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The Sample Portfolios
Introduction
We have eight 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; (6) the Aggressive Fifty-Fifty portfolio; (7) the Levered Golden Ratio portfolio; and (8) O.P.T.R.A. 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, and the Levered Golden Ratio, which was funded with $10,000 on July 1, 2021. For reference, on July 13, 2020, the S&P opened at 3205 and the NASDAQ at 10,729.
We are distributing from 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 current reference, for the week ending July 19, 2024, the S&P 500 was down 1.97%, the NASDAQ was down 3.65%, small-cap value (VIOV) was up 2.56%, gold was down 0.61%, and long-term treasuries (VGLT) were down 0.85%. REITs (REET) were up 0.82%, commodities (PDBC) were down 2.78%, preferred shares (PFF) were down 0.98% and managed futures (DBMF) were down 1.43%.
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 (aggressive 65/35) and VWIAX (conservative 35/65).
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/VGLT), 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 and a backtest by asset class with a 4% annualized distribution taken monthly.
Portfolio Policies: We will re-balance this portfolio annually. We will be distributing 4% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 300 and distributing 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.
We rebalanced this portfolio on July 21, 2021, to its original allocations based on its value of $10,802 on July 20, 2021. This involved selling $690 VTI and $215 PDBC, and buying $665 TLT, $165 VGIT and $90 GLDM. We rebalanced again on July 22, 2022 based on the balance of $9,248 on July 21, 2022. This involved selling $61 GLDM, $66 VGIT and $88 VTI, and buying $6 PDBC and $347 TLT. On December 21, 2002, we tax-loss harvested TLT and replaced it with VGLT. We rebalanced again on July 20, 2023 based on the value of $9,038 on July 19, 2023. This involved selling $119 GLDM and $403 VTI, and buying $143 PDBC, $21 VGIT and $357 VGLT. We rebalanced again on July 22, 2024, which involved selling $394 VTI and $92 GLDM and buying $73 PDBC, $39 VGIT and $379 VGLT.
Current Status: We distributed $30 from cash for July 2024 and have distributed $1532 total since inception ($64 GLDM, $36 TLT, $33 VGIT, $335 VTI, $192 PDBC and $899 cash) and $209 YTD. Here it is as of July 19, 2024. It was down about 1.14% for the week and is up 4.99% YTD. It is up 6.59% since inception in July 2020. For 2023, it was up 10.42% and we distributed $349.
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/VGLT), 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 and a backtest by asset class with a 5% annualized distribution taken monthly.
Portfolio Policies: We will re-balance this portfolio annually. We will be distributing 5% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 240 and distributing 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.
We rebalanced this portfolio on July 21, 2021, to its original allocations based on its value of $11,429 on July 20, 2021. This involved selling $720 VIOV and $395 VTI and buying $485 TLT, $325 GLDM and $300 SHY. We rebalanced again on July 22, 2022 based on the balance of $9,955 on July 21, 2022. This involved selling $47 GLDM, $116 SHY and $88 VIOV, and buying $21 VTI and $245 TLT. On December 21, 2022, we tax-loss harvested TLT and replaced it with VGLT. We rebalanced again on July 20, 2023 based on the value of $10,073 on July 19, 2023. This involved selling $116 GLDM, $9 VIOV and $257 VTI, and buying $56 SHY and $248 VGLT. We rebalanced again on July 22, 2024, which involved selling $200 VTI and $197 GLDM, and buying $117 SHY, $256 VGLT and $14 VIOV.
Current Status: We distributed $43 from cash for July 2024 and have distributed $2074 total since inception ($466 GLDM, $582 VIOV, $180 VTI, $48 TLT, $166 SHY and $638 cash) and $296 YTD. Here it is as of July 19, 2024. It was down about 0.16% for the week and is up 6.52% YTD. It is up 28.38% since inception in July 2020. For 2023, it was up 12.41% and we distributed $486.
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. 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 and a backtest by asset class with a 5% annualized distribution taken monthly.
Portfolio Policies: We will re-balance this portfolio annually. We will be distributing 5% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 240 and distributing 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.
