Common wisdom is that Intermediate Term (IT) treasuries are better for diversifying stocks than Short Term (ST) treasuries. The resoning provided is that, when markets crash, the Fed lowers itnerest rates and ITs go up in value. However, I ran Monte Carlo simulations and it looks like (1) there isn't much of a difference, and (2) ST actually look better in most cases.

**Model 1:**No contribution or withdrawal, 20 yr simulation, historical returns, 20yr blocks (link vs link)

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```
60% stock + 40% ST | 60% stock + 40% IT
-------------------------------------------
Return (10th percentile) 6.67% * | 6.57%
Return (50th percentile) 9.59% * | 9.50%
Return (90th percentile) 12.22% | 12.81% *
-----------------------------------------------------------------------
Maximum Drawdown (10th) -29.75% | -27.98% *
Maximum Drawdown (50th) -22.04% * | -27.28%
Maximum Drawdown (90th) -18.73% * | -18.97%
```

Next I will test other scenarios.

**Model 2:**No contribution or withdrawal, 20 yr simulation,

**statistical returns**(link vs link)

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```
60% stock + 40% ST | 60% stock + 40% IT
-------------------------------------------
Return (10th percentile) 6.52% * | 6.39%
Return (50th percentile) 9.39% * | 9.36%
Return (90th percentile) 12.30% | 12.38% *
-----------------------------------------------------------------------
Maximum Drawdown (10th) -20.86% * | -22.80%
Maximum Drawdown (50th) -14.70% * | -15.95%
Maximum Drawdown (90th) -10.54% * | -11.48%
```

**Model 3:**

**Fixed inflation-adjusted contributions**, 20 yr simulation, statistical returns (link vs link)

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```
60% stock + 40% ST | 60% stock + 40% IT
-------------------------------------------
Return (10th percentile) 6.50% * | 6.36%
Return (50th percentile) 9.35% * | 9.34%
Return (90th percentile) 12.32% | 12.53% *
-----------------------------------------------------------------------
Maximum Drawdown (10th) -15.98% * | -17.46%
Maximum Drawdown (50th) -11.96% * | -12.92%
Maximum Drawdown (90th) -9.13% * | -9.79%
```

**Model 4:**

**Fixed 4% yearly withdrawal**, 20 yr simulation, statistical returns (link vs link)

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```
60% stock + 40% ST | 60% stock + 40% IT
-------------------------------------------
Return (10th percentile) 6.48% * | 6.32%
Return (50th percentile) 9.34% | 9.39% *
Return (90th percentile) 12.39% | 12.45% *
-----------------------------------------------------------------------
Maximum Drawdown (10th) -30.81% * | -32.94%
Maximum Drawdown (50th) -20.93% * | -22.18%
Maximum Drawdown (90th) -14.79% * | -15.63%
```

**Model 5:**No contribution or withdrawal, 20 yr simulation, statistical returns,

**worst 10yrs first**(link vs link)

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```
60% stock + 40% ST | 60% stock + 40% IT
-------------------------------------------
Return (10th percentile) 6.48% * | 6.42%
Return (50th percentile) 9.33% * | 9.32%
Return (90th percentile) 12.35% | 12.43% *
-----------------------------------------------------------------------
Maximum Drawdown (10th) -31.41% * | -34.43%
Maximum Drawdown (50th) -19.89% * | -22.10%
Maximum Drawdown (90th) -12.17% * | -13.17%
```

- The difference between using short-term and intermediate-term treasuries is very small.
- Most of the time you would have been happier with short-term treasuries. Especially in bad times.