff of the same philosophy.
:D I didn't know, that's cool as hell, and thank you so much, I'm a stastistician by living. The bond market is definitely more difficult to understand. I will check it out and we'll discuss it later. From what I'm seeing the US is late in its credit cycle and all aspects imply to not go for long term bonds or whole market but short and intermediate. Such low sustained interest rates, the introduction of digital currency as a possible competitor to gold, aren't really
present in the data, but are game changing
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

im also curious where international equity can fit in here?

This has implications for jewish and muslim investors who do not delve into bonds. This is not my personal concern though, though its good to always hedge slow us growth with faster international growth, the two can most times be uncorrelated

Also, if I'm younger and want to put more into stock, is there anything you would remove or just evenly shave off points across? Basically my short term volatility is not a problem, my long term is.

https://www.portfoliovisualizer.com/bac ... tion6_3=20

oddly the sorinto ratios are higher on the butterfly vs intermediate and total bond over the last decade. but i guess golden goes to 1970?

Lastly, a cool visual for those of us interest in long term debt cycles would be to see https://portfoliocharts.com/portfolio/risk-and-return/ this chart over time. For instance from the start of the inflationary period in the 1970s to Covid. So basically how did the dots shift as far as risk and return on these portfolios, a moving visualization - so to speak
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

Tyler

Amazing read on bond convexity. I've read almost all your blog posts and its mindblowing one person mantains your site, thank you for putting the passion of finance into me

A few follow up quesitons:
1) How can I put TSM ex US into the portfolio finder? I want to allocate 30% of whatever equities I have to ex US, and am very curious about it risk vs return. Like an ex-US golden butterfly?
2) I am curiuous, the most robust data is until 1970. But how would permenant and golden butterfly type portfolios do in a 30s depression like scenerio? Deflation specifically, whereas 1970s was an inflationary period. Your opinon or insight here suffices
3) Which portoflios do you think would shift most drmatically in such a scenerio?
4) Can you go over your own investment portfolio? Whether you shift between different AAllocations or portfolio types? How much you adhere to the Boglehead philosophy?

I am a data scientist if it helps
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Tyler9000
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

zetsui wrote: Sun Nov 01, 2020 1:15 am Amazing read on bond convexity. I've read almost all your blog posts and its mindblowing one person mantains your site, thank you for putting the passion of finance into me
Thanks! Anyone who can claim to have read so many of the blog posts clearly has a similar passion for data. :D

Regarding your questions:

1) Look for the WLD XUS row and the TSM column. The intersection is World Developed ex-US. If you want to also include emerging markets, the typical split between developed and emerging in a total world fund is something like 80/20. That's a little less helpful in the Portfolio Finder, but it might come in handy in the other tools.

2) I'm not totally sure. The complicating factor is gold, as the rules governing how it is priced were drastically different back then. But I still intuitively feel like they would have been safer than most of the more traditional stock/bond alternatives thanks to the wider economic diversification.

3) Rather than guess, one way to approach the question is to look at Japan. In the 1990s they went through a massively painful period of a stagnant stock market coupled with deflation. Try setting the Portfolio Matrix to Japan, and you can see how a very different economic situation affected the various metrics.

4) What qualifies as the default "Boglehead philosophy" is hotly debated at times, but I'm definitely on board in terms of investing in a handful of low-cost index funds, rebalancing maybe once a year, and just letting the portfolio do its thing. I avoid making a big deal about my own portfolio, as everyone is different and it's important to make your own educated decision. But I will say that my investments are about 90% Golden Butterfly as you see on the site, with 10% personal tweaks based on my own situation. Pick a good recipe, and season to taste.
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

Tyler9000 wrote: Sun Nov 01, 2020 2:33 pm
zetsui wrote: Sun Nov 01, 2020 1:15 am Amazing read on bond convexity. I've read almost all your blog posts and its mindblowing one person mantains your site, thank you for putting the passion of finance into me
Thank you again Tyler
1. the ex us All Developed (dev/xus) tab correct?
2. There's no way to allocate actual numbers on your website/spreadsheet, correct? Just required or not and equal allocation?
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

zetsui wrote: Mon Nov 02, 2020 4:47 am Thank you again Tyler
1. the ex us All Developed (dev/xus) tab correct?
2. There's no way to allocate actual numbers on your website/spreadsheet, correct? Just required or not and equal allocation?
Yes, the DEV/XUS tab controls the setting for the entire WLD row. And most of the charts do use specific portfolio percentages. The only exception is the Portfolio Finder, which is really more of a search tool that studies hundreds of different allocations at once.

