Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

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Topic Author
rerombo
Posts: 15
Joined: Wed Sep 16, 2020 3:47 am

Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by rerombo »

Hello everybody,

I'm interested in implementing the Golden butterfly portfolio for my own savings and the Permanent portfolio for my wife's.
For simplicity and to reduce brokerage fees I am looking into whether I could replace the short-term treasuries and long-term treasuries with intermediate (7-10 years) in both portfolios.

I've backtested those configurations on portfolio charts and portfolio visualizers and I see I'm getting the same returns and slighty higher volatility (.1/.2%).

It's a compromise I am willing to make for the sake of simplicity and reduction of brokerage fees, but my question is: am I missing something here?

I know I shouldn't mess with those configuration, but will it really change that much?

Thanks a lot for your help!
rich126
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Joined: Thu Mar 01, 2018 4:56 pm

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by rich126 »

I thought the original PP was 25% in gold, stocks, cash and LT treasuries. I guess you are using ST treasuries instead of cash?
Topic Author
rerombo
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Joined: Wed Sep 16, 2020 3:47 am

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by rerombo »

You’re right. For the golden butterfly I am thinking of replacing LT and ST with IT and for the PP I would replace LT and cash with IT.
GaryA505
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Location: New Mexico

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by GaryA505 »

rerombo wrote: Wed Sep 16, 2020 3:27 pm You’re right. For the golden butterfly I am thinking of replacing LT and ST with IT and for the PP I would replace LT and cash with IT.
Doing so may defeat the workings of the Permanent Portfolio and possibly the Golden Butterfly as well. The purposes of LTT and cash/STT in the Permanent Portfolio are distinct. Don't take my word for it though. If you read up on how the PP works I think you'll see what I mean.
DarkHelmetII
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Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by DarkHelmetII »

GaryA505 wrote: Thu Sep 17, 2020 12:44 am
rerombo wrote: Wed Sep 16, 2020 3:27 pm You’re right. For the golden butterfly I am thinking of replacing LT and ST with IT and for the PP I would replace LT and cash with IT.
Doing so may defeat the workings of the Permanent Portfolio and possibly the Golden Butterfly as well. The purposes of LTT and cash/STT in the Permanent Portfolio are distinct. Don't take my word for it though. If you read up on how the PP works I think you'll see what I mean.
+1 defeats the point. Specifically LT treasuries supposed to give rise in $$ during deflation.
Topic Author
rerombo
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Joined: Wed Sep 16, 2020 3:47 am

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by rerombo »

Thanks for your answers. I see how it applies to the permanent portfolio, so I’ll stick with LTT and cash.

Do you think this is true also for the golden butterfly?
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tre3sori
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Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by tre3sori »

You may want to read this blog post about bond convexity from Tyler9000 himself, the inventor of the Golden Butterfly Portfolio :
https://portfoliocharts.com/2019/05/27/ ... convexity/
Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep by him in reserve. Talmud | 33% Real Estate, 42% VGWL, 15% VAGE, 7% 8PSG, 3% Cash
Topic Author
rerombo
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Joined: Wed Sep 16, 2020 3:47 am

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Post by rerombo »

Thanks a lot for sharing this, I'm very new to investing and convexity is a very interesting topic I didn't know about.
But isn't it more of a reason to generally hold bonds in one's portfolio, than a reason to choose LTT and STT over ITT?
I apologize if it is dumb question.
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