Is there any portoflio which can beat 90/10 ? [UK]

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Lonli-Lokli
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Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

Hi!

I am EU investor, but trying to first find an US version of portfolio which can beat 90/10 (VOO/VGLT) portfolio on long run.

Is there any topics of lazy portfolios?
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Re: Is there any portoflio which can beat 90/10 ?

Post by LadyGeek »

Welcome! What is your home country?

Yes, we have many lazy portfolio topics. Please see the wiki: Simple non-US portfolios

Also please see: Getting started for non-US investors

and: EU investing
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Re: Is there any portoflio which can beat 90/10 ?

Post by mega317 »

Lots of portfolios can. Which ones will is unknowable.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Re: Is there any portoflio which can beat 90/10 ?

Post by Marseille07 »

Mathematically, 95/5 or 100/0 would beat 90/10 provided the markets go up over time.

Is it worth increasing the risk from 90% to 100%? That's debatable, especially in retirement.
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Re: Is there any portoflio which can beat 90/10 ?

Post by Lonli-Lokli »

LadyGeek I am from UK

Thanks for pointing to nonUSA portfolios, but right now I am investigating only US portfolios - because I am not able to find backtest tool for UCITS ETFs.

So I am going to find US-portfolio which will be close as possible to 90/10 and make the same from UCITS low-cost equivalents.

Speaking of beating the portfolio - I've tested this 4 portfolios from https://www.bogleheads.org/wiki/Lazy_po ... _portfolio

Coffehouse
Coward's
Ideal Index
Yale University

and you see they are not close to SPY (of cource 90/10 will be little closer)
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by LadyGeek »

Thanks! I have added your home country to the thread's title.

We have several wiki articles of interest. See: Investing from the UK and Category:United Kingdom
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Lonli-Lokli
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

But my post is NOT related to my country, that's question for US investors actually.
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Re: Is there any portoflio which can beat 90/10 ?

Post by Tyler9000 »

Lonli-Lokli wrote: Tue Jun 21, 2022 1:07 pm LadyGeek I am from UK

Thanks for pointing to nonUSA portfolios, but right now I am investigating only US portfolios - because I am not able to find backtest tool for UCITS ETFs.

So I am going to find US-portfolio which will be close as possible to 90/10 and make the same from UCITS low-cost equivalents.
Try this:

https://portfoliocharts.com/portfolio/p ... XQA90QB10Z

Just copy the code it gives you and paste it into the black cell with the "Z". That will give you a list of portfolios with the various metrics translated to local UK funds, currency, and inflation. You may notice that some of the portfolios you're looking at are on the list, and I even pre-filled the 90/10 portfolio for comparison. Also note that you can make a similar chart of your own for other countries and portfolios by clicking "model a different portfolio."

Using this chart, you can sort the list by a bunch of different metrics. You may find that 90/10 is hard to beat in things like the average return but also very low on the list in other metrics that matter to you. Everything has a tradeoff.
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Re: Is there any portoflio which can beat 90/10 ?

Post by Lonli-Lokli »

Tyler9000 wrote: Tue Jun 21, 2022 1:59 pm
Try this:

https://portfoliocharts.com/portfolio/p ... XQA90QB10Z
Honestly speaking I do not think I fully understand everything on this website, but anyway it does not allow to compare this portfolios in dynamic - with contributions over time, which is like the real situation wheen you have initial pot, monthly contributions and yearly rebalancing - that's what US backtest tool give.
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Re: Is there any portoflio which can beat 90/10 ?

Post by Tyler9000 »

Lonli-Lokli wrote: Tue Jun 21, 2022 5:26 pm
Tyler9000 wrote: Tue Jun 21, 2022 1:59 pm
Try this:

https://portfoliocharts.com/portfolio/p ... XQA90QB10Z
Honestly speaking I do not think I fully understand everything on this website, but anyway it does not allow to compare this portfolios in dynamic - with contributions over time, which is like the real situation wheen you have initial pot, monthly contributions and yearly rebalancing - that's what US backtest tool give.
All of the tools on the site account for annual rebalancing. If you're interested in modeling regular contributions, try the Portfolio Growth and Savings Rates tools.

I admit the data is a lot to take in at first, but once you get the hang of it there's a good amount of information to work with for investors not only in the US but also abroad. Here are some general instructions to get you started. I also recommend browsing the Portfolios to get a feel for the charts and portfolio differences without fussing with the settings.