You may find this quick guide helpful: https://portfoliocharts.com/instructions/
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

Tyler9000 wrote: Mon Nov 02, 2020 10:12 am
zetsui wrote: Mon Nov 02, 2020 4:47 am Thank you again Tyler
1. the ex us All Developed (dev/xus) tab correct?
2. There's no way to allocate actual numbers on your website/spreadsheet, correct? Just required or not and equal allocation?
Yes, the DEV/XUS tab controls the setting for the entire WLD row. And most of the charts do use specific portfolio percentages. The only exception is the Portfolio Finder, which is really more of a search tool that studies hundreds of different allocations at once.

You may find this quick guide helpful: https://portfoliocharts.com/instructions/
Tyler,

Is there a link that explains what funds/indexes you use to simulate the returns? For example, what do you use for small cap value in the GB portfolio?
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Re: Anyone here have a golden butterfly portfolio?

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rich126 wrote: Mon Nov 02, 2020 11:07 am Is there a link that explains what funds/indexes you use to simulate the returns? For example, what do you use for small cap value in the GB portfolio?
For data sources, try this: https://portfoliocharts.com/data-sources/
And for fund equivalents, this may help: https://portfoliocharts.com/portfolio/i ... ndex-funds

BTW, if you'd like to learn more about Portfolio Charts you might enjoy the ongoing Bogleheads thread here: viewtopic.php?f=10&t=171019
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Re: Anyone here have a golden butterfly portfolio?

Post by heyyou »

Read about gold at the Evanson Asset Management website, in the long page about alternative investments. The author is very informative about the flaws/risks of gold investing, but he still recommends it. Note the length of gold's periods of poor performance before it suddenly gains 2x or 3x its previous prices. Sadly for future investors, that has occurred again since the 2019 article was written.
https://www.evansonasset.com/alternativ ... s-64.htm
Reading only the initial abstract, then the immediate long gold opinion, then skipping the other alternative investment opinions, to the ending conclusion of the article, will save time for us casual readers here at BHs.

Owning gold is a level of speculation in one inert metal, and it does not suit me as well as just owning stock and bond index funds with their more diversified risks. Note that is precisely how risk and reward treat investors, but my rewards have still been very good due to my continuing to happily live slightly below my means both during my work years and my early retirement, in order to have a little more money invested. The most important investment choice is choosing how much to save during our work years, and how much to spend annually in our retirement years.
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

Tyler9000 wrote: Mon Nov 02, 2020 11:39 am
rich126 wrote: Mon Nov 02, 2020 11:07 am Is there a link that explains what funds/indexes you use to simulate the returns? For example, what do you use for small cap value in the GB portfolio?
For data sources, try this: https://portfoliocharts.com/data-sources/
And for fund equivalents, this may help: https://portfoliocharts.com/portfolio/i ... ndex-funds

BTW, if you'd like to learn more about Portfolio Charts you might enjoy the ongoing Bogleheads thread here: viewtopic.php?f=10&t=171019
Thanks. I was just curious for a portfolio like the GB, what was used for the small cap value investment. I was looking at a few, including VBR, and some returns different significantly (more than 1% CAGR seems sizable).
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

rich126 wrote: Mon Nov 02, 2020 4:27 pm Thanks. I was just curious for a portfolio like the GB, what was used for the small cap value investment. I was looking at a few, including VBR, and some returns different significantly (more than 1% CAGR seems sizable).
I use my own calculations that follow traditional index fund methodologies. Here's the best explanation, not only for the PC data but also for how indices work. There will always be differences between annual returns of any two individual SCV funds because of different definitions of small and value and other fund-specific trading rules. But as you'll see in the link, the PC data should be close enough to the CRSP methodology (which VBR currently follows) for general study.
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Re: Anyone here have a golden butterfly portfolio?

Post by MotoTrojan »

zetsui wrote: Mon Oct 26, 2020 2:19 am im also curious where international equity can fit in here?
Would be silly not to include ex-US exposure IMHO.

I think you’ll enjoy this free book that covers a similar portfolio.

https://medium.com/@valuestockgeek/the- ... c0154d1c4a
rich126
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

MotoTrojan wrote: Mon Nov 02, 2020 8:56 pm
zetsui wrote: Mon Oct 26, 2020 2:19 am im also curious where international equity can fit in here?
Would be silly not to include ex-US exposure IMHO.

