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L.P.
Posted: 16 February 2025 22:01:27(UTC)
#45

Joined: 14/07/2023(UTC)
Posts: 670

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DIY Investing;334738 wrote:
L.P.;334734 wrote:
DIY Investing;334701 wrote:
NPH;334656 wrote:


Thank you for such a detailed reply. I share your concerns about inflation re-spiking, interest rates staying higher for longer and the new dawn for bonds being another false one.after a couple of years of disappointment. Several posters have recommended the gilt ladder for mid-term spending, but there have been very few clear calls for a 3-10 year horizon outside of this. I remain unconvinced outside of 2-3 years of short term protection.


It seems like your question is effectively, is a ‘3 bucket’ strategy worth it and is there anything suitable to out there to put into the second bucket. The second bucket being the mid term bucket, the one that consists of those less growthy, hopefully less volatile investments that offer more than cash in exchange for some volatility but not pure equity-like volatility.

TBH, bucket 2 is a lot more of a head scratcher these days than it once was. The good news is the evidence suggests that this isn’t an optimal strategy anyway; and Monte Carlo simulations suggest that actually the more you hold in equities, the less likely you are to run out of money in retirement, despite the increased volatility.

However, I get that it isn’t all about being optimal and that psychology comes into it a lot. Having an intermediate bucket of investments that are beating inflation but not tanking 25-30% every few years may well offer peace of mind.

Christine Benz of Morningstar talks about the 3 bucket strategy a lot. She seems to talk about bond funds with some equity funds focused on mature large cap companies that pay a dividend for that intermediate term bucket. For me, the latter might be reasonable, the former not so much.

PNL and its OEIC equivalent, Troy Trojan, get a lot of love on here and for good reason. Out of everyone trying to offer some positive real return without getting investors wrecked over the medium to long term, these guys are pretty much the undisputed world champions! So that is something you could put in that Intermediate bucket. But going all in on one trust, fund for bucket two might not be wise. Managers change, approaches change…..you never know.

CGT is worth a shout but it’s more of an alternative than it is an out and out steady as she goes safety first trust.

For me, RICA is a different beast. Much more hedgefundy. It has a tendency to take on more risk. It’s definitely a very alternative strategy that it employs but I’m not sure it’s for everyone and I’m not sure it’s a bucket 2 candidate.

There are other multi-asset funds out there. BlackRock MyMap 4 hasn’t been too bad. It uses passives, but there seems to be at least some effort to manage duration risk when it comes to the bond allocation. It’s been more volatile than PNL, but it hasn’t been terrible, it’s a reasonable bucket 2 candidate IMO.

You could always create your own bucket 2 portfolio. The Golden Butterfly portfolio could work. Easy to build yourself with 5 ETFs/ETCs, and it has a fantastic long term record. It consists of 20% large cap stocks, 20% small cap stocks, 20% gold, 20% short dated treasuries, 20% long dated treasuries. Its worst drawdown was, like bonds, 2022. According to portfolio visualizer, it pulled back 18.93% compared to 14.45% for Intermediate US treasuries, and 25.35% for global bonds. The goods news is that, unlike bonds, it’s already more than recovered. Even with that 20% allocation to long treasuries. Intermediate treasuries and global bonds are both still down.

5 Year Annualised Returns:

Golden Butterfly 5.53%
Intermediate treasuries. -0.40%
Global Bonds. -1.76%

10 year returns read virtually the same. Bonds just tip into positive territory over that time, Golden butterfly still comfortably over 5%.





A “Golden” what?

How about a straight forward mixed asset fund such as the ones mentioned up thread;
L60 5 year annualised returns = 5%
Or
HSBC Global Strategy Balanced 5year annualised returns = 5.9%
(10 year returns = 6.5% & 7.2%)
No fancy ‘Golden’ names… just straight forward and cheap without the “Golden” nonsense!

Other providers with similar costs and returns available.




Because, aside from PNL, they don’t work as well. And a late 20th century style stocks and bonds PF isn’t diversified enough.

