Bill Sharpe's preferred portfolio

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Sat Apr 21, 2018 10:46 am

The March 2018 end-of-quarter numbers are out for the indexes that Sharpe mentions in the video.
So to keep the portfolio allocations up-to-date for anyone who is interested, here are the numbers (in millions of USD):

27,139,040 - US stocks - CRSP US Total Market Index
24,838,130 - ex US stocks - FTSE Global All-Cap Index minus US
18,890,430 - US bonds - Citigroup US Broad Investment-Grade Index
19,331,390 - ex US bonds - Citigroup World Broad Investment-Grade Index minus US

So that equates to allocation percentages of:

30.09% US stocks
27.54% ex US stocks
20.94% US bonds
21.43% ex US bonds

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Mon May 21, 2018 11:02 am

With the announcement from Vanguard about their new Total World Bond ETF, Sharpe's preferred portfolio should get easier to implement.

So, with the two big indexes currently having these market caps:
FTSE Global All-Cap stock index: $51,878,881 million USD
FTSE World Broad Investment-Grade Bond Index (WorldBIG): $37,971,940 million USD

That would equate to a two Vanguard ETF portfolio of:
57.74% VT
42.26% Vanguard Total World Bond ETF (no ticker yet)

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aj76er
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Re: Bill Sharpe's preferred portfolio

Post by aj76er » Mon May 21, 2018 11:35 am

CyberBob wrote:
Mon May 21, 2018 11:02 am
With the announcement from Vanguard about their new Total World Bond ETF, Sharpe's preferred portfolio should get easier to implement.

So, with the two big indexes currently having these market caps:
FTSE Global All-Cap stock index: $51,878,881 million USD
FTSE World Broad Investment-Grade Bond Index (WorldBIG): $37,971,940 million USD

That would equate to a two Vanguard ETF portfolio of:
57.74% VT
42.26% Vanguard Total World Bond ETF (no ticker yet)
Thanks for posting, it is the first I've heard of the new ETF. That really does make implementation of the Sharpe's WBS portfolio very easy!
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: Bill Sharpe's preferred portfolio

Post by pascalwager » Thu Jul 12, 2018 10:25 pm

Regarding the stocks portion of the WBS, I last readjusted back in October 2017 and I decided to calculate* the error** today. In October, I had attempted to set the (same) market ratio of US/int'l in each account.

The result was 1.3%, the average error over three VG accounts (individual, rollover and Roth). The US portion showed a positive error and the int'l portion a negative error.

*Using the June 29, 2018 index market values and Yahoo Finance Historical Returns fund adjusted closing prices
**error = current market % minus portfolio %

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Sun Jul 22, 2018 11:03 am

The June 2018 end-of-quarter numbers are out for the indexes that Sharpe mentions in the video.
So to keep the portfolio allocations up-to-date for anyone who is interested, here are the numbers (in millions of USD):

27,900,058 - US stocks - CRSP US Total Market Index
23,739,777 - ex US stocks - FTSE Global All-Cap Index minus US
19,066,930 - US bonds - Citigroup US Broad Investment-Grade Index
18,463,300 - ex US bonds - Citigroup World Broad Investment-Grade Index minus US

So that equates to allocation percentages of:

31.29% US stocks
26.62% ex US stocks
21.38% US bonds
20.71% ex US bonds


Or, with the announcement from Vanguard about their new Total World Bond ETF, which is supposed to be out August-ish, the simpler two total-world asset class index numbers would be:

51,639,835 - FTSE Global All-Cap stock index
37,530,230 - Citi World Broad Investment-Grade Bond Index (WorldBIG)

So that equates to allocation percentages of:

57.91% World stocks (VT ETF)
42.09% World bonds (Vanguard Total World Bond ETF. No ticker yet)

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nedsaid
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Re: Bill Sharpe's preferred portfolio

Post by nedsaid » Sun Jul 22, 2018 11:23 am

pascalwager wrote:
Thu Feb 01, 2018 7:44 pm
Valuethinker wrote:
Thu Feb 01, 2018 12:03 pm
CyberBob wrote:
Thu Feb 01, 2018 10:16 am
pascalwager wrote:
Wed Jan 31, 2018 8:14 pm
You'll notice that Bob's AA entries are rounded, but Sharpe carries the AA percentages out to two decimal points. So I think Sharpe leans toward precision and always doing the quarterly exchanges.
Yeah, I'll have to stop rounding, because you're absolutely right about Sharpe's precision. In fact, in the video, he mentions doing a rebalance in his own portfolio of one-third of one percent (0.33%).

