RECENT PERFORMANCE

The charts below track the performance of a 4x25 Permanent Portfolio using 15/35 rebalancing bands as prescribed by Harry Browne. If you are new to the Permanent Portfolio concept you can learn more by clicking on the "Articles" tab above.

34 comments:

  1. No problem Kurt. Thanks for the feedback.

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  2. Question if you please:

    What would the returns look like if one rebalanced every quarter?

    Thanks
    JB

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  3. I don't think rebalancing on that frequent of a basis will not have a material impact on returns.

    Please see this post that I made: http://www.stableinvesting.com/2012/10/october-16-2012-daily-long-run-graphs.html

    Although I didn't include a quarterly rebalancing, you can see that annual rebalancing and 15/35 rebalancing bands have nearly identical performance.

    Generally if you wait longer to rebalance, it introduces a slight momentum effect to the portfolio because strong performers are held with a higher weighting for longer. Very short rebalancing bands (quarterly) would have very little of that momentum effect. You might make the argument that quarterly rebalancing would slightly reduce risk because you would be close to the relatively neutral 4 way split more often.

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  4. Ryan, Do you have a chart that can show the effect of withdrawing 3% or 4% of the cash portion each year while rebalancing at the 15% and 35% bands? Just wondered if this is sustainable for someone trying to live off their investments.

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  5. Thank you for this graph. I have been trying to get Google to do something like this for me and gave up, and I don't want to have to check/recheck my own stuff all the time. Now all I have to do is come here and see that the PP has essentially matched inflation so far this year with a real return of zero. That mirrors my own experience so glad to see you saved me some work.

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  6. Ryan,

    Have you ever run VTI,BIL,TLT,GLD (used in your graphs) through your Python script to determine the necessary % of each to achieve same weighted co-variance as the overall portfolio over a 3 or 5 year period? I'd be curious to know if this would result an equal % of each of the four.

    KJ

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    1. Hi KJ,

      The equal risk contribution formula (getting all asset classes to the same weighted covariance of the overall portfolio) doesn't make sense when folding T-Bills into the solution. Most risk parity portfolios reach a risk allocation, and the lever/delever it with cash afterwards (cash is negative leverage basically). So, when I run the script for 2005 - 2013 with TLT, GLD, and VTI, the equal risk contribution would have been 41% TLT, 23% GLD, and 36% VTI. The amount of cash you decide to add to this allocation is somewhat arbitrary, depending on how much you want to delever the portfolio... With all of this fancy number crunching it is really important to keep in mind that correlation coefficients are quite unstable and the negative correlation of Treasuries is a relic of the deflationary pressures experienced in the crisis. If our next crisis had an inflationary bias (perhaps an oil shock) than the equal risk contribution portfolio would probably involve more gold and less bonds. It's impossible to know going forward! I take my quantitative number crunching with enormous grains of salt and stick with equal weight personally :) It is still a great learning experience though!

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  7. Ryan,

    Last update for gold on YTD Performance appears to be 6/19. I would assume this is impacting the PP performance line as well.

    DH

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    1. Thanks for pointing that out. The axis was actually just not expanded enough to capture gold's drop, so the PP line was accurate. Everything should be normal now.

      Thanks,
      Ryan

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  8. seems like there is some type of error again - shoot, I like referring to this from time to time. Thanks.

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  9. Bro, do you know why it is displaying "All series on a given axis must be of the same data type" instead of the chart?

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    1. I think the inflation line was making the google doc less reliable. I removed the line which hopefully resolved it! It appears much more stable now

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  10. Ryan, This is my favorite place to check on the PP's daily performance. That constantly updated INTRADAY INTERPLAY chart is just such a great visual. Thank you!

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    1. Glad you like it anon! It's fun to watch the colored lines dance around, especially after you grasp the economics behind it

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  11. Ryan, One quick question. On the chart that shows "PP Performance Since Blog Inception", I don't see a green line for T-Bills. Is that because the return is so close to zero that the T-Bill line is hidden by the starting line, or are we really looking at a three-asset, cashless PP? Thanks.

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    1. The t-bill line is a very light green. The return has been approximately zero so it very closely hugs the x-axis.

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  12. Ah ha! I can see it if I zoom WAY in. Many thanks for the quick response!

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  13. What happened to the year to date performance? Appreciate the charts!

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  14. Great work. I like the addition of the % asset share. Can you draw the 35 % line also ?.I can hardly wait to rebalance the overvaulted Stocks and LT Bonds.

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  15. Can we please have the YTD performance chart back?

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  16. Yes, we want the YTD chart back!! Helps me to remember how important it is to stay diversified. Thanks!

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    1. Hi Anon,

      I was having issues with the YTD charts and now that they are gone I have figured that anything that isn't reflected in the longer term charts are immaterial in the grand scheme of things.

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  17. It strikes me that according to your "Assets % Share of Portfolio" chart, you wouldn't have had to rebalance over the last four years if you are using 15/35 bands. Also, is the "PP Performance Since Blog Inception" chart assuming no rebalances (as it appears to be)? Thanks.

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  18. Correct a PP started 4 years ago would have required no rebalancing. Both charts are based off the same model and a rebalancing event will be reflected in both when the 15/35 are breached.

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  19. Hi Ryan, It was my understanding that a re-balancing yearly even if the 15/35 bands were not breached was an appropriate and risk averse strategy. I'd like your thoughts.Thank you!

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  20. Hi Anon,

    Annual rebalancing vs. 15/35 bands results in very small performance differences in tax advantaged accounts. Either one is fine.

    However, for taxable accounts I think 15/35 has a stronger chance to outperform because it is more tax efficient because it normally involves fewer transactions (for a PP started 4 years with no new contributions you wouldn't have had to sell anything yet!)

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  21. Ah ha! A rebalance!

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  22. The chart is not up to date....

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  23. Hey Ryan, Thanks for adding that 3X33 line. This is still my favorite place to check up on PP performance.

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    1. Yeah lots of people run a cashless PP so I thought it would be helpful. Once I started viewing the PP from a risk parity perspective I realized the amount of cash is optional. Just depends on your risk tolerance.

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  24. Not only that, but I think a 3X33 allocation is also a fairer way of comparing the PP to, say, a standard 60/40 stock/bond portfolio in that neither one has a cash component. But in real life every portfolio needs SOME cash, right? With the 4X25, a big cash component is built in. A fairer comparison might be a 55/35/10 stock/bond/cash mix with a 30/30/30/10 stock/bond/gold/cash mix. Just my opinion, of course.

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