The Sample Portfolios  

Introduction

We have six real-time sample risk-parity inspired portfolios maintained at Fidelity that we monitor and track each week.  For convenience, we have named them (1) the All Seasons portfolio; (2) the Golden Butterfly portfolio; (3) the Golden Ratio portfolio; (4) the Risk Parity Ultimate portfolio; (5) the Accelerated Permanent Portfolio; and (6) the Aggressive Fifty-Fifty.   Each of them was funded with $10,000 on July 13, 2020, except for the All Weather, which was funded with $10,200 on July 21, 2020.  For reference, on July 13, 2020, the S&P opened at 3205 and the NASDAQ at 10,729.  We are drawing down on them monthly at the rates specified below.   The withdrawal rates are intentionally aggressive to demonstrate that these types of portfolios can withstand higher safe withdrawal rates than ordinary stock/bond mixes.  Also included is a correlation matrix for each portfolio generated at the portfoliovisualizer website.                                                                                                                                                                   For reference, during the week ending June 11, 2021, the S&P 500 was up 0.41%, the NASDAQ was up 1.85%, gold was down 0.83%, and long-term treasuries (TLT) were up 3.01%.  REITs (REET) were up 1.77%, commodities (PDBC) were up 1.16% and preferred shares (PFF) were up 0.42%.                                                                                                                                                                                                                                                            
Immediately below is our monthly tracker with the monthly percentage returns of all six of the sample portfolios and reference portfolios that include VTSAX (100% equity), VWENX (typical 60/40) and VWIAX (conservative 35/65).                                                    

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The All Seasons

What Is It: The All Seasons portfolio is a reference portfolio that is modeled after Ray Dalio's All Weather portfolio and is described in "Money:  Master the Game" by Tony Robbins.  It is a very conservative portfolio that is comprised of four asset classes in five funds, allocated as follows:  30% total U.S. stock market (VTI), 40% long-term treasury bonds (TLT), 15% intermediate-term treasury bonds (VGIT) 7.5% gold (GLDM) and 7.5% commodities (PDBC).  Since 1970, it has a compounded annual growth rate (after inflation) of 5.6%, and an expected permanent safe withdrawal rate of 3.8%.  Here is the current correlation matrix.                                                                                               
                                                                                                                                                          Portfolio Policies: We will re-balance this portfolio annually.  We will be removing 4% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 300 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 3% annualized until it returns to its starting value.  We will sell  a portion of the currently most productive fund as necessary to support the monthly withdrawals.                                                                                                                                                                                                                                                                                              
Current Status:  We distributed $35 from cash for June 2021 and have distributed $343 total since inception ($35 GLDM, $33 VGIT, $137 VTI, $34 PDBC and $104 cash).  Here it is as of June 18, 2021.  It was down 0.69% the prior week.    It is up 7.05% since inception.                                                                                                                                        

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Correlation Matrix -- All Seasons.png

Correlation Matrix

The Golden Butterfly

What Is It: The Golden Butterfly is the brainchild of Tyler, the founder and operator of the website www.portfoliocharts.com.  It is a conservative portfolio and is comprised of four asset classes in five funds that are equally weighted:  20% total U.S. stock market (VTI), 20% small cap value stocks (VIOV), 20% long-term treasury bonds (TLT), 20% short term treasury bonds (SHY) and 20% gold (GLDM).  Since 1970, it has a compounded annual growth rate (after inflation) of 6.4%, and an expected permanent safe withdrawal rate of 5.3%.  Here is the current correlation matrix.                                                                                                                                                                                            Portfolio Policies: We will re-balance this portfolio annually.  We will be removing 5% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 240 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 4% annualized until it returns to its starting value.  We will sell  a portion of the currently most productive fund as necessary to support the monthly withdrawals.                                                                                                                                                                                                                                                                                              
Current Status:  We distributed $48 from VIOV for June 2021 and have distributed $494 total since inception ($43 GLDM, $363 VIOV and $88 cash).  Here it is as of June 18, 2021.  It was down about 2.82% the prior week.  It is up 18.75% since inception.                                                                                                                                                                            

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Correlation Matrix -- Golden Butterfly.p

Correlation Matrix

The Golden Ratio

What Is It:  The Golden Ratio is a conservative portfolio that is designed for medium to long-term needs.  It is based on the mathematical golden ratio known to the ancients, which is approximately 1.618 and is represented by the Greek letter phi.  It is comprised of five asset classes in seven funds that are weighted by successive applications of the golden ratio:  42% stocks (split into 14% large cap growth (VUG), 14% small cap value (VIOV) and 14% low volatility (USMV)), 26% long-term treasury bonds (TLT), 16% gold (GLDM), 10% REITs (REET) and 6% money market (SPAXX),  Since 1970, it has a compounded annual growth rate (after inflation) of 7.0%, and an expected permanent safe withdrawal rate of 5.0%.  Here is the current correlation matrix.                                                                                                                                                                        
Portfolio Policies:  We will re-balance this portfolio annually.   We will be removing 5% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 240 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 4% until it returns to its starting value.  We will sell the money market asset first and a portion of the most productive fund after that as necessary to support the withdrawals.                                                                                                                                                                                                                                                                        
Current Status:  We distributed $47 from cash (SPAXX) for June 2021 and have distributed $489 from cash since inception.  Here it is as of June 18, 2021.  It was down   about 2.23% the prior week.  It is up 17.71% since inception.                                                                                                                                                                                                             

