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Subject:  Re: OT Bonds Date:  3/7/2019  10:35 AM
Author:  richinaz Number:  273640 of 279291


Thanks for the reply. Its been something I've been pondering a lot as I approach retirement.

I've played around with various back tests at Portfolio Visualizer but often the tests only go back to 1972 (at best) and the results I feel are skewed due to the last decade of low interest rates. In my case, while more is always better I'd be thrilled with inflation +4%, happy with inflation+3%, satisfied with inflation+2% and concerned with inflation+1% for my returns in retirement.

(Note I'm not saying Portfolio Visualizer is the greatest tool but it is simple.)

A portfolio of:
60% Intermediate Treasuries (also tried 20/20/20 short/intermed/long but was basically the same results)
10% US Small Cap
15% US Stock Market
15% Global Ex-US

From 1986 gives me 7.92% CAGR or 5.22% after inflation (rebalanced annually). Max drawdown ~16%.
PV only has data for the Global Ex-US Stocks index to 1986.

Replacing Global with a larger US Stock Market allotment gives results back to 1972.
(i.e., same allotment as above except 30% in the US stock market)
CAGR 8.9 (inflation adj 4.79%).

Personally I don't think it is wise to have all US stocks. Also I think the returns are juiced by the very low interest rates over the last decade so I don't expect the returns to be that high in the future (although I guess most backtested portfolios don't do as well in the future).

And sure a portfolio like the Golden Butterfly does well in the back tests.
20% US stocks
20% US small cap value
20% Gold
20% short term treasuries
20% long term treasuries

9.89 CAGR 6.21 after inflation from 1978. Max draw down around 17%.

My issues there are the fact it is only US stocks and that I don't believe you can replicate the returns the tool uses for gold with a gold ETF (at least in my limited and quick comparison). And 20% in gold is very high.

Real estate (not ETFs but real property) has me concerned because it requires substantial investment, there are overhead costs, etc. Currently I do have a rental property in AZ but that was for unusual reasons - I moved during the big drop in AZ real estate, I could afford to keep it and was "sure" it was significantly under priced compared to other AZ real estate and I was able to easily rent it out. In that case my views were confirmed via nearly 100% occupation rate and the house and risen nearly 70% in value (maybe too high again).

I know Ray has recommended something like Vanguard Moderate Growth fund with its 60/40 stocks/bonds and 60/40 US/international split and that certainly is the easiest approach.

A max draw down of around 20% is usually pretty easy to handle, its the 40-50% ones that cause you to ponder if this time is different and do something stupid.

Anyhow, thanks for responding and reading
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