If you prefer other tools, that's totally cool. But if you have questions about Portfolio Charts feel free to ask. It's my hobby project, and I've spent a lot of time collecting data so that people can answer questions just like yours. :D
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by andrew99999 »

Lonli-Lokli wrote: Tue Jun 21, 2022 12:20 pm Hi!

I am EU investor, but trying to first find an US version of portfolio which can beat 90/10 (VOO/VGLT) portfolio on long run.

Is there any topics of lazy portfolios?
100/0 is higher
leverage increases it further
borrowing 10% of your 100% equities portfolio to invest in equities gives you a portfolio of 110/-10

Things to beware of with leverage:
• margin calls if borrowing against your shares. borrowing against a house should reduce this risk down to near zero
• borrowing costs reduce your return on the leveraged part, although 1) interest is tax-deductible in many countries, and 2) inflation eats away at the loan principal, so those two cancel out a lot of the borrowing costs
• rates can rise and put a strain on your cashflow
• need to mitigate risk of job loss and interst rate rises on the repayments with life insurance and cash buffer
• need to have the investing time horizon to tolerate the ups and downs
• need the emotional capacity to remain invested even when there are large market losses, which are then magnified with leverage
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

Thanks, but I am trying to diversificate on country basis (USA+World) and make a long investment, not play with margin
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by minimalistmarc »

Lonli-Lokli wrote: Wed Jun 22, 2022 1:34 am Thanks, but I am trying to diversificate on country basis (USA+World) and make a long investment, not play with margin
If you are a U.K. investor with a high willingness and ability to take risk then go for an all world index tracker 90 - 100%. If you go 100% USA then you are tilting to US shares which may or may not outperform in the long term.

I’m also U.K. and my portfolio > 1 mill is in vanguard all world (done in developed world for capital gains harvesting outside tax sheltered accounts)

For this strategy to work, you must never panic sell when markets are crashing, and always keep on buying. Many people think they can do it but when the times come they can’t, and make decisions which cause significant damage to their wealth.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

minimalistmarc wrote: Wed Jun 22, 2022 3:28 am
If you are a U.K. investor with a high willingness and ability to take risk then go for an all world index tracker 90 - 100%. If you go 100% USA then you are tilting to US shares which may or may not outperform in the long term.
I've tested different proportions for World+US but it still underpermorms 90/10
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by minimalistmarc »

Lonli-Lokli wrote: Wed Jun 22, 2022 3:46 am
minimalistmarc wrote: Wed Jun 22, 2022 3:28 am
If you are a U.K. investor with a high willingness and ability to take risk then go for an all world index tracker 90 - 100%. If you go 100% USA then you are tilting to US shares which may or may not outperform in the long term.
I've tested different proportions for World+US but it still underpermorms 90/10
Link
It may have underperformed (in the past) but that has no reflection on the future. Stick with the all world, don’t try and outsmart the markets
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

I understand that past profits do not guarantee future, but if they were failing before for decades I do not believe it will be better in future
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Tellurius »

The problem with overperformance is that it keeps becoming a larger and larger part of the overall world portfolio. Is the USA now at 50%, 60%? Will it continue to overperform and go to 80%?

Why not a World ETF?

Also note the effect of currency fluctuations in your results, since you live in GBP, I assume
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Valuethinker »

Lonli-Lokli wrote: Wed Jun 22, 2022 5:28 am I understand that past profits do not guarantee future, but if they were failing before for decades I do not believe it will be better in future
It's not a strong argument to make that

1. the US has always outperformed in the past AND
2. the market has not correctly priced that knowledge into future returns AND
3. markets are informationally efficient and tend to do better in pricing securities than any individual (not in receipt of private information) can do (hence the preference for low cost index funds)

Global capital markets are pretty integrated and you have a lot of very smart people with the best computers and data trying to divine the future. It's a big reach to assume that somehow one has divined something that means 1) will continue in the future AND the market hasn't put a value on that now in the price you pay for the US index.

BUT

If you are happier just owning US stocks then fine. I would be 20% in bonds.

You have a question regarding currency risk. Do you want to hedge your GBP exposure for the US index fund? I would say that I would not hedge if my time horizon were more than 10 years. Hedging has a cost and in the long run exchange rates are likely to work out towards Purchasing Power Parity. If we had not had the 2016 vote then I believe the GBP would be higher, but in the long run it probably gets back to its "right" value vis a vis the Euro (largest trading partner) in particular.