We rebalanced this portfolio on July 21, 2021, to its original allocations based on its value of $11,485 on July 20, 2021. This involved selling $760 VIOV, $285 VUG, $105 USMV and $225 REET, and buying $635 TLT and $235 GLDM. We rebalanced again on July 22, 2022 based on the balance of $9,753 on July 21, 2022. This involved selling $182 GLDM, $24 REET, $170 USMV and $156 VIOV, and buying $17 VUG and $210 TLT. We rebalanced again on July 20, 2023 based on the value of $9,776 on July 19, 2023. This involved selling $230 GLDM, $54 USMV, $98 VIOV and $272 VTI, and buying $41 REET and $306 VGLT. We rebalanced again on July 22, 2024, which involved selling $291 VUG, $129 USMV and $252 GLDM, and buying $15 VIOV, $333 VGLT, and $24 REET.
Current Status: We distributed $42 from cash for July 2024 and have distributed $2039 from cash since inception and $287 YTD. Here it is as of July 19, 2024. It was down about 0.56% for the week and is up about 7.02% for the year. It is up 25.26% since inception in July 2020. For 2023, it was up 14.18% and we distributed $467.
The Risk Parity Ultimate
What Is It: The Risk Parity Ultimate is a diverse portfolio that is designed for medium and long-term needs. It was originally comprised of 12 different funds in six different asset classes: 50% stock and REIT funds (split into 12.5% VUG, 12.5% VIOV, 10% REET, 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), and 2.5% in a stock market volatility tracking fund (VXX). On July 21, 2021 it was rebalanced and modified to include even more diverse holdings. For the next year it was comprised of 45% stock and REIT funds (12.5% VUG, 12.5% VIOV, 5% USMV, 5% KBA, 5% UPRO and 5% REET); 20% long-term treasury bonds (15% TLT/VGLT and 5% TMF); 15% gold (GLDM), 10% preferred shares (PFF), 5% commodities (COM), 3% volatility tracking (VIXY) and 2% crypto-assets (1% BITW and 1% BITQ). On July 22, 2022 it was rebalanced and modified slightly again. Since then it has been comprised of 45% stock and REIT funds (12.5% VUG, 12.5% VIOV, 5% USMV, 5% KBA, 5% UPRO and 5% REET); 20% long-term treasury bonds (15% TLT and 5% TMF); 15% gold (GLDM), 10% managed futures and commodities (5% COM and 5% DBMF), 5% preferred shares (PFF), 3% volatility tracking (VIXM) and 2% crypto-assets (1% GBTC and 1% ETHE). On July 2023 it was rebalanced and modified slightly again. Since then it has been comprised of 45% stock and REIT funds (15% VIOV, 10% VUG, 5% USMV, 5% UPRO, 5% REET and 5% KBA; 25% treasury bonds and preferreds (15% VGLT, 5% TMF and 5% PFF); 15% gold (GLDM); 10% managed futures and commodities (5% COM and 5% DBMF); and 5% other alternatives (3% BTAL, 1% BTC and 1% ETH). The crypto assets are now held in a separate account. On July 22, 2024, we rebalanced and made additional slight modifications. Since then it has been comprised of 45% stock and REIT funds (15% VIOV, 10% VUG, 5% USMV, 5% UPRO, 5% REET and 5% KBA; 25% treasury bonds and preferreds (15% VGLT, 5% TMF and 5% PFFV); 15% gold (GLDM); 10% managed futures (DBMF); and 5% other alternatives (3% BTAL, 1% BTC and 1% ETH).
Portfolio Policies: We will re-balance this portfolio annually. We will be distributing 6% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 200 and distributing 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.
We rebalanced this portfolio of July 21, 2021, to its revised allocations based on its value of $11,381 on July 20, 2021. This involved selling $205 VUG, $325 VIOV, $195 USMV, $763 SPLV, $421 EDV, $260 PFF, $805 REET and $32 VXX, and buying $565 KBA, $350 TLT, $215 TMF, $755 GLDM, $565 COM, $340 VIXY, $110 BITQ and $110 BITW. We rebalanced again on July 22, 2022 to its revised allocations based on the balance of $9,159 on July 21, 2022. This involved selling $43 BITQ, $38 BITW, $67 COM, $142 GLDM, $524 PFF, $40 REET, $87 USMV, $143 VIOV, and $214 VIXY, and buying $91 GBTC, $96 ETHE, $33 KBA, $456 DBMF, $40 TLT, $204 TMF, $118 UPRO, and $273 VIXM. On December 21, 2022, we tax-loss harvested TLT and replaced it with VGLT. We rebalanced again on July 20, 2023, to its revised allocations based on the value of $8,840 on July 19, 2023. This involved selling $10 COM, $94 ETHE, $120 GBTC, $119 GLDM, $129 UPRO, $35 USMV, $160 VIXM and $494 VUG, and buying $80 DBMF, $88 BTC, $88 ETH, $139 KBA, $19 PFF, $173 TMF, $113 VGLT, $186 VIOV and $264 BTAL. We rebalanced again on July 22, 2024 based on a value of $9381 on July 21, 2024. This involved selling $174 VUG, $37 USMV, $208 UPRO, $108 GLDM, $2 BTAL, $20 BTC, and $33 ETH, and buying $72 VIOV, $187 VGLT, $215 TMF, $18 REET, $12 PFFV, $49 KBA, along with incorporating COM into DBMF and adding $37 to that.