So in the spirit of Sharpe's more exactness, the 2017 end-of-year numbers look like:

30.34% US stocks
27.66% ex-US stocks
21.22% US bonds
20.77% ex-US bonds
I wonder if it is just coincidence that these proportions are 50/50 US/ foreign equities and US/ foreign bonds, and 59% stocks, 41% bonds?

Other than a slight underweighting of the USA, those numbers seem so remarkably like a 60/40 portfolio with equity fully diversified globally?
Yes, 60/40 is pure coincidence. The portfolio proportions are determined by the individual market values of four indexes, so the stock/bond ratio is not fixed. In August 2015, for example, the ratio was 55/45.
It might be coincidence but it is close enough. An all-World portfolio seems to do pretty well over time. My impression was that the World Bond Markets were larger than the World Stock Markets and that an All World Portfolio would be about 40% stocks/60% bonds. Perhaps the quantitative easing all over the world floated stock markets around the world and reversed the stock/bond ratio. Comments?

It is weird but 60% stocks/40% bonds is a time tested investing formula that works well. I don't think anyone really knows why for sure, my theory is that it is a good round number that intuitively makes sense. Somebody tried such a portfolio, found that it worked, got written up in trade publications, and became conventional wisdom. Those are my thoughts, anyway. You look at the performance numbers of any decent balanced fund and you can't help but be impressed. A lot of Bogleheads just love the 60/40 Wellington and the 40/60 Wellesley balanced funds at Vanguard. A simple strategy that almost anyone can implement and yet is better than the more complex portfolios.
A fool and his money are good for business.

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Re: Bill Sharpe's preferred portfolio

Post by drk » Sun Jul 22, 2018 11:31 am

nedsaid wrote:
Sun Jul 22, 2018 11:23 am
My impression was that the World Bond Markets were larger than the World Stock Markets and that an All World Portfolio would be about 40% stocks/60% bonds.
That index only covers investment-grade bonds, defined as BBB- or Baa3 or above. If there's a good index of global non-investment-grade bonds, you could supplement with that to find out if your impression is correct.

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spdoublebass
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Re: Bill Sharpe's preferred portfolio

Post by spdoublebass » Sun Jul 22, 2018 2:26 pm

CyberBob wrote:
Sun Jul 22, 2018 11:03 am

27,900,058 - US stocks - CRSP US Total Market Index
23,739,777 - ex US stocks - FTSE Global All-Cap Index minus US
19,066,930 - US bonds - Citigroup US Broad Investment-Grade Index
18,463,300 - ex US bonds - Citigroup World Broad Investment-Grade Index minus US

I agree with everything above except the Global all cap ex US.
I found that number to be 21,532,624
found here in this fact sheet:
https://www.ftse.com/Analytics/factsheets/home/search

Which would bring the numbers to:
US STOCK= 32.08%
INT STOCK= 24.76%
US BOND = 21.93%
INT BOND = 21.23%
I'm trying to think, but nothing happens

asset_chaos
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Re: Bill Sharpe's preferred portfolio

Post by asset_chaos » Sun Jul 22, 2018 8:05 pm

nedsaid wrote:
Sun Jul 22, 2018 11:23 am
It is weird but 60% stocks/40% bonds is a time tested investing formula that works well. I don't think anyone really knows why for sure, my theory is that it is a good round number that intuitively makes sense.
I hypothesize that it's based on a fallacy of equivalence. US stocks have done better on average than US bonds over short time periods (one quarter or one year) between 60-65% of the periods at least from the beginning of last century. (I had cause to look up quarterly data starting from the early 90s, and Schiller's book has a graph showing the more remote one year period average.) I think people could observe that stocks beat bonds about 60% of the short intervals that might stick in someone's mind, and made the---probably logically erroneous---conclusion that a long term portfolio of 60% stocks should be good. But really, it's a speculation because I have no evidence of where the 60:40 conventional wisdom came from.
Regards, | | Guy

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Taylor Larimore
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THE 60/40 SOLUTION by Peter Bernstein

Post by Taylor Larimore » Sun Jul 22, 2018 8:18 pm

asset_chaos wrote;
I have no evidence of where the 60:40 conventional wisdom came from.
THE 60/40 SOLUTION by Peter Bernstein

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Fclevz
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Re: Bill Sharpe's preferred portfolio

Post by Fclevz » Sun Jul 22, 2018 10:14 pm

spdoublebass wrote:
Sun Jul 22, 2018 2:26 pm
I agree with everything above except the Global all cap ex US.
I found that number to be 21,532,624
In your link it shows the global number as 51,639,835 and the US as 27,505,578

51,639,835 - 27,505,578 = 24,134,257
Where did you get the 21,532,624 number?