If your glide path is of increasing bond weightings, bond funds tend to hedge into GBP. So over time, as you increase your bond weighting, that's the opportunity to reduce your exposure to the USD/ GBP exchange rate.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Marseille07 »

Lonli-Lokli wrote: Wed Jun 22, 2022 3:46 am I've tested different proportions for World+US but it still underpermorms 90/10
Link
What exactly are you asking here :confused

Adding international appears to underperform vs US 90/10, which is already known. There is no magic formula to turn it around on PV because the historical data is what it is.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by mikejuss »

It's impossible to know what might beat a 90/10 portfolio, OP. Anything could happen in the future that makes owning less or more stocks beneficial.

It sounds like you've yet to realize that an investor's savings rate is far more important than his asset allocation. So ask yourself: are you saving enough right now? Stick with an asset allocation with which you can live through thick and thin, and don't worry about it too much.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by minimalistmarc »

Lonli-Lokli wrote: Wed Jun 22, 2022 5:28 am I understand that past profits do not guarantee future, but if they were failing before for decades I do not believe it will be better in future
Look what happened in the decades before the last few decades
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

I feel like everyone propose just go with 90/10 (#SSAC/#VUTY) :)
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Marseille07 »

Lonli-Lokli wrote: Wed Jun 22, 2022 5:17 pm I feel like everyone propose just go with 90/10 (#SSAC/#VUTY) :)
That's not the takeaway at all. As multiple posters mentioned, 95/5 or 100/0 beats 90/10 assuming the markets eventually renew ATH.

I don't even understand where you got 90/10 from or why you are asking if something beats 90/10.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by mikejuss »

Marseille07 wrote: Wed Jun 22, 2022 6:06 pm
Lonli-Lokli wrote: Wed Jun 22, 2022 5:17 pm I feel like everyone propose just go with 90/10 (#SSAC/#VUTY) :)
That's not the takeaway at all. As multiple posters mentioned, 95/5 or 100/0 beats 90/10 assuming the markets eventually renew ATH.

I don't even understand where you got 90/10 from or why you are asking if something beats 90/10.
Nobody knows nothing. The OP doesn't know what he doesn't know yet. Maybe one day...
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by minimalistmarc »

Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
Don’t overthink it. Just go for an all world tracker for equities. From the tone of your posts I am concerned that you might not have the risk tolerance for 90 -100% equities though
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by UnhandledException »

Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
Is your financial situation substantially similar to Warren Buffet's wife? Are you confident your financial goals are consistent with Buffet's goals? Did Buffet actually recommend this strategy to investors in general, or just his wife specifically?
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Fireishere »

UnhandledException wrote: Thu Jun 23, 2022 2:54 am
Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
Is your financial situation substantially similar to Warren Buffet's wife? Are you confident your financial goals are consistent with Buffet's goals? Did Buffet actually recommend this strategy to investors in general, or just his wife specifically?
Warren Buffett about 90/10 on Berkshire’s letter to shareholders in 2013:
"superior to those attained by most investors - whether pension funds, institutions or individuals."
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Marseille07 »

Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
Everyone here knows this. I follow this myself (see my sig).

But I am also aware 95/5 or 100/0 would beat 90/10.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by mikejuss »

Marseille07 wrote: Thu Jun 23, 2022 8:50 am
Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago
https://www.investopedia.com/terms/1/90-10-strategy.asp
Everyone here knows this. I follow this myself (see my sig).

But I am also aware 95/5 or 100/0 would beat 90/10.
How about 200/0? There is such a thing as leverage, no?

I don't really get the point of this discussion.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Marseille07 »

mikejuss wrote: Thu Jun 23, 2022 8:53 am How about 200/0? There is such a thing as leverage, no?

I don't really get the point of this discussion.
I'm lost as much as you are. This OP just mentioned the Buffett portfolio, but the opening post says VGLT which...is not what he chose. I hate to say it but they sound clueless.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by TedSwippet »

Lonli-Lokli wrote: Tue Jun 21, 2022 12:20 pmI am EU investor, ...
Lonli-Lokli wrote: Tue Jun 21, 2022 1:07 pm... I am from UK
Point of order. As of 31 Jan 2020, the UK is no longer part of the EU.
Lonli-Lokli wrote: Thu Jun 23, 2022 1:17 am 90/10 (SnP500 and bonds) is a strategy proposed by Buffett some time ago ...
At least two factors here that you are probably overlooking.