Current Status: We distributed $38 from BTC for July 2024 and have distributed $2248 total since inception ($359 GLDM, $507 VIOV, $108 VUG, $116 UPRO, $49 COM, $41 DBMF, $75 BTC, $38 ETH and $955 cash) and $261 YTD. Here it is as of July 19, 2024 -- there is now a separate account for crypto assets and the real combined total is $9,381. It was down about 0.58% for the week and is up 9.89% YTD. It is up 17.78% since inception in July 2020. For 2023, it was up 13.04% and we distributed $491. Note that the graph below does not include the separate crypto account.
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 and a backtest with an 8% annualized distribution taken monthly.
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 distributing 8% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 150 and distributing 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.
Rebalancings to Date: Rebalancing was triggered mid-January and mid-July 2021 when UPRO exceeded its target allocation by over 7.5%, in mid-April and mid-November 2022 when TMF went below its target allocation by over 7.5%. Accordingly, on January 18, 2021, we sold $975 UPRO and bought $917 TMF. On July 21, 2021, we sold $865 UPRO and bought $450 TMF, $125 PFF and $300 GLDM. On April 18, 2022, we sold $155 UPRO, $186 PFF and $599 GLDM and bought $941 TMF. On November 16, 2022, we sold $339 GLDM and $286 PFF and bought $500 TMF and $150 UPRO. On October 16, 2023 we sold $238 GLDM, $21 PFF and $332 UPRO, and bought $524 TMF. On June 17, 2024 we sold $627 UPRO and bought $117 GLDM, $303 PFF, and $179 TMF.
Current Status: We distributed $37 from cash for July 2024 and have distributed $2435 total since inception ($184 TMF, $1035 UPRO, $242 PFF, $210 GLDM and $804 cash) and $251 YTD. Here it is as of July 19, 2024. It was down about 2.71% for the week and is up 8.80% YTD. It is down about 0.29% since inception in July 2020. For 2023, it was up 20.24% and we distributed $397.
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 and a backtest with an 8% annualized distribution taken monthly.
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 distributing 8% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 150 and distributing 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.
Rebalancings and Other Actions to Date: Rebalancing was triggered mid-November 2020 and mid-March 2021 when UPRO exceeded its target allocation by over 7.5%, and in mid-April and mid-November 2022 when TMF went below its target allocation by over 7.5%. Accordingly, on November 16, 2020 we sold $794 UPRO and bought $694 TMF and $63 VGIT, leaving $37 additional cash for the next distribution. On March 16, 2021 we sold $1143 UPRO and bought $1110 TMF, leaving $33 for the next distribution. On April 18, 2022 we sold $126 PFF, $33 VGIT and $615 UPRO and bought $776 TMF. On November 16, 2022 we sold $290 VGIT and $310 PFF and bought $100 UPRO and $500 TMF. On August 16, 2023, we sold $468 UPRO and $15 VGIT, and bought $522 TMF and $44 PFF. On February 16, 2024, we sold $531 UPRO and bought $24 PFF, $379 TMF and $84 VGIT. On May 31, 2022, the balance had dropped below 80% of the starting value and so we reduced the monthly distributions to 6% annualized.
Current Status: We distributed $33 from UPRO for July 2024 and have distributed $2424 since inception ($135 TMF, $1270 UPRO, $134 PFF, $173 VGIT and $611 cash) and $189 YTD. Here it is as of July 19, 2024. It was down about 3.44% for the week and is up 7.37% for the year. It is down 11.95% since inception in July 2020. For 2023, it was up 18.37% and we distributed $365.