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spdoublebass
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Re: Bill Sharpe's preferred portfolio

Post by spdoublebass » Sun Jul 22, 2018 10:20 pm

Fclevz wrote:
Sun Jul 22, 2018 10:14 pm
spdoublebass wrote:
Sun Jul 22, 2018 2:26 pm
I agree with everything above except the Global all cap ex US.
I found that number to be 21,532,624
In your link it shows the global number as 51,639,835 and the US as 27,505,578

51,639,835 - 27,505,578 = 24,134,257
Where did you get the 21,532,624 number?
Ok. First, you do not have to subtract anything for the stocks.

You use the CRSP index for he US Stocks. Which is 27,900,058
The FTSE Global EX US index is 21,532,624
The USBIG INDEX is 19,066,930
The World BIG-USBIG = 18,463,300 (Here, for bonds, you subtract)

Which equals:
US STOCK 32.08%
INT STOCK 24.76%
US BOND 21.93%
INT BOND 21.23%
I'm trying to think, but nothing happens

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Sun Jul 22, 2018 10:34 pm

spdoublebass wrote:
Sun Jul 22, 2018 10:20 pm
Fclevz wrote:
Sun Jul 22, 2018 10:14 pm
spdoublebass wrote:
Sun Jul 22, 2018 2:26 pm
I agree with everything above except the Global all cap ex US.
I found that number to be 21,532,624
In your link it shows the global number as 51,639,835 and the US as 27,505,578

51,639,835 - 27,505,578 = 24,134,257
Where did you get the 21,532,624 number?
Ok. First, you do not have to subtract anything for the stocks.

You use the CRSP index for he US Stocks. Which is 27,900,058
The FTSE Global EX US index is 21,532,624
The USBIG INDEX is 19,066,930
The World BIG-USBIG = 18,463,300 (Here, for bonds, you subtract)

Which equals:
US STOCK 32.08%
INT STOCK 24.76%
US BOND 21.93%
INT BOND 21.23%
The 21 number is for the All-World ex-us index, which is large and mid-cap only. Doing the subtraction from the Global index series gets you small-cap too, and so is a more complete number.

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spdoublebass
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Re: Bill Sharpe's preferred portfolio

Post by spdoublebass » Sun Jul 22, 2018 10:44 pm

CyberBob wrote:
Sun Jul 22, 2018 10:34 pm
spdoublebass wrote:
Sun Jul 22, 2018 10:20 pm
Fclevz wrote:
Sun Jul 22, 2018 10:14 pm
spdoublebass wrote:
Sun Jul 22, 2018 2:26 pm
I agree with everything above except the Global all cap ex US.
I found that number to be 21,532,624
In your link it shows the global number as 51,639,835 and the US as 27,505,578

51,639,835 - 27,505,578 = 24,134,257
Where did you get the 21,532,624 number?
Ok. First, you do not have to subtract anything for the stocks.

You use the CRSP index for he US Stocks. Which is 27,900,058
The FTSE Global EX US index is 21,532,624
The USBIG INDEX is 19,066,930
The World BIG-USBIG = 18,463,300 (Here, for bonds, you subtract)

Which equals:
US STOCK 32.08%
INT STOCK 24.76%
US BOND 21.93%
INT BOND 21.23%
The 21 number is for the All-World ex-us index, which is large and mid-cap only. Doing the subtraction from the Global index series gets you small-cap too, and so is a more complete number.

I deleted my post. I was wrong about info.

Your number is right. I was using the wrong factsheet by mistake. Thank you for catching that.

There is a fact sheet for FTSE Global All Cap Ex US
Last edited by spdoublebass on Sun Jul 22, 2018 10:48 pm, edited 1 time in total.
I'm trying to think, but nothing happens

columbia
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Re: Bill Sharpe's preferred portfolio

Post by columbia » Sun Jul 22, 2018 10:48 pm

Closest Vanguard approximation would be VSMGX (60/40 Life Strategy). One could do a lot worse over 30-50 years.