I think you’ll enjoy this free book that covers a similar portfolio.

https://medium.com/@valuestockgeek/the- ... c0154d1c4a
Obviously if you include international stocks that changes the portfolio. You can lower ST & LT treasuries from 20 to 15% each and put 10% into international but that clearly will increase the max draw downs.

Just out of curiosity I've been tracking (not with a ton of rigor just using prices from Yahoo) a few funds/portfolios from the market's peak on 2/19 through the drop and recovery.

As of 10/29 close I had:
GB: +1.29%
PP: +5.96%
60/40: +0.32%

GB bottomed at -15% in mid March. PP at -8.4% and 60/40 at -16.5% but not I haven't been tracking daily prices but just a few days per month so this is far from 100% accurate.

Unlike some people I don't have a lot of issues with holding 20% in LT treasuries but 20% in ST treasuries right now seem pointless unless I dump it in some kind of MYGA to get at least some return.
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Re: Anyone here have a golden butterfly portfolio?

Post by invest4 »

I track the GB (and others) against my actual 60/40 four fund portfolio (VTI / VXUS and BND / BNDX). The GB has some appeal to me and has performed well, but considered myself very late to the party with Gold and LTT already run up, so did not want to chase. Also, I still struggle a bit with the idea of gold (along the lines of Buffet).
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Re: Anyone here have a golden butterfly portfolio?

Post by willthrill81 »

invest4 wrote: Wed Nov 04, 2020 2:02 pmAlso, I still struggle a bit with the idea of gold (along the lines of Buffet).
If you're referring to the purportedly expected real return of zero, that's better than what the market believes that bonds will yield over the next decade.
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

Are there any websites that track GB and similar portfolios on a daily basis? For example I could look and see "oh, it is up 1.2% today". I know some sites track it over longer periods of time. And I can probably create something in Morningstar but was just wondering if it is already available.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

One thing I wonder though about bond convexity is will they really continue to pay continue to pay out those rates if the US govt continues to mishandle its debt? Your data seems to be robust and historical. However the US Govt has come close to defaulting multiple times. That convexity also takes into account risk, and I don't see myself taking on even higher interest rates once it becomes apparent I might not get paid back.
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Re: Anyone here have a golden butterfly portfolio?

Post by invest4 »

willthrill81 wrote: Wed Nov 04, 2020 2:52 pm
invest4 wrote: Wed Nov 04, 2020 2:02 pmAlso, I still struggle a bit with the idea of gold (along the lines of Buffet).
If you're referring to the purportedly expected real return of zero, that's better than what the market believes that bonds will yield over the next decade.
I hear you. I had seriously considered it, but In addition to my base reservations, felt I would also simply be chasing.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

Tyler9000 wrote: Mon Nov 02, 2020 4:53 pm
rich126 wrote: Mon Nov 02, 2020 4:27 pm Thanks. I was just curious for a portfolio like the GB, what was used for the small cap value investment. I was looking at a few, including VBR, and some returns different significantly (more than 1% CAGR seems sizable).
I use my own calculations that follow traditional index fund methodologies. Here's the best explanation, not only for the PC data but also for how indices work. There will always be differences between annual returns of any two individual SCV funds because of different definitions of small and value and other fund-specific trading rules. But as you'll see in the link, the PC data should be close enough to the CRSP methodology (which VBR currently follows) for general study.
So here's what I found for gold Tyler:
1972-2018 returns 7.55%/year
1975-2018 returns 4.50%/year
1980-2018 returns 2.32%/year

The majority of appreication happened after breton woods. Disclude those years and I think gold should be closer to half the portfolio, since 1975, no?

It also makes this risk reward chart look a lot different: https://portfoliocharts.com/portfolio/risk-and-return/ I dont think I can include non-gold only portfolio, as this brings up an interesting question, on when most of the appreciation in say REITs or commodities, or international equity/bonds occured since 1970. Seven Twelve seems weirdly enough to be the best (although REIT and international expense ratios may skew this also).
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Re: Anyone here have a golden butterfly portfolio?

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zetsui wrote: Fri Nov 06, 2020 6:36 am So here's what I found for gold Tyler:
1972-2018 returns 7.55%/year
1975-2018 returns 4.50%/year
1980-2018 returns 2.32%/year

The majority of appreication happened after breton woods. Disclude those years and I think gold should be closer to half the portfolio, since 1975, no?
It's more complicated than that. I discuss this topic at length in the following two posts:

Are the gold returns after 1971 repeatable?

How to study portfolios when the data is full of bubbles

Long story short, single averages of individual assets don't tell the whole story for how the portfolio as a whole works in the real world. You have to look deeper, and that's what the site is all about.
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Re: Anyone here have a golden butterfly portfolio?