The Levered Golden Ratio
What Is It: The Levered Golden Ratio is an aggressive portfolio that is designed for accumulation and long-term needs. Similar to the original Golden Ratio portfolio, 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 seven funds in the following nominal proportions: 35% NTSX; 10% TNA; 10% TMF; 25% GLDM; 15% O; 3% VIXM; and 2% GBTC (formerly 1% BITQ and 1% BITW). The VIXM and GBTC were replaced with 5% KMLM on September 18, 2023. The first three funds are leveraged. When the funds are broken out into asset classes, the portfolio is 61% stocks (equivalent to 31% SPY and 30% IWM); 34.2% long-term treasury bonds (equivalent to TLT); 25% gold (GLDM); 15% REITs (O); 8.4% intermediate treasuries (equivalent to VGIT); 8.4% short-term treasuries (equivalent to SHY); and 5% other assets (now managed futures for this sample portfolio). The leverage in this portfolio is 157.5/100 (roughly the golden ratio). Here is a correlation matrix of the most similar assets available and a backtest with a 7% annualized distribution taken monthly.
Portfolio Policies: We will re-balance this portfolio whenever there is a nominal 5% deviation from the nominal allocations in any fund at mid-month. We will be distributing 7% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 170 and distributing 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% until it returns to its starting value. We will sell a portion of the most productive fund as necessary to support the withdrawals.
Rebalancings to Date: Rebalancing was triggered mid-May 2022 when TNA went below its target allocation by over 5%. Accordingly, on May 16, 2022 we sold $375 GLDM, $92 NTSX, $291 O (including ONL spinoff) and $55 VIXM; tax-loss harvested $36 BITQ and $35 BITW; and bought $332 TMF, $400 TNA and $160 GBTC, leaving $43 cash for the next distribution. Rebalancing was triggered again on September 15, 2023 when TMF went below its target allocation of 5%. Accordingly, on September 18, 2023 we will sell $352 NTSX and $273 GLDM, and will buy $99 O, $346 TMF, $82 TNA and $345 KMLM, leaving $38 for the next distribution. We are liquidating the positions in VIXM ($109) and GBTC ($154) in favor of KMLM.
Current Status: We distributed $32 from cash for July 2024 and have distributed $1383 total since inception ($327 NTSX, $60 TMF, $81 TNA, $92 O, $348 GLDM, $78 VIXM and $363 cash) and $216 YTD. Here it is as of July 19, 2024. It was down about 0.15% for the week and is up 8.55% YTD. It is down about 6.06% since inception on July 1, 2021. For 2023, it was up 13.04% and we distributed $357.
O.P.T.R.A.
What Is It: The O.P.T.R.A. portfolio is an aggressive portfolio that is designed to take advantage of the most recent developments in and availability of diversified ETFs over the past 10-15 years. It is comprised of five funds in the following nominal proportions: 16% UPRO; 24% AVGV; 24% GOVZ; 18% GLDM; and 18% DBMF. Each of these funds is relatively new. The fund UPRO is a three times leveraged fund based on the S&P 500. The fund AVGV is an Avantis fund of funds that contains all of their world-wide value-tilted funds and is based on sophisticated factor-based algorithms. The fund GOVZ is a low-cost U.S. treasury strips fund with an average duration of approximately 25 years. The fund GLDM is a low-cost gold fund and the fund DBMF is a fund for managed futures that replicates a SocGen Index. Most of these funds have only been available for less than 10 years in their current forms.
When the funds are broken out into asset classes and accounting for the effective leverage implied by the holdings in UPRO and GOVZ, the portfolio is expected to model 72% stocks (equivalent to 48% S&P 500 and 24% global value); 36% long-term treasury bonds (equivalent to TLT); and 36% in alternatives represented by GLDM (gold) and DBMF (managed futures). This is effectively a ratio of 50% stocks to 25% bonds to 25% alternatives with leverage of 144/100. Here is a correlation of the most similar assets available and a backtest from of similar assets and leverage since 1994.
Portfolio Policies: We will re-balance this portfolio on an experimental basis, which will be whenever the U.S. Federal Reserve reverses its most recent course from either raising its Fed Funds rate or lowering it. This is expected to result in very infrequent rebalancing activity but that will be timed with overall macro-economic developments. We will be distributing 6% annualized from this portfolio each month, which in practice will involve dividing the ending monthly balance by 200 and distributing 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% until it returns to its starting value. We will sell a portion of the most productive fund as necessary to support the withdrawals.
Rebalancings to Date: This portfolio was launched on July 1, 2024 and there have been no rebalancings to date.
Current Status: Here it is as of July 19, 2024. We have not made any distributions and will make the first one in August 2024. It was down about 1.86% for the week and is up 1.74% YTD. It is up 1.74% since inception on July 1, 2024.
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