It’s called that because, like PNL, it has a significant gold allocation, making it more of a genuine all weather wealth preserver because it has something for all scenarios: growth+inflation, stagflation, growth+deflation, recession+deflation.

It’s very simple to construct, consisting of just 5 ETFs with an equal weighting to each. Ongoing charges should be sub 0.15%, much cheaper than anything mentioned above. Can be held on a free platform with a rebalance button that you can hit once a year.

It’s hardly outrageously complex! Not really worth dismissing because of the overly grandiose name!


I didn’t dismiss it because I thought it was “outrageously complex”! I dismissed it because it was outrageously unnecessary just to create returns no better than a popular one stop, auto-rebalancing low cost 60/40 multi asset fund.
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Guest on 17/02/2025(UTC), Jed Mires on 17/02/2025(UTC)
ben ski
Posted: 16 February 2025 22:09:48(UTC)
#44

Joined: 15/01/2016(UTC)
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DIY Investing;334738 wrote:
L.P.;334734 wrote:
DIY Investing;334701 wrote:
NPH;334656 wrote:


Thank you for such a detailed reply. I share your concerns about inflation re-spiking, interest rates staying higher for longer and the new dawn for bonds being another false one.after a couple of years of disappointment. Several posters have recommended the gilt ladder for mid-term spending, but there have been very few clear calls for a 3-10 year horizon outside of this. I remain unconvinced outside of 2-3 years of short term protection.


It seems like your question is effectively, is a ‘3 bucket’ strategy worth it and is there anything suitable to out there to put into the second bucket. The second bucket being the mid term bucket, the one that consists of those less growthy, hopefully less volatile investments that offer more than cash in exchange for some volatility but not pure equity-like volatility.

TBH, bucket 2 is a lot more of a head scratcher these days than it once was. The good news is the evidence suggests that this isn’t an optimal strategy anyway; and Monte Carlo simulations suggest that actually the more you hold in equities, the less likely you are to run out of money in retirement, despite the increased volatility.

However, I get that it isn’t all about being optimal and that psychology comes into it a lot. Having an intermediate bucket of investments that are beating inflation but not tanking 25-30% every few years may well offer peace of mind.

Christine Benz of Morningstar talks about the 3 bucket strategy a lot. She seems to talk about bond funds with some equity funds focused on mature large cap companies that pay a dividend for that intermediate term bucket. For me, the latter might be reasonable, the former not so much.

PNL and its OEIC equivalent, Troy Trojan, get a lot of love on here and for good reason. Out of everyone trying to offer some positive real return without getting investors wrecked over the medium to long term, these guys are pretty much the undisputed world champions! So that is something you could put in that Intermediate bucket. But going all in on one trust, fund for bucket two might not be wise. Managers change, approaches change…..you never know.

CGT is worth a shout but it’s more of an alternative than it is an out and out steady as she goes safety first trust.

For me, RICA is a different beast. Much more hedgefundy. It has a tendency to take on more risk. It’s definitely a very alternative strategy that it employs but I’m not sure it’s for everyone and I’m not sure it’s a bucket 2 candidate.

There are other multi-asset funds out there. BlackRock MyMap 4 hasn’t been too bad. It uses passives, but there seems to be at least some effort to manage duration risk when it comes to the bond allocation. It’s been more volatile than PNL, but it hasn’t been terrible, it’s a reasonable bucket 2 candidate IMO.

You could always create your own bucket 2 portfolio. The Golden Butterfly portfolio could work. Easy to build yourself with 5 ETFs/ETCs, and it has a fantastic long term record. It consists of 20% large cap stocks, 20% small cap stocks, 20% gold, 20% short dated treasuries, 20% long dated treasuries. Its worst drawdown was, like bonds, 2022. According to portfolio visualizer, it pulled back 18.93% compared to 14.45% for Intermediate US treasuries, and 25.35% for global bonds. The goods news is that, unlike bonds, it’s already more than recovered. Even with that 20% allocation to long treasuries. Intermediate treasuries and global bonds are both still down.