Post by willthrill81 »

zetsui wrote: Fri Nov 06, 2020 6:36 am
Tyler9000 wrote: Mon Nov 02, 2020 4:53 pm
rich126 wrote: Mon Nov 02, 2020 4:27 pm Thanks. I was just curious for a portfolio like the GB, what was used for the small cap value investment. I was looking at a few, including VBR, and some returns different significantly (more than 1% CAGR seems sizable).
I use my own calculations that follow traditional index fund methodologies. Here's the best explanation, not only for the PC data but also for how indices work. There will always be differences between annual returns of any two individual SCV funds because of different definitions of small and value and other fund-specific trading rules. But as you'll see in the link, the PC data should be close enough to the CRSP methodology (which VBR currently follows) for general study.
So here's what I found for gold Tyler:
1972-2018 returns 7.55%/year
1975-2018 returns 4.50%/year
1980-2018 returns 2.32%/year

The majority of appreication happened after breton woods. Disclude those years and I think gold should be closer to half the portfolio, since 1975, no?

It also makes this risk reward chart look a lot different: https://portfoliocharts.com/portfolio/risk-and-return/ I dont think I can include non-gold only portfolio, as this brings up an interesting question, on when most of the appreciation in say REITs or commodities, or international equity/bonds occured since 1970. Seven Twelve seems weirdly enough to be the best (although REIT and international expense ratios may skew this also).
The performance of one's portfolio should matter far more than the performance of its individual components. Even after 1980, the Golden Butterfly has still had remarkably stable performance. Both before and after 1980, the GB has never had a three year period where it hasn't had positive returns. Portfolios with only stocks and bonds have not come remotely close to matching that.
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

zetsui wrote: Fri Nov 06, 2020 6:36 am
Tyler9000 wrote: Mon Nov 02, 2020 4:53 pm
rich126 wrote: Mon Nov 02, 2020 4:27 pm Thanks. I was just curious for a portfolio like the GB, what was used for the small cap value investment. I was looking at a few, including VBR, and some returns different significantly (more than 1% CAGR seems sizable).
I use my own calculations that follow traditional index fund methodologies. Here's the best explanation, not only for the PC data but also for how indices work. There will always be differences between annual returns of any two individual SCV funds because of different definitions of small and value and other fund-specific trading rules. But as you'll see in the link, the PC data should be close enough to the CRSP methodology (which VBR currently follows) for general study.
So here's what I found for gold Tyler:
1972-2018 returns 7.55%/year
1975-2018 returns 4.50%/year
1980-2018 returns 2.32%/year

The majority of appreication happened after breton woods. Disclude those years and I think gold should be closer to half the portfolio, since 1975, no?

It also makes this risk reward chart look a lot different: https://portfoliocharts.com/portfolio/risk-and-return/ I dont think I can include non-gold only portfolio, as this brings up an interesting question, on when most of the appreciation in say REITs or commodities, or international equity/bonds occured since 1970. Seven Twelve seems weirdly enough to be the best (although REIT and international expense ratios may skew this also).
Looks like the dates were picked just to confirm your conclusion. I think the numbers are different.
1/2005 to 10/20 CAGR is 9.2% for GLD. These numbers come up just do to the length of time GLD has been around.
1/2010 to 10/20 CAGR 4.68%

Once reason I ignore most of these posts. People look for numbers to make their point.

Anytime I use gold in a portfolio I make sure to exclude the very high returns of the early 70s but when it comes to money, I try not to be biased in ways just to make my point since my only goal is to make money.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

Tyler9000 wrote: Fri Nov 06, 2020 9:35 am
zetsui wrote: Fri Nov 06, 2020 6:36 am So here's what I found for gold Tyler:
1972-2018 returns 7.55%/year
1975-2018 returns 4.50%/year
1980-2018 returns 2.32%/year

The majority of appreication happened after breton woods. Disclude those years and I think gold should be closer to half the portfolio, since 1975, no?
It's more complicated than that. I discuss this topic at length in the following two posts:

Are the gold returns after 1971 repeatable?