Firstly, a US investor holding only S&P 500 US stocks has no real currency risk. However, a UK (or EU?) investor holding only US stocks has both an element of concentration risk (only 500 stocks, out of a possible universe of several thousand), and also a sizeable added element of currency risk. If the USD falls (or the GBP and EUR rise; same thing), that crimps returns when measured in those non-US currencies.

And secondly, US investors receive dividends from an S&P 500 fund with zero tax withholding. However, UK and other non-US investors suffer an unrecoverable US tax on dividends received through an S&P500 fund, typically 15%. This tax drag occurs even where the fund is held in a UK ISA or other tax sheltered account. This unavoidable US withholding tax on US stocks for non-US investors can have the effect of making alternative non-US stocks comparatively somewhat more attractive.

So, for non-US investors, a portfolio of US-only stocks has both a higher risk (currency) and a lower reward (tax drag) than for US investors.

What precisely is the aim of your questions? Like others, I'm struggling to understand your goals here. Have you read the relevant wiki section?
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Lonli-Lokli »

TedSwippet wrote: Thu Jun 23, 2022 9:26 am Point of order. As of 31 Jan 2020, the UK is no longer part of the EU.
Haha, agree :)
TedSwippet wrote: Thu Jun 23, 2022 9:26 am So, for non-US investors, a portfolio of US-only stocks has both a higher risk (currency) and a lower reward (tax drag) than for US investors.
I agree with you, but I am trying to compare pure indices aka ETFs, not actual return for the person, as you said it depends on tax.
TedSwippet wrote: Thu Jun 23, 2022 9:26 am What precisely is the aim of your questions? Like others, I'm struggling to understand your goals here.
My goal is
1) to create a portfolio which could beat 90/10 USStocks portfolio in more than 5 years during the decade.
2) make this portfolio less focused on US, ie kind of simplified MSCI ACWI index.
3) do NOT take into account currency risks.
4) do NOT take into account my current residence & taxes.
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by minimalistmarc »

Lonli-Lokli wrote: Fri Jun 24, 2022 4:18 am
TedSwippet wrote: Thu Jun 23, 2022 9:26 am Point of order. As of 31 Jan 2020, the UK is no longer part of the EU.
Haha, agree :)
TedSwippet wrote: Thu Jun 23, 2022 9:26 am So, for non-US investors, a portfolio of US-only stocks has both a higher risk (currency) and a lower reward (tax drag) than for US investors.
I agree with you, but I am trying to compare pure indices aka ETFs, not actual return for the person, as you said it depends on tax.
TedSwippet wrote: Thu Jun 23, 2022 9:26 am What precisely is the aim of your questions? Like others, I'm struggling to understand your goals here.
My goal is
1) to create a portfolio which could beat 90/10 USStocks portfolio in more than 5 years during the decade.
2) make this portfolio less focused on US, ie kind of simplified MSCI ACWI index.
3) do NOT take into account currency risks.
4) do NOT take into account my current residence & taxes.
100% cash, 100% equities, anything might outperform. I think your goal is pointless. Just go 90:10 all world
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by Bernmaster »

Well, in that case my suggested portfolio is:

90% Vanguard FTSE all world ETF
10% Global aggregate bond ETF
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Re: Is there any portoflio which can beat 90/10 ? [UK]

Post by TedSwippet »

Lonli-Lokli wrote: Fri Jun 24, 2022 4:18 am My goal is
1) to create a portfolio which could beat 90/10 USStocks portfolio in more than 5 years during the decade.
This seems arbitrary. Why this 90/10 benchmark? Why five years out of ten? Will you be happy if trawling historical data finds something that has mildly outperformed for five years but has hugely underperformed for the other five years out of ten? What about something that meets your ten year definition but then has massively underperformed for the next five, ten, twenty, thirty years? Or the preceding five, ten, twenty years?

A spectacular five-year run bracketed either side by truly lousy performance seems to meet this goal, but it's not something on which anyone would seriously want to base a real-world future portfolio asset allocation.

As mentioned already (more than once!), any number of asset allocations exist that could beat the much-vaunted (over-hyped?) Buffett allocation, or for that matter, any other benchmark you care to select. The problem, as ever, is identifying them ahead of time.
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