5 Year Annualised Returns:

Golden Butterfly 5.53%
Intermediate treasuries. -0.40%
Global Bonds. -1.76%

10 year returns read virtually the same. Bonds just tip into positive territory over that time, Golden butterfly still comfortably over 5%.





A “Golden” what?

How about a straight forward mixed asset fund such as the ones mentioned up thread;
L60 5 year annualised returns = 5%
Or
HSBC Global Strategy Balanced 5year annualised returns = 5.9%
(10 year returns = 6.5% & 7.2%)
No fancy ‘Golden’ names… just straight forward and cheap without the “Golden” nonsense!

Other providers with similar costs and returns available.




Because, aside from PNL, they don’t work as well. And a late 20th century style stocks and bonds PF isn’t diversified enough.

It’s called that because, like PNL, it has a significant gold allocation, making it more of a genuine all weather wealth preserver because it has something for all scenarios: growth+inflation, stagflation, growth+deflation, recession+deflation.

It’s very simple to construct, consisting of just 5 ETFs with an equal weighting to each. Ongoing charges should be sub 0.15%, much cheaper than anything mentioned above. Can be held on a free platform with a rebalance button that you can hit once a year.

It’s hardly outrageously complex! Not really worth dismissing because of the overly grandiose name!


It's a tough one, because the Boglehead VLS approach is foolproof. You don't need to overthink it. I do think it has holes.

Gold's been massively outpacing its long-term inflation-tracking trend, since Nixon. It rose 44% over 2024. So it's going to look great in backtests, but if it were to mean revert, 20% in gold could look like a huge mistake. (Personally, I'm 5% gold, inc. PNL. I'd quite like to be 10%, but hasn't been a good opportunity to buy in years.)

Then, what you've really got with Golden Butterfly is a fairly pedestrian stock/bond portfolio. It's always been questionably large allocations to gold and small-cap value that make backtests (post 1970s) look great. Yet the arguments for gold right now are probably stronger than ever. Huge debt pile, and somehow you need to make that painful for holders of debt/cash.

I originally said if VLS had a 5-10% allocation to gold, I'd recommend it by default. The problem is a portfolio of just financial assets (no real assets) is vulnerable to conditions like stagflation. So maybe you want 60:20:20 stocks, bonds, real assets. And for real assets, you should probably predominantly have shorter-dated TIPS and IL Gilts, with maybe 5-7% gold. Then VLS 20 or 40 almost look like All Weather portfolios.

Ultimately, I concluded that with things like QE, and trends in growth and inflation that we haven't had much of over the past 50 years (typical backtest territory), no fixed allocation is really going to be safe. You always risk a situation in which you're left buying then holding the worthless assets.

I think what CGT and PNL should consider launching are low-cost ETF-based All Weather portfolios. Basically their existing asset allocations, but just use a FTSE World index for risk; short-dated TIPS ETF, MMF, gold ETF. And the active decisions should just be the allocations, in situations in which valuations get extreme.
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5 users thanked ben ski for this post.
Robin B on 16/02/2025(UTC), Guest on 17/02/2025(UTC), dlp6666 on 17/02/2025(UTC), Blunt Instrument on 17/02/2025(UTC), Joe P on 17/02/2025(UTC)
L.P.
Posted: 16 February 2025 22:22:39(UTC)
#92

Joined: 14/07/2023(UTC)
Posts: 670

Thanks: 1670 times
Was thanked: 2046 time(s) in 541 post(s)
Aminatidi;334706 wrote:
I think it was the degree of the drop wasn't it?

Heavy US bias to this but the 3rd worst pretty much in history for a 60/40 etc. so not too surprising it's left a bad taste for people who aren't used to it.



This post is an example of how misleading this forum can be and makes you think that it is a total waste of time and effort.

For example: lets looks at 1974 which is described in Aminatidi’s post here as the “1973/74 bear market”.
The general market top was actually November 72 and it did not recover for well over a decade.