How to study portfolios when the data is full of bubbles

Long story short, single averages of individual assets don't tell the whole story for how the portfolio as a whole works in the real world. You have to look deeper, and that's what the site is all about.
The gold link and the permenant portfolio chart is still confusing and I dont know how it really mitigates my belief that gold is a good inflation hedge going forward. the darker lines on the growth chart show that 1970 ish ie older portfolios did better. If anything it reinforces my belief

Can you also help explain drawdown? I remember figuring this out the first time I read your blog but then forgot how to read the drawdown chart. Let's use GB as an example

https://portfoliocharts.com/portfolio/golden-butterfly/

I hae the first main drawdown that starts are 0 and ends at about 2 with the trough at 10%/1 year. Meaning if I had invested at year 0, my largest drawdown would take place over the course of a year (from t=0 to 1) with a max drawdown of 10% and take about 2 years to recover. Am I reading that correctly?

The second less frequent drawdown takes 3 years to recover after a drawdown over a year.

Thank you
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

zetsui wrote: Fri Nov 06, 2020 10:02 pm The gold link and the permenant portfolio chart is still confusing and I dont know how it really mitigates my belief that gold is a good inflation hedge going forward. the darker lines on the growth chart show that 1970 ish ie older portfolios did better. If anything it reinforces my belief
Try reading the rest of the article. :wink: It also helps to compare that chart to the same one for other portfolios to appreciate how consistent it really is.

zetsui wrote: Fri Nov 06, 2020 10:02 pm Can you also help explain drawdown? I remember figuring this out the first time I read your blog but then forgot how to read the drawdown chart.
All of the individual charts have detailed guides. For example, go to Drawdowns and scroll down.
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zetsui
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Re: Anyone here have a golden butterfly portfolio?

Post by zetsui »

https://imgur.com/Mb5RqCn

Tyler how about other commodities vs gold. Is there a way to backtest energy copper materials vs say gold?
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Tyler9000
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

zetsui wrote: Sun Nov 15, 2020 12:01 pm https://imgur.com/Mb5RqCn

Tyler how about other commodities vs gold. Is there a way to backtest energy copper materials vs say gold?
I have data for a broad commodities index, but none for things like copper. It could be an interesting thing to look for, though.
superbobbyg
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Re: Anyone here have a golden butterfly portfolio?

Post by superbobbyg »

Tyler9000
Have read all the portfolios on portfoliocharts.com and although am very intrigued by your Golden Butterfly I am reluctant to commit to 20% gold. Have modified a bit with VNQ-5%, VPU-5%, GLD-5% and rest to bonds vs GLD-20%. Very similar results. I can't argue with the data, however, 20% gold (no income) just doesn't feel right. Have modified the Dalio portfolio as well and achieved some decent results as measured by CAGR, worst year, Max drawdown, Sharpe, Sortino and Beta. If interested I can share my final portfolio; my objective is a portfolio for a soon to be retiree.
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Tyler9000
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

superbobbyg wrote: Sun Nov 15, 2020 7:33 pm Tyler9000
Have read all the portfolios on portfoliocharts.com and although am very intrigued by your Golden Butterfly I am reluctant to commit to 20% gold. Have modified a bit with VNQ-5%, VPU-5%, GLD-5% and rest to bonds vs GLD-20%. Very similar results. I can't argue with the data, however, 20% gold (no income) just doesn't feel right. Have modified the Dalio portfolio as well and achieved some decent results as measured by CAGR, worst year, Max drawdown, Sharpe, Sortino and Beta. If interested I can share my final portfolio; my objective is a portfolio for a soon to be retiree.
Good for you! Even the best asset allocation is of no use if you're not able to stick with it, so making a few educated tweaks to bring it in line with your financial and emotional needs is generally a better option than buying something you don't believe in. Every portfolio is a personal choice.
bikeeagle1
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Re: Anyone here have a golden butterfly portfolio?

Post by bikeeagle1 »

I'm in! I am just about to retire, and the way the GB avoids sequence of returns risk really appeals to me. The only tweak I may do is to put some of the stock allocation into non-US companies, but otherwise I love it!

Thanks Tyler!
Iconicus
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Re: Anyone here have a golden butterfly portfolio?

Post by Iconicus »

I have implemented the GB for my AA. I'm also trying out some of the retirement planning tools reference by this site. The trouble is that some of the tools, like i-ORP, ask what your stock/bond ratio is (only two choices, stocks and bonds). With GB which includes gold, what do I put? 40/60, 60/40, or split the difference 50/50? Thank you very much in advance for your consideration.
CDub
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Re: Anyone here have a golden butterfly portfolio?

Post by CDub »

Given recent events - I’m beginning to see Bitcoin filling a similar role as gold in the future. As such, I’m considering splitting the gold component of the golden butterfly to be 50/50 gold/btc.

