Portfolio Charts

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Mister Imperceptible
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Re: Portfolio Charts

Post by Mister Imperceptible » Tue Jul 17, 2018 9:57 am

I think the fairer comparison for commodities is to gold and REITs, because you would be including them in your portfolio as a hedge against crisis. You want something anti-correlated that will go up when stocks and bonds go down.

Seppia
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Re: Portfolio Charts

Post by Seppia » Tue Jul 17, 2018 5:04 pm

The issue I personally see in owning commodities is the same that MI sees.
Wood, look back in the investment trade log thread, I have done a mini dive into it and found it's not worth it to me.
It Sounds good in practice but the available commodity instruments are suboptimal for the task because of a number of issues (contango/decay/etc).
Buy some farmableland if you want commodities.

Also, I think you need to look at the specific situation you are in. You are european, and the Bond benchmark here is Germany, that can borrow money for 2 years in exchange for... a negative interest?
Would you lend money to someone only to get back LESS money two years later?
Or for a 0.5% interest over 10 years?

Reits almost don't exist in Europe, so it's messy to invest in them here.
I would pass.

Gold: I personally think (but YMMV) that gold's number 1 most interesting feature is its ability to save people's asses in case of disasters/wars/etc.
owning gold via an ETF will not save your ass in that situation.
So I personally would either acquire a small quantity of physical gold and hide it somewhere, or not own it at all.
This is personal obviously

Bottom line:
If you are worried about imminent crashes, build your cash stash
If you are worried about imminent disaster / unrest, buy some physical gold and start prepping

I'm doing a bit of the first, stated thinking about the second but not acting on it at the moment
Last edited by Seppia on Wed Jul 18, 2018 1:05 am, edited 1 time in total.

wolf
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Re: Portfolio Charts

Post by wolf » Tue Jul 17, 2018 11:54 pm

Seppia wrote:
Tue Jul 17, 2018 5:04 pm
Wolf, look back in the investment trade log thread, I have done a mini dive into it and found it's not worth it to me.
I guess you meant wood, although I am also interested in commodities. 😉

Seppia
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Re: Portfolio Charts

Post by Seppia » Wed Jul 18, 2018 1:06 am

Edited, I'm so sorry for the mix up. It was late at night :)
I told myself while writing "wait I thought he wasn't from Norway" but stupidly kept on going LOL

slowtraveler
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Re: Portfolio Charts

Post by slowtraveler » Wed Jul 18, 2018 2:47 am

@Wood, what you're proposing is not the golden butterfly as both percents and asset classes differ, albeit with some overlap.

You could try leaving the real estate as a separate portfolio and having the golden butterfly for the liquid portion.

VUSTX is a long term treasury fund. There should be others.

I personally use a mix of mostly Wellesley and dividend stocks chosen with the Single Best Investment book guidelines. Wellesley has done well. The stocks are new to me as I recently switched from indexing.

I would also bail on the commodities unless you really know what you're doing. I believe Jacob held some commodities for some time years ago and I don't believe it often pays off.

I'd keep the real estate if it's treating you well and you enjoy it.

I personally feel hesitant about the golden butterfly due to lack of international diversification and I'd rather focus on cash flow from stocks/ fixed income.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Thu Jul 19, 2018 10:48 am

wood wrote:
Tue Jul 17, 2018 7:24 am
Any critical comments to the above mentioned allocation are most welcome.
Lots of good questions. I'm not sure I have all the answers, but here's a first pass:

Bonds: generally speaking, if you're looking for long-term bonds you can use the longest-term available in your country. If you want to model them on Portfolio Charts but only have 10-year bonds available, then maybe you can blend intermediate and long bonds to get the correct target average maturity.

Real estate: Personally I think adjusting your mortgage annually is too much work. Factor in the transaction costs and shifting interest rates, and I'm also not sure it will be worth it. Investing in individual properties is certainly a reasonable strategy if you know what you're doing.

Gold vs. Commodities: I do think they play a similar role in a portfolio in terms of diversifying away from purely financial assets. I personally wouldn't mess with individual commodities futures, but a good index fund is fine. That said, between the two assets I admit I have a personal preference for gold and value it both for its durability and for how it interacts with stocks.

