fjpajerski
Recycles dryer sheets
This recent post (copied below) by stefansm is, for me, the most meaningful helpful forum post I've seen in years. I've been doing modeling and charting and whatever of this concept and now, for me, I am comfortable in creating it as my entire IRA-ROTH account holdings. For me, I would have DBMF and SPYI (S&P 500), QQQI (Nasdaq 100), and MLPI (MLP and Energy), and CSHI (cash) in an 45---45(15 each)---10 % allocation Please take this in the context of my personal needs/wishes. I'm now 82 in declining health, strongly want more time for other interests than investing. Priority here is modest TR growth/drawdown and with cap preservation and good yields of course. I began chasing growth via small boutique firms 60 years ago with middling success and too much time and worry. Became a buy-and-monitor passive income-investor some years ago with my IRA-Rollover account (of CEFs and ETFs) now distributing 11+% monthly on my cost that's twice what's needed for my normal expenses. So no financial worry here and not too much time expended on it. But as for my IRA-ROTH account ....
I'm left with one question: do I check its allocation weekly or monthly and rebalance then if needed?
I would also appreciate any thoughts in general if you would like to do so.
Once again ... all this is in context of me, your situation may justifiably take you in in a different direction. Thanks in advance for any thoughts/advice.
--- Frank
This is a very simple, mechanical portfolio, where I used PTY as a stand in for CEFs and DBMF (CTA index). The portfolio is 50%/50% PTY/DBMF, and is rebalanced when the allocation drifts and any asset is over/under 7% the initial allocation. In 23 years, this happened 20 times (see the list of rebalancing events below).
I used PTY because I wanted to test how the portfolio would have performed in the GFC.
The big advantage of this particular portfolio construction, for us, as retail investors, is that it removes all fear, uncertainty and doubt, no matter what the market does. You do nothing most of the time, outside reinvesting dividends and rebalancing back to 50/50 from time to time (see list of rebalancing events below).
Note that this mechanical rebalancing makes you sell high and buy low. This is very clearly illustrated by the few rebalancing events in 2008 (see the list) where you bought a lot more PTY at huge discount.
After I did this test, I was very surprised of how good the performance was:
The 23 years CAGR (from May 2023 - May 2026) is 9%, with most drawdowns in the 10-15% and one larger drawdown -30% in the GFC, which, however, is almost half the PTY drawdown of -58% in the GFC (see chart below).
So, basically, a very good, stable, steady performance of the 50/50 PTY/DBMF portfolio for over 23 years, a time period which includes the GFC, deep corrections, the 2020 recession, 2022 stagflation and many minor crisis.
Of course, all the heavy lifting was done by the Pimco and the CTA managers, while the portfolio owner had only to rebalance from time to time. That's all.
In the charts below,:
Here is the list of rebalancing events: 20 rebalancings in 23 years:
1 2004-09-03 PTY = 57.1% DBMF = 42.9%
2 2008-07-11 PTY = 42.9% DBMF = 57.1%
3 2008-10-10 PTY = 36.1% DBMF = 63.9%
4 2008-11-07 PTY = 57.2% DBMF = 42.8%
5 2008-11-21 PTY = 41.6% DBMF = 58.4%
6 2008-12-19 PTY = 58.2% DBMF = 41.8%
7 2009-03-06 PTY = 37.3% DBMF = 62.7%
8 2009-03-27 PTY = 60.6% DBMF = 39.4%
9 2009-06-05 PTY = 58.6% DBMF = 41.4%
10 2009-12-18 PTY = 58.0% DBMF = 42.0%
11 2011-01-28 PTY = 57.3% DBMF = 42.7%
12 2012-09-21 PTY = 57.0% DBMF = 43.0%
13 2014-05-09 PTY = 57.1% DBMF = 42.9%
14 2015-01-02 PTY = 42.8% DBMF = 57.2%
15 2017-03-24 PTY = 57.1% DBMF = 42.9%
16 2018-05-25 PTY = 57.3% DBMF = 42.7%
17 2020-03-20 PTY = 42.8% DBMF = 57.2%
18 2020-06-05 PTY = 57.8% DBMF = 42.2%
19 2022-04-29 PTY = 42.8% DBMF = 57.2%
20 2024-10-25 PTY = 57.1% DBMF = 42.9%
Finally, here is the yearly Profits/Loss:
I'm left with one question: do I check its allocation weekly or monthly and rebalance then if needed?