Curious if any others have implemented this as such. I know so far it’s not indicating a gold-like response, but as it gains more traction I could see it beginning to display similar properties.

I’m also beginning to think a lot of fearful dollars that would previously have been invested in gold in times like these is now being invested in Bitcoin.
zie
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Re: Anyone here have a golden butterfly portfolio?

Post by zie »

CDub wrote: Sat Feb 13, 2021 7:28 pm Given recent events - I’m beginning to see Bitcoin filling a similar role as gold in the future. As such, I’m considering splitting the gold component of the golden butterfly to be 50/50 gold/btc.

Curious if any others have implemented this as such. I know so far it’s not indicating a gold-like response, but as it gains more traction I could see it beginning to display similar properties.

I’m also beginning to think a lot of fearful dollars that would previously have been invested in gold in times like these is now being invested in Bitcoin.
As I understand it, the gold is to decrease volatility and to hedge insane inflation a little. BTC so far does neither of those things, as far as I'm aware. BTC is like 100% volatility. Gold is like 0% volatility, opposite ends of the spectrum. We have no idea how BTC will handle crazy insane inflation, it's never happened in the history of the asset. I'm guessing gold will continue to do better than BTC ever will, at least for the next "crazy inflation" if/when that ever happens. So far when markets crash, BTC also crashes, Gold tends to go up.

So while I hear BTC is "digital gold" It sure doesn't seem to behave like gold...yet(?).
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
CDub
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Re: Anyone here have a golden butterfly portfolio?

Post by CDub »

zie wrote: Sat Feb 13, 2021 7:41 pm
As I understand it, the gold is to decrease volatility and to hedge insane inflation a little. BTC so far does neither of those things, as far as I'm aware. BTC is like 100% volatility. Gold is like 0% volatility, opposite ends of the spectrum. We have no idea how BTC will handle crazy insane inflation, it's never happened in the history of the asset. I'm guessing gold will continue to do better than BTC ever will, at least for the next "crazy inflation" if/when that ever happens. So far when markets crash, BTC also crashes, Gold tends to go up.

So while I hear BTC is "digital gold" It sure doesn't seem to behave like gold...yet(?).
Fair point. The comparisons to gold are pure speculation . It’s possible this time period for Bitcoin/crypto is a little like gold in the 70s. Starting to become widely possible for people to purchase relatively easily.

I guess my thinking is based more on the fact that gold by its very nature as a portfolio stabilizer depends on “a flight to gold” in times of inflation or stock market uncertainty. I’m feeling now like the more common response in those times may be to flee to crypto/Bitcoin. It’s obviously anyone’s guess. Just considering alternatives.
zie
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Re: Anyone here have a golden butterfly portfolio?

Post by zie »

CDub wrote: Sat Feb 13, 2021 7:56 pm
zie wrote: Sat Feb 13, 2021 7:41 pm
As I understand it, the gold is to decrease volatility and to hedge insane inflation a little. BTC so far does neither of those things, as far as I'm aware. BTC is like 100% volatility. Gold is like 0% volatility, opposite ends of the spectrum. We have no idea how BTC will handle crazy insane inflation, it's never happened in the history of the asset. I'm guessing gold will continue to do better than BTC ever will, at least for the next "crazy inflation" if/when that ever happens. So far when markets crash, BTC also crashes, Gold tends to go up.

So while I hear BTC is "digital gold" It sure doesn't seem to behave like gold...yet(?).
Fair point. The comparisons to gold are pure speculation . It’s possible this time period for Bitcoin/crypto is a little like gold in the 70s. Starting to become widely possible for people to purchase relatively easily.

I guess my thinking is based more on the fact that gold by its very nature as a portfolio stabilizer depends on “a flight to gold” in times of inflation or stock market uncertainty. I’m feeling now like the more common response in those times may be to flee to crypto/Bitcoin. It’s obviously anyone’s guess. Just considering alternatives.
By March 31st, BTC lost -25.39% while gold stayed basically flat. Gold did what it was expected of it. BTC did not follow the same pattern. Maybe next time will be different, as this was the first big crash where BTC existed, but it sure isn't off to a great start if you are wanting to replace gold with BTC.

So this "flight to BTC" theory hasn't panned out so far. After a few more crashes, we should be able to say with more certainty how BTC will behave, it's still a very new asset, so it's possible it will change behaviour over time, but so far it's not doing what gold does.

That's not to say BTC might not have a place in a portfolio, it's just that BTC does not currently behave like gold... so far.

source: https://www.portfoliovisualizer.com/bac ... ion2_2=100
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
CDub
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Re: Anyone here have a golden butterfly portfolio?