Cash: It's perhaps the single most underrated asset out there. Yes, it's similar to bonds. But the short duration also makes properly invested cash an excellent inflation hedge.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Thu Jul 19, 2018 10:56 am

classical_Liberal wrote:
Sun Jun 24, 2018 11:00 pm
I'm not sure how all your data plays out on the inside, but I would imagine if you are already calculating annual portfolio values and annual CAGR, it wouldn't be too difficult to add some ifs? Then again I'm no programmer!
The way the spreadsheets are structured, it will take a bit of effort to enable that type of feature. But honestly I've been wanting to do that for a while to also model a few different rebalancing alternatives like momentum and trading bands. With the right foundation, adding more conditional functionality will start to make more sense. Maybe it's time to finally revisit that.

herp
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Re: Portfolio Charts

Post by herp » Thu Jul 19, 2018 11:06 am

wood wrote:
Tue Jul 17, 2018 7:24 am
Bonds/treasuries
I'm struggling to find a sensible way to purchase long term bonds. I could purchase domestic long term bonds but I can't find 30-year bonds. Only 10. Is that still long term? The other "low-transaction-cost" option is buying shares in bond funds but most of these offer a mix of short, Intermediate and long term bonds and they have a mix of government and corporate bonds. Some of these funds are domestic, others invest internationally. I also found a fund investing in international government bonds. Most of such funds require obscene amounts of capital if you want to invest, but I found one suited for small investors. Still, its a mix of short, medium and long term bonds.
There's no real issue with a bond fund holding a mix of short, medium, and long term bonds. In fact, that's generally a good idea as you're diversifying across different durations and thus are minimizing risk with respect to interest rate swings at particular parts of the yield curve (although in many cases this may be more of an academic exercise).

Bond funds that target a specific duration will typically hold bonds of all durations, but the weightings will be such that the effective duration of the fund will be skewed towards their target. Eg. a fund may choose to hold 25% short, 25% medium, and 50% long term bonds, shifting the effective duration upwards compared to your vanilla intermediate term bond fund.

FWIW, as a dane I find that I've been better off using "high yield" savings account these past years (although the actual yield is very low, at the moment even below 1%). The interest rate has been better than danish government bonds going out to even 10 year duration, and you have no risk if you stay below the deposit insurance limit. That's a case of the smalltime investor having their cake and eating it too ;) I'm not sure how comparable this is to the environment in Norway, but it's worth considering.

wood
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Re: Portfolio Charts

Post by wood » Fri Jul 20, 2018 1:44 am

slowtraveler wrote:
Wed Jul 18, 2018 2:47 am
@Wood, what you're proposing is not the golden butterfly as both percents and asset classes differ, albeit with some overlap.
(...)
I personally feel hesitant about the golden butterfly due to lack of international diversification and I'd rather focus on cash flow from stocks/ fixed income.
You are right. I believe what I'm seeking is some kind of low-volatile portfolio resembling the golden butterfly, permanent portfolio or something similar.

Like you, I'd also want more international diversification. I think you can get some of it from owning domestic large cap.

wood
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Re: Portfolio Charts

Post by wood » Fri Jul 20, 2018 1:58 am

Tyler9000 wrote:
Thu Jul 19, 2018 10:48 am
(...)
Thanks for sharing your thoughts!

Do index funds for commodities exist? I thought the only option was buying tracker certificates. Maybe they're the same? One difference I've found is that tracker certificates give me direct currency exposure (USD or EUR) and have a higher annual fee than the typical index fund for stocks.

wood
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Re: Portfolio Charts

Post by wood » Fri Jul 20, 2018 2:03 am

herp wrote:
Thu Jul 19, 2018 11:06 am
FWIW, as a dane I find that I've been better off using "high yield" savings account these past years (although the actual yield is very low, at the moment even below 1%). The interest rate has been better than danish government bonds going out to even 10 year duration, and you have no risk if you stay below the deposit insurance limit. That's a case of the smalltime investor having their cake and eating it too ;) I'm not sure how comparable this is to the environment in Norway, but it's worth considering.
Yes it's similar here. The 10-year bond yields about 1.8% I think, whereas savings accounts yield 2%. But bonds fluctuate in value just like stocks, so with bonds in your portfolio you expose yourself to the upside of buying low and selling high. This is what makes it hard for me to choose :lol:

Mister Imperceptible
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Re: Portfolio Charts

Post by Mister Imperceptible » Fri Jul 20, 2018 8:44 am

If bonds are paying 2% there’s not much room for upside and lots of room for downside.