Correlation Matrix -- Golden Ratio.png

Correlation Matrix

The Risk Parity Ultimate

What Is It:  The Risk Parity Ultimate is a conservative portfolio that is designed for medium and long-term needs.  It is comprised of 12 different funds in six different asset classes:  40% stock funds (split into 12.5% VUG, 12.5% VIOV, 6.25% USMV, 6.25% SPLV and 2.5% UPRO), 25% long-term treasury bond funds (split into 15% TLT, 5% EDV and 5% TMF), 12.5% preferred stock funds (PFF), 10% gold (GLDM), 10% REITs (REET) and 2.5% in a stock market volatility tracking fund (VXX).  Here is the current correlation matrix.                                                                                                                                                                                                                                                                                 
Portfolio Policies:  We will re-balance this portfolio annually.  We will be removing 6% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 200 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 5% annualized until it returns to its starting value.  We will sell a portion of the most productive asset as necessary to support the withdrawals.                                                                                                                                                                           
Current Status:  We distributed $55 from VIOV for June 2021 and have distributed $578 total since inception ($52 GLDM, $319 VIOV, $51 VUG and $156 cash).  Here it is as of June 18, 2021.  It was down about 1.7% the prior week.  It is up 17.03% since inception.                                                                                                                                                                

Correlation Matrix -- Risk Parity Ultima

Correlation Matrix

The Accelerated Permanent Portfolio

What Is It:  The Accelerated Permanent Portfolio is an aggressive and experimental portfolio that is designed to take advantage of leveraged funds that offer multiples on returns, but is based fundamentally on Harry Browne's original Permanent Portfolio.  It is comprised of four different funds in four different asset classes:  25% leveraged stock funds (UPRO),  27.5%% leveraged long-term treasury bond funds (TMF), 25% preferred stock funds (PFF), and 22.5% gold (GLDM).  In theory it should yield a double-digit real compounded annual growth rate.  Here is the current correlation matrix.                                                                                                                                                                                                                                                                                                       
Portfolio Policies:  We will rebalance this portfolio whenever there is a 7.5% deviation from the targeted holding of a fund at mid-month.   We will be removing 8% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 150 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 6% until it returns to its starting value. We will sell the most productive asset as necessary to support the withdrawals.                                                                                                                                                                                                               
Current Status:  We distributed $71 from UPRO for June 2021 and have distributed $762 total since inception ($71 TMF, $483 UPRO, $65 PFF and $143 cash).  Rebalancing was triggered mid-January when UPRO exceeded its target allocation by over 7.5%.  Accordingly, on January 18, 2021, we sold $975 UPRO and bought $917 TMF.  Here it is as of June 18, 2021.  It was down about 1.57% the prior week.  It is up 15.30% since inception.                                                                                                                                        

Correlation Matrix -- Accelerated Perman

Correlation Matrix

The Aggressive Fifty-Fifty

What Is It:  The Aggressive Fifty-Fifty Portfolio is an aggressive and experimental portfolio that is designed to take advantage of leveraged funds that offer multiples on returns. It is comprised of four different funds in that are associated with stocks and bonds in a 50/50 stock/bond ratio:  33% leveraged stock funds (UPRO),  17% preferred stock funds (PFF), 33%% leveraged long term treasury bond funds (TMF), and 17% intermediate treasury bond funds (VGIT).  In theory it should yield a double-digit real compounded annual growth rate.  Here is the current correlation matrix.                                                                                                                                                                                 
Portfolio Policies:  We will be rebalance this portfolio whenever there is a 7.5% deviation from the targeted holding of a fund at mid-month.   We will be removing 8% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 150 and removing that amount on the first trading day of the next month.  If the portfolio falls below 80% of its starting value, we will reduce the withdrawal rate to 6% until it returns to its starting value.  We will sell the most productive fund as necessary to support the withdrawals.                                                                                                                                                                                                               
Current Status:  We distributed $72 from UPRO for June 2021 and have distributed $765 since inception ($70 TMF, $419 UPRO, $63 PFF and $213 cash).  Rebalancing was triggered mid-November 2020 and mid-March 2021 when UPRO exceeded its target allocation by over 7.5%.  Accordingly, on November 16 we sold $794 UPRO and bought $694 TMF and $63 VGIT, leaving $37 additional cash for the next distribution.  On March 16, we sold $1143 UPRO and bought $1110 TMF, leaving $33 for the next distribution.  Here it is as of June 18, 2021.  It was up about 0.24% for the prior week.  It is up 20.21% since inception.                                                                                                                                                                                                                                                                  

Correlation Matrix

Correlation Matrix

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