Post by CDub »

zie wrote: Sun Feb 14, 2021 11:42 am By March 31st, BTC lost -25.39% while gold stayed basically flat. Gold did what it was expected of it. BTC did not follow the same pattern. Maybe next time will be different, as this was the first big crash where BTC existed, but it sure isn't off to a great start if you are wanting to replace gold with BTC.

So this "flight to BTC" theory hasn't panned out so far. After a few more crashes, we should be able to say with more certainty how BTC will behave, it's still a very new asset, so it's possible it will change behaviour over time, but so far it's not doing what gold does.

That's not to say BTC might not have a place in a portfolio, it's just that BTC does not currently behave like gold... so far.

source: https://www.portfoliovisualizer.com/bac ... ion2_2=100
In reality the volatility last March caused a much larger drawdowns than we even see there in the PV data. I know in Tyler's article here he quotes gold as having dropped 7.7% at one point, and the GB portfolio as a whole dropping almost 15%. I think BTC also dropped > 50% over the same time period.
https://portfoliocharts.com/2020/03/23/ ... ful-month/

Tyler's writings and the data at portfoliocharts convinced me to invest in the golden butterfly for a small part of my total portfolio (10-15%).
I think in reality you're right - bitcoin doesn't have a place in it.

I've considered gambling on in it for years and have seen a few friends make millions on it now. As gold has a similar speculative feel (although not even remotely comparable on volatility terms) - it feels easier to justify swapping some of my speculative dollars in gold for another speculative investment in bitcoin. However, thanks to this discussion I'll refrain from doing that as it takes away from the purpose of investing in that portfolio to be begin with - consistent, stable returns with low risk of huge drawdowns. Now need to figure out a new justification to gamble on BTC after this crazy run-up. haha. :)
Iconicus
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Re: Anyone here have a golden butterfly portfolio?

Post by Iconicus »

Why doesn't adding International stocks to the Golden Butterfly increase return and decrease risk? The efficient frontier chart in the domestic/international article (https://www.bogleheads.org/wiki/Domestic/International) shows that a 30% allocation to international will increase the return of the D/I mix by a quarter point and slightly decrease volatility.
Image

I realize that this doesn't guarantee that a portfolio that contains them will benefit as much, but when I allocate 30% of the GB stocks to international the result is lower portfolio return with higher standard deviation (risk).
(https://portfoliocharts.com/portfolio/m ... 6EI06GB20Z compared to GB: https://portfoliocharts.com/portfolio/golden-butterfly/)
Why would that be?
crocc
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Re: Anyone here have a golden butterfly portfolio?

Post by crocc »

Hi Tyler9000,

I am considering implementing your golden butterfly.

I currently use:
  • 20% Total Stock Market (VTI)
  • 20% Small Cap Value (?)
  • 20% Long Term Bonds (?)
  • 20% Short Term Bonds (BSV)
  • 20% Gold (IAU)
Questions:
  1. Do you have any recommendations for Long-term bonds and small cap?
  2. Can one just use 40% BND in place of two sperate bond ETFs?
  3. Alternatively, what do you think about replacing small cap with say ARK, if one drinks the Cathy Wood Koolaid? Are there any other ARK style ETFs that you would recommend with lower expense ratios?
Thanks,
Chris
CDub
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Re: Anyone here have a golden butterfly portfolio?

Post by CDub »

crocc wrote: Mon Mar 22, 2021 7:09 pm Hi Tyler9000,

I am considering implementing your golden butterfly.

I currently use:
  • 20% Total Stock Market (VTI)
  • 20% Small Cap Value (?)
  • 20% Long Term Bonds (?)
  • 20% Short Term Bonds (BSV)
  • 20% Gold (IAU)
Questions:
  1. Do you have any recommendations for Long-term bonds and small cap?
  2. Can one just use 40% BND in place of two sperate bond ETFs?
  3. Alternatively, what do you think about replacing small cap with say ARK, if one drinks the Cathy Wood Koolaid? Are there any other ARK style ETFs that you would recommend with lower expense ratios?
Thanks,
Chris

Not Tyler but I think he would point you to this page to find specific funds : https://portfoliocharts.com/portfolio/index-funds/

VBR - is a popular scv fund
VGLT - could be used for long term bonds

40% bnd would be a reasonable approximation for those two in my opinion, but do your own due diligence.