The 60/40 actually dropped 7.1% in 1973 and 14.7% in 1974 and yet, Aminatidi fails to mention that in 1975 it rose over 23% and over 20% in 1976 whilst the S&P kept falling and did not recover for at least another 10+ years.
The reason for this ‘outperformance’ is clear in the link that I posted earlier, US 10year treasuries nudging 8% at the same time but if you cannot be bothered to take a look…….

This “bear market” was not just a two year event… it lasted for over a decade.
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3 users thanked L.P. for this post.
Thrugelmir on 16/02/2025(UTC), Guest on 17/02/2025(UTC), Aminatidi on 17/02/2025(UTC)
DIY Investing
Posted: 16 February 2025 23:07:13(UTC)
#46

Joined: 29/09/2018(UTC)
Posts: 3,827
L.P.;334747 wrote:
DIY Investing;334738 wrote:
L.P.;334734 wrote:
DIY Investing;334701 wrote:
NPH;334656 wrote:


Thank you for such a detailed reply. I share your concerns about inflation re-spiking, interest rates staying higher for longer and the new dawn for bonds being another false one.after a couple of years of disappointment. Several posters have recommended the gilt ladder for mid-term spending, but there have been very few clear calls for a 3-10 year horizon outside of this. I remain unconvinced outside of 2-3 years of short term protection.


It seems like your question is effectively, is a ‘3 bucket’ strategy worth it and is there anything suitable to out there to put into the second bucket. The second bucket being the mid term bucket, the one that consists of those less growthy, hopefully less volatile investments that offer more than cash in exchange for some volatility but not pure equity-like volatility.

TBH, bucket 2 is a lot more of a head scratcher these days than it once was. The good news is the evidence suggests that this isn’t an optimal strategy anyway; and Monte Carlo simulations suggest that actually the more you hold in equities, the less likely you are to run out of money in retirement, despite the increased volatility.

However, I get that it isn’t all about being optimal and that psychology comes into it a lot. Having an intermediate bucket of investments that are beating inflation but not tanking 25-30% every few years may well offer peace of mind.

Christine Benz of Morningstar talks about the 3 bucket strategy a lot. She seems to talk about bond funds with some equity funds focused on mature large cap companies that pay a dividend for that intermediate term bucket. For me, the latter might be reasonable, the former not so much.

PNL and its OEIC equivalent, Troy Trojan, get a lot of love on here and for good reason. Out of everyone trying to offer some positive real return without getting investors wrecked over the medium to long term, these guys are pretty much the undisputed world champions! So that is something you could put in that Intermediate bucket. But going all in on one trust, fund for bucket two might not be wise. Managers change, approaches change…..you never know.

CGT is worth a shout but it’s more of an alternative than it is an out and out steady as she goes safety first trust.

For me, RICA is a different beast. Much more hedgefundy. It has a tendency to take on more risk. It’s definitely a very alternative strategy that it employs but I’m not sure it’s for everyone and I’m not sure it’s a bucket 2 candidate.

There are other multi-asset funds out there. BlackRock MyMap 4 hasn’t been too bad. It uses passives, but there seems to be at least some effort to manage duration risk when it comes to the bond allocation. It’s been more volatile than PNL, but it hasn’t been terrible, it’s a reasonable bucket 2 candidate IMO.

You could always create your own bucket 2 portfolio. The Golden Butterfly portfolio could work. Easy to build yourself with 5 ETFs/ETCs, and it has a fantastic long term record. It consists of 20% large cap stocks, 20% small cap stocks, 20% gold, 20% short dated treasuries, 20% long dated treasuries. Its worst drawdown was, like bonds, 2022. According to portfolio visualizer, it pulled back 18.93% compared to 14.45% for Intermediate US treasuries, and 25.35% for global bonds. The goods news is that, unlike bonds, it’s already more than recovered. Even with that 20% allocation to long treasuries. Intermediate treasuries and global bonds are both still down.

5 Year Annualised Returns:

Golden Butterfly 5.53%
Intermediate treasuries. -0.40%
Global Bonds. -1.76%

10 year returns read virtually the same. Bonds just tip into positive territory over that time, Golden butterfly still comfortably over 5%.