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spdoublebass
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Re: Bill Sharpe's preferred portfolio

Post by spdoublebass » Sun Jul 22, 2018 11:03 pm

CyberBob wrote:
Sun Jul 22, 2018 10:34 pm

The 21 number is for the All-World ex-us index, which is large and mid-cap only. Doing the subtraction from the Global index series gets you small-cap too, and so is a more complete number.
I realize I was using the wrong index.

But just so I understand, why do you have to subtract it from the Global index?
There is a FTSE Global ALl Cap Ex US index, Why not just use that and the CRSP?
I'm trying to think, but nothing happens

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Sun Jul 22, 2018 11:56 pm

spdoublebass wrote:
Sun Jul 22, 2018 11:03 pm
CyberBob wrote:
Sun Jul 22, 2018 10:34 pm

The 21 number is for the All-World ex-us index, which is large and mid-cap only. Doing the subtraction from the Global index series gets you small-cap too, and so is a more complete number.
I realize I was using the wrong index.

But just so I understand, why do you have to subtract it from the Global index?
There is a FTSE Global ALl Cap Ex US index, Why not just use that and the CRSP?
The subtraction is only necessary because I always wind up looking at the main Global index page, which doesn’t break out ex-US.

The reason I look at the main Global index page is that is shows the US number which is a second source to compare to the CRSP US number. They’re always close.

But your way is easier and better because of no potential math errors.

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Re: Bill Sharpe's preferred portfolio

Post by pascalwager » Mon Jul 23, 2018 3:03 am

columbia wrote:
Sun Jul 22, 2018 10:48 pm
Closest Vanguard approximation would be VSMGX (60/40 Life Strategy). One could do a lot worse over 30-50 years.
This may be someone's preferred portfolio, but the world portfolio may be something like 30/70 US/non-US in the future. In that case, would 60/40 still be a good approximation? Many US investor's would probably answer in the affirmative, so Sharpe's portfolio is actually totally irrelevant to them in the general sense.

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Re: THE 60/40 SOLUTION by Peter Bernstein

Post by asset_chaos » Mon Jul 23, 2018 3:42 am

Taylor Larimore wrote:
Sun Jul 22, 2018 8:18 pm
asset_chaos wrote;
I have no evidence of where the 60:40 conventional wisdom came from.
THE 60/40 SOLUTION by Peter Bernstein

Best wishes.
Taylor
That's a good article, which I've read before, but it doesn't say where 60:40 comes from, just that 60:40 "was so popular in the era before the bull market of the ’90s" and that it "seemed like a good compromise for the long-run average balance between maximizing return and minimizing risk". 50:50 also balances return and risk but is not the received wisdom. The point of Bernstein's article is to stick with a diversified portfolio, which 60:40 is, but it does not say where the cachet of the specific 60:40 balance comes from.
Regards, | | Guy

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Re: THE 60/40 SOLUTION by Peter Bernstein

Post by dekecarver » Mon Jul 23, 2018 7:44 am

asset_chaos wrote:
Mon Jul 23, 2018 3:42 am
Taylor Larimore wrote:
Sun Jul 22, 2018 8:18 pm
asset_chaos wrote;
I have no evidence of where the 60:40 conventional wisdom came from.
THE 60/40 SOLUTION by Peter Bernstein

Best wishes.
Taylor
That's a good article, which I've read before, but it doesn't say where 60:40 comes from, just that 60:40 "was so popular in the era before the bull market of the ’90s" and that it "seemed like a good compromise for the long-run average balance between maximizing return and minimizing risk". 50:50 also balances return and risk but is not the received wisdom. The point of Bernstein's article is to stick with a diversified portfolio, which 60:40 is, but it does not say where the cachet of the specific 60:40 balance comes from.
Could be from numerous backtesting models?

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Tue Sep 11, 2018 10:19 am

There has been an interesting development regarding the indexes that Sharpe has been using for this portfolio. The Citi bond indexes are now FTSE Russell indexes.

This means that it is now possible to get numbers for all four portfolio components from FTSE. This would presumably give a bit more consistency than getting numbers from three different index providers. The U.S. stock number can also now be found from FTSE as an individual breakdown number for the U.S. in the FTSE Global All-Cap index number.