herp
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Re: Portfolio Charts

Post by herp » Fri Jul 20, 2018 9:08 am

wood wrote:
Fri Jul 20, 2018 2:03 am
herp wrote:
Thu Jul 19, 2018 11:06 am
FWIW, as a dane I find that I've been better off using "high yield" savings account these past years (although the actual yield is very low, at the moment even below 1%). The interest rate has been better than danish government bonds going out to even 10 year duration, and you have no risk if you stay below the deposit insurance limit. That's a case of the smalltime investor having their cake and eating it too ;) I'm not sure how comparable this is to the environment in Norway, but it's worth considering.
Yes it's similar here. The 10-year bond yields about 1.8% I think, whereas savings accounts yield 2%. But bonds fluctuate in value just like stocks, so with bonds in your portfolio you expose yourself to the upside of buying low and selling high. This is what makes it hard for me to choose :lol:
I think of the long term return of bonds, and in that scenario the current yield is a good indicator of where the return will be over the next, say, decade or so.

With a government insured savings account paying more than a bond, there's no way I'd invest in the bond.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Fri Jul 20, 2018 10:01 am

wood wrote:
Fri Jul 20, 2018 1:58 am
Do index funds for commodities exist?
Absolutely. For reference, the commodities data on the site tracks the S&P GSCI index. Commodities index funds are more scarce than for other assets, but one example is GSG.
Mister Imperceptible wrote:
Fri Jul 20, 2018 8:44 am
If bonds are paying 2% there’s not much room for upside and lots of room for downside.
True, but the relationship between interest rates and price movement is non-linear. Small moves at lower rates have a larger effect than similar moves at higher rates. So even at low rates, bonds have more opportunity for gains than you may think.

Mister Imperceptible
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Re: Portfolio Charts

Post by Mister Imperceptible » Fri Jul 20, 2018 12:20 pm

@Tyler9k

I am familiar with the concept of bond convexity.

I also think it depends on whether you are accumulating or withdrawing. If you are still accumulating, even if your bonds appreciate, instead of realizing capital gains by selling bonds, you would merely buy fewer bonds the next time you balance the portfolio, and hence lose the advantage. Maybe it feels different for someone on top, where the incremental additional yield makes a tangible difference, but bonds look unattractive for we lowly accumulators.

And as I’ve never addressed a message to you directly, thank you for all that you have done here!

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Fri Jul 20, 2018 12:39 pm

You're welcome!

Personally, I always liked bonds even with their historically low rates as an accumulator. The low uncertainty of the resulting diversified portfolio as a whole made it a lot easier to project my FIRE date without stressing about sequence of returns, and it helped me focus my energy on maximizing my savings rate rather than wringing more theoretical yield out of my investments. But I agree that everyone is different and have zero problem with others taking a different approach.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Tue Aug 14, 2018 10:44 pm

FYI -- I just updated all of the calculators on the site with a fancy new interface and the ability to easily translate portfolio ideas between countries. I know there are a good number of international investors here on the forum, so feel free to let me know if there's something I can change or add to make it as useful as possible.

https://portfoliocharts.com/2018/08/14/ ... ever-done/

BRUTE
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Re: Portfolio Charts

Post by BRUTE » Wed Aug 15, 2018 11:39 pm

very cool. feels faster too, but maybe brute just got lucky.

is Tyler9000 planning on keeping these in Excel sheets, or is he thinking about building some kind of application suite out of them? it would be cool to enter a list of favorite portfolios once and then display all the various calculators/calculations/projections on demand.

Tyler9000
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Re: Portfolio Charts

Post by Tyler9000 » Thu Aug 16, 2018 12:03 am

You probably just got lucky, but I did simplify some of the calculations behind the scenes so I imagine they're also running more efficiently.

I'm sorta torn. On the one hand, I understand that hard coding the calculators would open up lots more design opportunities including the types of features you mention. But on the other hand, that would require me to relinquish some amount of control as I can work Excel in my sleep but would likely need help to program in anything else. I find the level of design autonomy I have now to be empowering, and I admit I struggle with the idea of giving that up. I guess option C would be to learn to code myself, but that seems like a big commitment as the last programming class I took was so long ago (does Fortran still exist? :lol:) and I feel like a software dinosaur. I know I've asked before, but are there any relevant classes or tutorials you'd recommend?

BRUTE
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Re: Portfolio Charts

Post by BRUTE » Thu Aug 16, 2018 1:38 am

for this type of stuff, React (for snappy applications) + D3 (visualization/graph library).
there are tons of tutorials out there, but brute doesn't know which ones are better than others.

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