A “Golden” what?

How about a straight forward mixed asset fund such as the ones mentioned up thread;
L60 5 year annualised returns = 5%
Or
HSBC Global Strategy Balanced 5year annualised returns = 5.9%
(10 year returns = 6.5% & 7.2%)
No fancy ‘Golden’ names… just straight forward and cheap without the “Golden” nonsense!

Other providers with similar costs and returns available.




Because, aside from PNL, they don’t work as well. And a late 20th century style stocks and bonds PF isn’t diversified enough.

It’s called that because, like PNL, it has a significant gold allocation, making it more of a genuine all weather wealth preserver because it has something for all scenarios: growth+inflation, stagflation, growth+deflation, recession+deflation.

It’s very simple to construct, consisting of just 5 ETFs with an equal weighting to each. Ongoing charges should be sub 0.15%, much cheaper than anything mentioned above. Can be held on a free platform with a rebalance button that you can hit once a year.

It’s hardly outrageously complex! Not really worth dismissing because of the overly grandiose name!


I didn’t dismiss it because I thought it was “outrageously complex”! I dismissed it because it was outrageously unnecessary just to create returns no better than a popular one stop, auto-rebalancing low cost 60/40 multi asset fund.


It has better risk adjusted returns than all of them and costs less. Annualised returns over 30 years have come close to 60:40 but with volatility more akin to the Harry Brown Permanent portfolio.

For me, I’m happy with 90:10 stocks/gold, volatility be damned. But if I wanted an intermediate risk, medium term investment, I’d take this over the now defunct 60:40.
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Robin B
Posted: 16 February 2025 23:24:42(UTC)
#98

Joined: 01/04/2024(UTC)
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My god, an interesting discussion on the investing forum for a change. Thanks to those who've taken the time to contribute to it, especially ben and DIY.

I hold CGT and PNL at about 8% each. 75% in passive global trackers, then some in TRY (the questionable one recently, but a fine long term holder imo).

Outside my pf, I have a load of cash earning about 5% in cash ISAs, which isn't bad and continues to beat inflation for now. And I'm going to pour a third of this cash into extending my house - i.e. real assets, beyond the likes of gold, and genuinely useful to me. Bricks and mortar and plaster and copper pipes and concrete. Which is all experiencing inflation of 7% or more per annum. Unlikely to let up any time soon. Arguably better value and utility than gold at this time.

What's the point of bond funds? Diversification, stupid! ;) But the word "bonds" covers a vast multitude of sins, as do bond funds.

I leave those to the, seemingly much maligned, chaps at CGT and PNL. Both trusts up around 7% for me, minus fees and dividends. I'll be sticking with them and buying more for the cautious part of my pf - probably making them more like 9% each in the coming weeks. No brainer whilst they're on discounts, and because...

Whilst I have faith in the stock market, I won't ever depend on it entirely, and bonds have their place. You just don't know what's going to happen in future and I won't rule out a nasty spell for equities, which I will want to rebalance into from other asset classes if that time comes. But, I want them to be selected and managed by people who know what they're doing and can apply some skill when it is needed. I can't help noticing that a lot of these multi asset funds tend to be a bit dumb and lack ingenuity at tricky moments. Like a plane in a storm when the sensors have iced up... you want an experienced pilot to take over the controls and use his instincts to achieve a safe landing.
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5 users thanked Robin B for this post.
ben ski on 17/02/2025(UTC), Guest on 17/02/2025(UTC), dlp6666 on 17/02/2025(UTC), Aminatidi on 17/02/2025(UTC), LondonYank84 on 18/02/2025(UTC)
Thrugelmir
Posted: 16 February 2025 23:32:43(UTC)
#100

Joined: 01/06/2012(UTC)
Posts: 5,317
Robin B;334754 wrote:
I can't help noticing that a lot of these multi asset funds tend to be a bit dumb and lack ingenuity at tricky moments.