Another benefit of using all FTSE numbers is that they come out monthly, rather than quarterly.


So, using August 31st FTSE numbers (in millions of USD):

29,273,216 - U.S. stocks - FTSE Global All-Cap index, U.S. breakdown
24,099,318 - ex U.S. stocks - FTSE Global All-Cap index minus U.S.
19,619,750 - U.S. bonds - FTSE US Broad Investment-Grade index
18,400,980 - ex U.S. bonds - FTSE World Broad Investment-Grade index minus U.S.

So that equates to allocation percentages of:

32.07% US stocks (VTSAX)
26.40% ex US stocks (VTIAX)
21.49% US bonds (VBTLX)
20.04% ex US bonds (VTABX)

Or,
58.47% world stocks (VT)
41.53% world bonds (BNDW)

Edit: fixed typo for U.S. bond capitalization number.
Last edited by CyberBob on Wed Sep 12, 2018 9:00 am, edited 1 time in total.

hdas
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Re: Bill Sharpe's preferred portfolio

Post by hdas » Tue Sep 11, 2018 11:59 am

CyberBob wrote:
Tue Sep 11, 2018 10:19 am
So, using August 31st FTSE numbers (in millions of USD):

29,273,216 - U.S. stocks - FTSE Global All-Cap index, U.S. breakdown
24,099,318 - ex U.S. stocks - FTSE Global All-Cap index minus U.S.
19,509,800 - U.S. bonds - FTSE US Broad Investment-Grade index
18,400,980 - ex U.S. bonds - FTSE World Broad Investment-Grade index minus U.S.

So that equates to allocation percentages of:

32.07% US stocks (VTSAX)
26.40% ex US stocks (VTIAX)
21.37% US bonds (VBTLX)
20.16% ex US bonds (VTABX)
Very nice. Thanks!

asset_chaos
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Re: Bill Sharpe's preferred portfolio

Post by asset_chaos » Tue Sep 11, 2018 3:40 pm

CyberBob wrote:
Tue Sep 11, 2018 10:19 am
19,509,800 - U.S. bonds - FTSE US Broad Investment-Grade index
Why the par amount instead of market value? Not that they are very different now. Aug 31 factsheet says 19,619.75 for market value.
Regards, | | Guy

pascalwager
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Re: Bill Sharpe's preferred portfolio

Post by pascalwager » Tue Sep 11, 2018 4:05 pm

CyberBob wrote:
Tue Sep 11, 2018 10:19 am
There has been an interesting development regarding the indexes that Sharpe has been using for this portfolio. The Citi bond indexes are now FTSE Russell indexes.

This means that it is now possible to get numbers for all four portfolio components from FTSE. This would presumably give a bit more consistency than getting numbers from three different index providers. The U.S. stock number can also now be found from FTSE as an individual breakdown number for the U.S. in the FTSE Global All-Cap index number.

Another benefit of using all FTSE numbers is that they come out monthly, rather than quarterly.


So, using August 31st FTSE numbers (in millions of USD):

29,273,216 - U.S. stocks - FTSE Global All-Cap index, U.S. breakdown
24,099,318 - ex U.S. stocks - FTSE Global All-Cap index minus U.S.
19,509,800 - U.S. bonds - FTSE US Broad Investment-Grade index
18,400,980 - ex U.S. bonds - FTSE World Broad Investment-Grade index minus U.S.

So that equates to allocation percentages of:

32.07% US stocks (VTSAX)
26.40% ex US stocks (VTIAX)
21.37% US bonds (VBTLX)
20.16% ex US bonds (VTABX)
Interesting. Seems like it might be an improvement, but that depends mainly on the indices components and similarity to the Barclay indices.

Note: the new VG (Barclay-benchmarked) Global Bond ETF shows 53% int'l for 9/11/2018, so still may be some difference between Barclay and FTSE proportional market values. FTSE indices show 48% int'l bonds as of 9/10/2018.

