Page 1 of 1

Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Wed Sep 16, 2020 3:56 am
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!

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Wed Sep 16, 2020 12:43 pm
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?

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Wed Sep 16, 2020 3:27 pm
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.

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Thu Sep 17, 2020 12:44 am
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.

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Thu Sep 17, 2020 2:20 am
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.

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Thu Sep 17, 2020 7:49 am
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?

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Thu Sep 17, 2020 8:21 am
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/

Re: Intermediate Treasuries in Golden Butterfly and Permanent Portfolio

Posted: Thu Sep 17, 2020 10:43 am
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.