Nothing magical about trading. If there's no counterparty offering a sensible price on large lines of stock. Then there's zero options available. Retail investors do have an edge in such moments. Agility counts.
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L.P.
Posted: 17 February 2025 05:53:11(UTC)
#99

Joined: 14/07/2023(UTC)
Posts: 670

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Was thanked: 2046 time(s) in 541 post(s)
Robin B;334754 wrote:
My god, an interesting discussion on the investing forum for a change. Thanks to those who've taken the time to contribute to it, especially ben and DIY.



Other posters ‘need not apply’ ;-)
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Peanuts
Posted: 17 February 2025 08:30:14(UTC)
#93

Joined: 16/02/2019(UTC)
Posts: 1,476
L.P.;334751 wrote:
Aminatidi;334706 wrote:
I think it was the degree of the drop wasn't it?

Heavy US bias to this but the 3rd worst pretty much in history for a 60/40 etc. so not too surprising it's left a bad taste for people who aren't used to it.



This post is an example of how misleading this forum can be and makes you think that it is a total waste of time and effort.

For example: lets looks at 1974 which is described in Aminatidi’s post here as the “1973/74 bear market”.
The general market top was actually November 72 and it did not recover for well over a decade.

The 60/40 actually dropped 7.1% in 1973 and 14.7% in 1974 and yet, Aminatidi fails to mention that in 1975 it rose over 23% and over 20% in 1976 whilst the S&P kept falling and did not recover for at least another 10+ years.
The reason for this ‘outperformance’ is clear in the link that I posted earlier, US 10year treasuries nudging 8% at the same time but if you cannot be bothered to take a look…….

This “bear market” was not just a two year event… it lasted for over a decade.


I'm not sure how to post this pic but shows how strong the argument is for a 60/40 pf. I appreciate its only using the S&P500 and US 10yr so would be interested in seeing a similar chart of something like the MSCI global / Global Bond index

https://ofdollarsanddata...ello_6040_2022_tweet.png
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Aminatidi
Posted: 17 February 2025 09:58:15(UTC)
#94

Joined: 29/01/2018(UTC)
Posts: 5,865

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L.P.;334751 wrote:
Aminatidi;334706 wrote:
I think it was the degree of the drop wasn't it?

Heavy US bias to this but the 3rd worst pretty much in history for a 60/40 etc. so not too surprising it's left a bad taste for people who aren't used to it.



This post is an example of how misleading this forum can be and makes you think that it is a total waste of time and effort.

For example: lets looks at 1974 which is described in Aminatidi’s post here as the “1973/74 bear market”.
The general market top was actually November 72 and it did not recover for well over a decade.

The 60/40 actually dropped 7.1% in 1973 and 14.7% in 1974 and yet, Aminatidi fails to mention that in 1975 it rose over 23% and over 20% in 1976 whilst the S&P kept falling and did not recover for at least another 10+ years.
The reason for this ‘outperformance’ is clear in the link that I posted earlier, US 10year treasuries nudging 8% at the same time but if you cannot be bothered to take a look…….

This “bear market” was not just a two year event… it lasted for over a decade.


It was something I remembered seeing in a piece about the traditional 60/40.

https://awealthofcommons...of-the-60-40-portfolio/

It's not my table and whatever happened before or after those significant drops still happened in those years didn't they?

Investors are human not automatons and a lot of it comes down to the "stomach" point I mentioned earlier.

I'm not sure how showing something that actually happened is "misleading" or why the need for the tone.

Peanuts this is your image.
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smg8 on 17/02/2025(UTC), Peanuts on 17/02/2025(UTC)
Peanuts
Posted: 17 February 2025 10:51:24(UTC)
#95

Joined: 16/02/2019(UTC)
Posts: 1,476
Aminatidi;334772 wrote:


Peanuts this is your image.



Thank you Aminatidi

Again, I know this is US data so will always be stronger than RoW etc, but I think the importance of what the 60/40 chart above shows is -

Out of 94yrs of data - 49 of those years were double-digit positive returns. Only 6 yrs were negative double-digit returns. I’ll take that, thank you ☺️
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