I would also appreciate any thoughts in general if you would like to do so.
Once again ... all this is in context of me, your situation may justifiably take you in in a different direction. Thanks in advance for any thoughts/advice.
--- Frank
stefansm
Recycles dryer sheets
I think it is important and helpful, for investors who do not want to trade or time the market, and want mostly a buy an hold CEF portfolio, to show this "all weather" portfolio and its performance over a long term.This is a very simple, mechanical portfolio, where I used PTY as a stand in for CEFs and DBMF (CTA index). The portfolio is 50%/50% PTY/DBMF, and is rebalanced when the allocation drifts and any asset is over/under 7% the initial allocation. In 23 years, this happened 20 times (see the list of rebalancing events below).
I used PTY because I wanted to test how the portfolio would have performed in the GFC.
The big advantage of this particular portfolio construction, for us, as retail investors, is that it removes all fear, uncertainty and doubt, no matter what the market does. You do nothing most of the time, outside reinvesting dividends and rebalancing back to 50/50 from time to time (see list of rebalancing events below).
Note that this mechanical rebalancing makes you sell high and buy low. This is very clearly illustrated by the few rebalancing events in 2008 (see the list) where you bought a lot more PTY at huge discount.
After I did this test, I was very surprised of how good the performance was:
The 23 years CAGR (from May 2023 - May 2026) is 9%, with most drawdowns in the 10-15% and one larger drawdown -30% in the GFC, which, however, is almost half the PTY drawdown of -58% in the GFC (see chart below).
So, basically, a very good, stable, steady performance of the 50/50 PTY/DBMF portfolio for over 23 years, a time period which includes the GFC, deep corrections, the 2020 recession, 2022 stagflation and many minor crisis.
Of course, all the heavy lifting was done by the Pimco and the CTA managers, while the portfolio owner had only to rebalance from time to time. That's all.
In the charts below,:
- Upper pane is the portfolio equity (green) vs PTY (red) and DBMF (CTA index reconstituted in blue).
- Mid pane is the portfolio drawdown (red) vs PTY drawdown (grey).
- Bottom pane is the allocation, green is PTY, orange is the DBMF index:
Here is the list of rebalancing events: 20 rebalancings in 23 years:
1 2004-09-03 PTY = 57.1% DBMF = 42.9%
2 2008-07-11 PTY = 42.9% DBMF = 57.1%
3 2008-10-10 PTY = 36.1% DBMF = 63.9%
4 2008-11-07 PTY = 57.2% DBMF = 42.8%
5 2008-11-21 PTY = 41.6% DBMF = 58.4%
6 2008-12-19 PTY = 58.2% DBMF = 41.8%
7 2009-03-06 PTY = 37.3% DBMF = 62.7%
8 2009-03-27 PTY = 60.6% DBMF = 39.4%
9 2009-06-05 PTY = 58.6% DBMF = 41.4%
10 2009-12-18 PTY = 58.0% DBMF = 42.0%
11 2011-01-28 PTY = 57.3% DBMF = 42.7%
12 2012-09-21 PTY = 57.0% DBMF = 43.0%
13 2014-05-09 PTY = 57.1% DBMF = 42.9%
14 2015-01-02 PTY = 42.8% DBMF = 57.2%
15 2017-03-24 PTY = 57.1% DBMF = 42.9%
16 2018-05-25 PTY = 57.3% DBMF = 42.7%
17 2020-03-20 PTY = 42.8% DBMF = 57.2%
18 2020-06-05 PTY = 57.8% DBMF = 42.2%
19 2022-04-29 PTY = 42.8% DBMF = 57.2%
20 2024-10-25 PTY = 57.1% DBMF = 42.9%
Finally, here is the yearly Profits/Loss:
