Trident Portfolio

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Near retirement
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Trident Portfolio

Post by Near retirement » Wed Aug 24, 2016 8:09 pm

Hello fellow BHs,

I was just reading about the Trident Portfolio on the Investwithstrength.com website. It entails investing in equal measure into three ETFs: US Small-Cap Value Stocks (VBR), Gold (GLD), and Long Term US Treasuries (TLT). Has anyone had any experience with this strategy or any insights that might compare it to the BH 3 fund portfolio strategy? Thanks in advance.

NR

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arcticpineapplecorp.
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Re: Trident Portfolio

Post by arcticpineapplecorp. » Wed Aug 24, 2016 8:41 pm

Looks like the Trident did better from 1972-2015 than the 3 fund (see below).
I used 33/33/34 (34 for bond). But the problem is you want to know if Trident will do better in the future. That's an unknown that portfolio visualizer (as great as it is) will never be able to tell you. If you stick to the 3 fund portfolio, at least you know you'll get the return of all markets (stock and bond). That should be good enough, but for some reason isn't for many who want to beat the market. Best of luck.

(P.S. it looks below like the three fund pulled ahead of Trident around year 2000. Maybe that's because growth beat value and Large beat Small in much of the 90s. Would you have given up Trident when it started failing around the 30 year mark? Many would (and do). That's why it's called tracking error and it causes many to abandon their best laid plans at precisely the moment things don't go your way). Whatever you choose, stay the course.

using portfolio visualizer
https://www.portfoliovisualizer.com/bac ... sisResults

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"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Wed Aug 24, 2016 8:53 pm

Looks like the Permanent Portfolio, but without Cash

https://www.bogleheads.org/blog/harry-b ... portfolio/

https://www.bogleheads.org/wiki/Lazy_po ... _Portfolio

Be careful when backtesting portfolios heavy in Gold and Long Term Treasuries. Gold skyrocketed in the 70's after the dollar was unpegged from gold. Long Term Treasuries benefit from a very favorable environment of declining rates for the past 30 years. Yields on Long Term Treasuries are a bit over 2%, so you can't expect the 8% that it received over the past 30 years.

There is some interest in Risk Parity portfolios, such as the Permanent Portfolio, the All Weather Portfolio, and the Golden Butterfly. You can check them all out at the link below. In my opinion, all 3 are better balanced than this Trident Portfolio, but I'm still not on board with any of them in their entirety. But I like the concept, and I like how they give you a different perspective on balancing risk in your portfolio.
https://portfoliocharts.com/
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Wed Aug 24, 2016 9:00 pm

Thanks Arctic. Nice graphs that illustrate growth. NJ, I had not seen this site with all strategies in visual array comparisons. Gold is always hard for me to understand ... As a hedge, a "market", etc. I had a broker some years ago that really pushed the dickens out of it ... And Polish oil. Go figure ......

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Wed Aug 24, 2016 9:11 pm

Yes, gold is hard to understand. It's a shiny metal that does nothing. But people agree it's worth something, and that probably won't change anytime soon. But they never agree on what it's worth for very long, so it's very volatile.

The most common things I hear about gold is that it's a 'diversifier' and it's a hedge against inflation. So are REITs and TIPS. I'd feel more comfortable with one of those if I needed an added inflation hedge.

I've noticed that Gold seems to be a part of these stable value, low drawdown portfolios. If you backtest on the https://www.portfoliovisualizer.com/ site that Arctic shared, you can remove gold and put in a mix of REITs and TIPS and have a similarly stable portfolio with better returns.

They tout Gold as the stabilizing force in these portfolios, but it's really the Long Term Treasuries. They've had an excellent 30+ year run, and have performed especially well during difficult times, such 2008. Unfortunately, the yields on Long Term Treasuries are so low now, you can't expect the same returns. However, they should still provide some cushion during a bear market, just not great returns. I've moved my bond holdings into a mix of Long Term and Intermediate Term Treasuries, but I'm not buying into Gold or any explicit inflation hedge.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Wed Aug 24, 2016 10:19 pm

NJ,

Likewise, I have been rethinking bonds as my stabilizer as have many. Long and intermediate term treasuries sounds like a safe alternative. Have you considered mixing in REITS, and if yes, how would you choose?

NR

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Thu Aug 25, 2016 12:08 am

I really like the Risk Parity concept, even if you don't feel the need to have true risk balance the way that the All Weather portfolio claims to have. I think it's important to understand why your balanced 50/50 portfolio still tanks when stocks tank.

There was a thread on here a while back about treasuries having a very negative correlation to stocks, that is, when stocks ZIG, treasuries zag. It makes sense, when the stock market is going down, investors sometimes flee to the safety of bonds, and interest rates usually go down, which will increase the value of the bonds.

I recently switched my bond allocation from Total Bond Market to a mix of LT and IT Treasuries. I have no illusions that they'll produce the returns they have in the past, but am hoping they'll provide my portfolio more stability during market downturns. I'm not that close to retirement, and plan to gradually reduce my LT for IT Treasuries as I get closer.

I don't have REITs, but that's the next thing I'm looking at. I think I'll carve 5-10% of my stock allocation out for REITs. I'll probably start with 5% when I rebalance at the end of the year. I'm hoping it can provide some added inflation protection considering my higher LT bond allocation.

I'm also working on my in-laws portfolio as they've just retired. I drew inspiration from the All Weather portfolio, but was uncomfortable with the amounts as they were. I knew my mother-in-law wanted a conservative 40/60 portfolio, so we went with
30% Total Stock Market
15% LT Treasuries
40% IT Treasuries
7.5% REIT
7.5% TIPS

You can see that these risk parity portfolios aren't so weird after you make a couple of minor tweaks. I find that they generally have too high allocations to gold and long term treasuries.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Thu Aug 25, 2016 6:28 am

I am retired but only for about 2 years so I am concerned about sequence risk, and the proverbial Achilles Heel of of clinging too dearly to past practices. I currently have a 50/50 stock to bond ratio, mostly in TSM and TBM. I am likely going to continue research in areas tha tight make sense for tweaking.

Staying the course with my investment plan is critical, but I am also trying to be prudent. Which is more prudent, staying the course or staying open to possible stabilizers?

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Thu Aug 25, 2016 8:31 am

I understand what you mean, what's the point of the added return of the higher stock allocation, if you have to hold more in reserve due to sequence risk?

I don't think changing just your bond allocation from Total Bond Market (is that what you currently have?) to Treasuries means you're not staying the course. If you have Total Bond, you already own about 1/2 Treasuries, 1/4 Corporates, and 1/4 Mortgage Backed Securities. Moving to all Treasuries for your bond allocation reduces risk on the bond side. Many on this forum, including myself, believe that the risk should be taken on the equities side, and the bond side should be for safety.

And you wouldn't necessarily be taking on much more interest rate risk. Let's say you went 40% IT/10% LT, based on the duration of the Vanguard funds, IT and LT have durations of 5.25 and 17.2, respectively. At that ratio, the duration for your entire bond allocation would be 7.64. Not so much more than the duration of Total Bond Market, which is 5.78.

You're staying the course, you're just throwing more anchor to windward.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Fri Aug 26, 2016 7:00 am

I see your point. I will consider, NJ. Thanks for your thoughtful replies. Enjoy the weekend ahead.
BH cheers,
NR

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Re: Trident Portfolio

Post by Near retirement » Mon Aug 29, 2016 3:11 pm

Any particular REIT strategy or fund? I am reluctant to buy industry video dual REITS. I have also been "REIT averse"as I own my home and a vacation condo plus have a small investment in TIAA Real Estate so would need not to over balance the real estate part of my assets.

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Mon Aug 29, 2016 8:54 pm

Near retirement wrote:Any particular REIT strategy or fund? I am reluctant to buy industry video dual REITS. I have also been "REIT averse"as I own my home and a vacation condo plus have a small investment in TIAA Real Estate so would need not to over balance the real estate part of my assets.

What's an Industry Video Dual REIT?

I'm at Fidelity, so I'm just using Fidelity Real Estate Index Fund. But you shouldn't buy REIT if you're REIT averse. I was just pointing out that I felt it was a better inflation hedge than gold, which you brought up when you asked about the Trident Portfolio.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Tue Aug 30, 2016 9:45 am

I have no idea! My iPad took over with its own interpretation!! :oops: I think I typed "I am reluctant to buy individual company REITS?"

I agree that REITS are great inflation hedge. Have appreciated your perspective. Thanks, NJ.

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David Jay
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Re: Trident Portfolio

Post by David Jay » Tue Aug 30, 2016 10:23 am

There are many roads to Dublin - I love this thread on the WhiteCoatInvestor website:

http://whitecoatinvestor.com/150-portfo ... han-yours/
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

mickens16
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Re: Trident Portfolio

Post by mickens16 » Tue Aug 30, 2016 12:40 pm

If you were to hold this portfolio would you put all 33% in GLD or keep actual gold? I'm no expert but having that much gold would bother me. If you wanted to do a safer portfolio than maybe the Permanent Portfolio would suffice. If I was to do the Permanent Portfolio with the funds you provided I would split US small value with International small. Just my 2 cents...

heyyou
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Re: Trident Portfolio

Post by heyyou » Tue Aug 30, 2016 2:09 pm

My portfolio grew the most by ...........................................................saving to invest more $$ for most of thirty years.
My allocation mattered much less than my contributions and my behaviors to market crashes. Pick a reasonable allocation, not the highest risk, highest performing one, add 15% of your income to it 30 years, and you will be fine. As Jack Bogle said, "Simple, but not easy."

leonard
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Re: Trident Portfolio

Post by leonard » Tue Aug 30, 2016 2:15 pm

I "love" these "why not alternative X to a boglehead portfolio" questions.

OP - why don't we start with why you think this portfolio would provide better risk adjusted returns than the 3 asset portfolio for your specific situation? Certainly, there must be something about it that you believe recommends the Trident (even over the thousands of other possibilities). That might make a good place to start in answering your question.
Last edited by leonard on Tue Aug 30, 2016 2:25 pm, edited 1 time in total.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

Desert
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Re: Trident Portfolio

Post by Desert » Tue Aug 30, 2016 2:21 pm

arcticpineapplecorp. wrote:Looks like the Trident did better from 1972-2015 than the 3 fund (see below).
I used 33/33/34 (34 for bond). But the problem is you want to know if Trident will do better in the future. That's an unknown that portfolio visualizer (as great as it is) will never be able to tell you. If you stick to the 3 fund portfolio, at least you know you'll get the return of all markets (stock and bond). That should be good enough, but for some reason isn't for many who want to beat the market. Best of luck.


If you run the comparison again, this time starting in 1975 when gold ownership was legalized, the results are quite different. I'm not anti-gold, but many gold-heavy portfolios rely too much on the early 1972-75 great gold reset period, the three years between the date when the gold/dollar peg was discontinued and the date when gold ownership was legalized (in the U.S.). When backtesting with gold, I never use a start date prior to 1975. That reset period was quite literally a once-in-a-lifetime event.

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Re: Trident Portfolio

Post by Call_Me_Op » Tue Aug 30, 2016 3:54 pm

Near retirement wrote:Hello fellow BHs,

I was just reading about the Trident Portfolio on the Investwithstrength.com website. It entails investing in equal measure into three ETFs: US Small-Cap Value Stocks (VBR), Gold (GLD), and Long Term US Treasuries (TLT). Has anyone had any experience with this strategy or any insights that might compare it to the BH 3 fund portfolio strategy? Thanks in advance.


Sounds like the Permanent Portfolio with the cash lopped-off.

Back-testing can be hazardous to your wealth.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Trident Portfolio

Post by Near retirement » Tue Aug 30, 2016 8:40 pm

Back testing, while prudent to a point, CAN truly be hazardous.

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arcticpineapplecorp.
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Re: Trident Portfolio

Post by arcticpineapplecorp. » Wed Aug 31, 2016 5:07 pm

Well, what'ya know? I only started it at 1972 because that's as far back as portfolio visualizer goes. And sure enough the three fund portfolio beat the Trident from 1975 to 2015. How about that!? Thanks Desert. What a difference a few years can make. When you look at it that way, it's scary to put so much faith in a particular slice and dice strategy. I was listening to a podcast this week (I think it was Barry Ritholtz Masters in Business) and someone said something very similar about small cap or value (can't remember which). That the outsized returns were really only due a few years that juiced returns. Should restore one's faith in a total market strategy.

I posted the data below so the OP can see with his/her own eyes that data can be cherry picked quite easily and to confirm what Desert stated.

Image
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: Trident Portfolio

Post by Near retirement » Wed Aug 31, 2016 8:47 pm

That does it, Arctic! Nice graph and confirmation. Thanks.

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Tyler9000
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Re: Trident Portfolio

Post by Tyler9000 » Thu Sep 01, 2016 9:58 am

arcticpineapplecorp. wrote:Well, what'ya know? I only started it at 1972 because that's as far back as portfolio visualizer goes. And sure enough the three fund portfolio beat the Trident from 1975 to 2015. How about that!? Thanks Desert. What a difference a few years can make. When you look at it that way, it's scary to put so much faith in a particular slice and dice strategy. I was listening to a podcast this week (I think it was Barry Ritholtz Masters in Business) and someone said something very similar about small cap or value (can't remember which). That the outsized returns were really only due a few years that juiced returns. Should restore one's faith in a total market strategy.

I posted the data below so the OP can see with his/her own eyes that data can be cherry picked quite easily and to confirm what Desert stated.


Yeah, start date always makes a big difference when comparing portfolios. That's why I prefer to look at all of the start dates at once. By looking at the big picture, you can get a much better feel for the consistency of a portfolio over time and cherry-picked comparisons seem a lot less important.

Image
Image

Near retirement
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Re: Trident Portfolio

Post by Near retirement » Thu Sep 01, 2016 7:01 pm

Am I missing something here? It looks like Trident performed better than Boglehead 60/40, unless I am reading this wrong????

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Tyler9000
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Re: Trident Portfolio

Post by Tyler9000 » Thu Sep 01, 2016 7:22 pm

Near retirement wrote:Am I missing something here? It looks like Trident performed better than Boglehead 60/40, unless I am reading this wrong????


Well, "better" means different things to different people. There are many good ways to invest, and different people prefer different portfolios. IMHO, the most important thing is to seek out one you're comfortable sticking with through both good times and bad.

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njboater74
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Re: Trident Portfolio

Post by njboater74 » Fri Sep 02, 2016 12:13 am

Near retirement wrote:Am I missing something here? It looks like Trident performed better than Boglehead 60/40, unless I am reading this wrong????

From these two charts, it really depends on when you started investing. If you started investing in 1984, then your were better of with the 60/40, but if you started in 1972, just at the US went off the gold standard and gold became legal to purchase, and you were able to somehow acquire gold as an individual investor, you would have really made out.

Unfortunately for fans of the Trident Portfolio, the US can only go off the gold standard once.
When the mob and the press and the whole world tell you to move, your job is to plant yourself like a tree beside the river of truth and tell the whole world - 'No, YOU move'--Captain America, Boglehead

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