Small cap value is an index fund, ARK is actively managed - I don’t think is a suitable replacement in this portfolio. See my ill advised questions about using Bitcoin instead of gold above :). If you like ARK then go for it, but it’s not the golden butterfly. SCV was a big reason for some of the outperformance of this strategy.
CDub
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Re: Anyone here have a golden butterfly portfolio?

Post by CDub »

Iconicus wrote: Sun Mar 21, 2021 7:54 am Why doesn't adding International stocks to the Golden Butterfly increase return and decrease risk? The efficient frontier chart in the domestic/international article (https://www.bogleheads.org/wiki/Domestic/International) shows that a 30% allocation to international will increase the return of the D/I mix by a quarter point and slightly decrease volatility.
Image

I realize that this doesn't guarantee that a portfolio that contains them will benefit as much, but when I allocate 30% of the GB stocks to international the result is lower portfolio return with higher standard deviation (risk).
(https://portfoliocharts.com/portfolio/m ... 6EI06GB20Z compared to GB: https://portfoliocharts.com/portfolio/golden-butterfly/)
Why would that be?
Extending that to 2021 on PV shows 100% US stock as the tangency portfolio on the efficient frontier. https://www.portfoliovisualizer.com/eff ... eight2=100
rich126
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Re: Anyone here have a golden butterfly portfolio?

Post by rich126 »

I'm not sure how popular of a comment this is, but you really need to adapt to the circumstances of markets. Anything that includes the last few decades and includes bonds is going to look good. Long term bonds in the last decade have returned 4.7% (real return). The odds of that going forward is slim IMO.

Unfortunately no one will know the best thing to do until we can look back 10 yrs from now and say "Hi, we should have done xyz".

Currently I have almost zero bonds. I had VGLT for a while but I don't want to hold it now with rates rising. Is it timing? Sure, but I think it is wise. I'd rather hold low/no yielding cash than hold an investment likely to lose money.

My father retired in 1992 and he had mostly conservative investments (stuff like Wellesley and bonds). He told me recently his now has more money than when he retired. Partly due to low expenses but also largely due to bonds returning more than he was spending. Of course that generation was aided by generous pensions. Now if rates weren't on a constant downward trend for the last few decades I doubt my father's portfolio would have done as well.

Of course my father also benefited with a big rise in the market. 7.72% real return on the US market during that time. If I thought I could get that for my retirement, I wouldn't be working now :)
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PaulArbie
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Re: Anyone here have a golden butterfly portfolio?

Post by PaulArbie »

Coming out of Covid, I think we are seeing a fundamental shift in the economy. So I've decided to reallocate from a 60/40 portfolio to GB.

Over the past 2 years my 60/40 has drifted into 60% equity (with a big bias towards growth and tech), 7% munis, 3% Crypto (BTC and ETH) and 30% cash. The reason I'm so heavily weighted in cash is because rising interest rates are inevitable and LT bonds will get crushed by rising interest rates. And ST bonds? They are simply not paying enough to bother. I guess I'm thinking a bit like Jamie Dimon -- sit on cash and wait for the fed to raise rates.

On this excellent thread, there's an under current of shared skepticism regarding the near term prospects for bonds.

In concrete terms, I'm curious to see how people are thinking about the bond side of GB right now. If you have already implemented a GB portfolio, then the golden rule is "do nothing and don't try to time the market". But if you are someone like me who is doing a major shift, what would you do? My inclination is to implement everything else, but swap the 20% LT Bonds/20% ST bonds for 40% cash. Thoughts?

P.S., how do you include cash in a portfolio on Portfoliocharts.com?
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LadyGeek
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Re: Anyone here have a golden butterfly portfolio?

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (general discussion).

PaulArbie, Welcome!
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Tyler9000
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Re: Anyone here have a golden butterfly portfolio?

Post by Tyler9000 »

PaulArbie wrote: Wed Jun 16, 2021 12:21 pm P.S., how do you include cash in a portfolio on Portfoliocharts.com?
That's what Bills are for (BIL). They represent T-bills maturing in 3 months or less, and are a common measure of cash interest rates in things like money market accounts (rather than simply paper cash stuffed under the mattress).
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firebirdparts
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Re: Anyone here have a golden butterfly portfolio?

Post by firebirdparts »

zetsui wrote: Sun Oct 25, 2020 9:52 pm You are right, but I wonder if anyone has actually put their 20% into gold and 20% into LTTreasuries.... Seems like a risky thing these days
20% in LTT's wouldn't worry me at all. I don't have high expectations, but I don't think they're going to drop by half, where gold might.

Gold seems to me a little more of a random factor.
This time is the same
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