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CyberBob
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Re: Bill Sharpe's preferred portfolio

Post by CyberBob » Wed Sep 12, 2018 9:02 am

asset_chaos wrote:
Tue Sep 11, 2018 3:40 pm
CyberBob wrote:
Tue Sep 11, 2018 10:19 am
19,509,800 - U.S. bonds - FTSE US Broad Investment-Grade index
Why the par amount instead of market value? Not that they are very different now. Aug 31 factsheet says 19,619.75 for market value.
Oops, typo. Fixed it in the original post. Thanks for catching it. :thumbsup

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Re: Bill Sharpe's preferred portfolio

Post by cjking » Wed Sep 12, 2018 2:03 pm

If I remember what I've previously read about the Global Market Portfolio correctly, you need to mix it with the appropriate amount of leverage or safe assets to get to your desired risk level. It would be nice if Vanguard offered a base fund, then several derivative funds with weightings from 50% to maybe 200% in the base fund. (The base fund would be named as the 100% fund.)

This was already linked up-thread, repeated for convenience.

https://www.forbes.com/sites/phildemuth ... 081e4770d1
Once we own the Global Market Portfolio, the only other thing we need is cash. If we are conservative, we water it down with cash to suit our risk tolerance. If we are high rollers, we borrow money to leverage our bet. Either way, we remain hard-riding cowboys on the efficient frontier.

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Re: Bill Sharpe's preferred portfolio

Post by pascalwager » Sat Sep 15, 2018 4:54 pm

Personally, I totally abandoned the bonds part of the WBS portfolio at Vanguard. After reading about the nature of the int'l fund investors and govt coercion for European banks to buy large amounts of low-yielding bonds, I decided that I was not an average investor (large entities). In other words, unlike the banks, I'm not in a position that requires me to succumb to coercion to buy, so why do it?

Also, I didn't like the longer maturity. So I decided to just use a US low-cost bond index fund of my preferred duration.

I still follow the stocks part of the WBS, but I'm not rebalancing to any particular ratio of stocks/bonds. I'm just letting the bond money do what it will for the time being.

I have a pension, so following the current WBS would not necessarily be unwise in my case, but I have a younger heir with only SS to think about. But, if you also have TIPS/pension to cover living expenses, then again, the WBS might well be suitable.

And 2/3 of my investments are at DFA with no total market funds to build a WBS portfolio.

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Re: THE 60/40 SOLUTION by Peter Bernstein

Post by whodidntante » Sat Sep 15, 2018 4:58 pm

asset_chaos wrote:
Mon Jul 23, 2018 3:42 am
Taylor Larimore wrote:
Sun Jul 22, 2018 8:18 pm
asset_chaos wrote;
I have no evidence of where the 60:40 conventional wisdom came from.
THE 60/40 SOLUTION by Peter Bernstein

Best wishes.
Taylor
That's a good article, which I've read before, but it doesn't say where 60:40 comes from, just that 60:40 "was so popular in the era before the bull market of the ’90s" and that it "seemed like a good compromise for the long-run average balance between maximizing return and minimizing risk". 50:50 also balances return and risk but is not the received wisdom. The point of Bernstein's article is to stick with a diversified portfolio, which 60:40 is, but it does not say where the cachet of the specific 60:40 balance comes from.
I don't know where it comes from either but certain ideas are kind of obvious, so I don't assume it had to come from anywhere.

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Re: THE 60/40 SOLUTION by Peter Bernstein

Post by pascalwager » Sat Sep 15, 2018 8:14 pm

whodidntante wrote:
Sat Sep 15, 2018 4:58 pm
asset_chaos wrote:
Mon Jul 23, 2018 3:42 am
Taylor Larimore wrote:
Sun Jul 22, 2018 8:18 pm
asset_chaos wrote;
I have no evidence of where the 60:40 conventional wisdom came from.
THE 60/40 SOLUTION by Peter Bernstein

Best wishes.
Taylor
That's a good article, which I've read before, but it doesn't say where 60:40 comes from, just that 60:40 "was so popular in the era before the bull market of the ’90s" and that it "seemed like a good compromise for the long-run average balance between maximizing return and minimizing risk". 50:50 also balances return and risk but is not the received wisdom. The point of Bernstein's article is to stick with a diversified portfolio, which 60:40 is, but it does not say where the cachet of the specific 60:40 balance comes from.
I don't know where it comes from either but certain ideas are kind of obvious, so I don't assume it had to come from anywhere.
If we're maximizing returns at 100/0 and minimizing risk at 0/100, then 50/50 would seem to be the balance point (like Moskowitz used for his own portfolio). Then 60/40 could be viewed as a popularly desired tilt toward more returns (and more risk).

Note: Something like 20/80 is the equal risk portfolio, but with low returns.

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