Hopefully can restore some civility
I made some charts of rolling returns.
The data is taken from Simba’s spreadsheet and adjusted for inflation. Note: it is hard to perfectly replicate a PP in his spreadsheet because the long bonds are not volatile enough. So, for cash I used a 2 year Treasury fund to help compensate for the lack of duration in the long bond fund. Also, the PP calls for 35%/15% rebalancing bands, but Simba’s spreadsheet assumes annual rebalancing. All of these little details are unlikely to make a material difference, but I am a big fan of full disclosure.
The 60/40 achieved a 4.74% annualized real rate of return from 1972-2010 and the PP returned 4.93%. So, the overall CAGR is a basically a tie, this battle will have to be settled in how the portfolios manage risk.
60/40 Highest 5 Year Real Rate of Return: 16.4%
60/40 Lowest 5 Year Real Rate of Return: -4.4%
PP Highest 5 Year Real rate of Return: 9.8%
PP Lowest 5 Year Real Rate of Return: 1%
60/40 Highest 10 Year Real Rate of Return: 11%
60/40 Lowest 10 Year Real Rate of Return: -1.4%
PP Highest 10 Year Real rate of Return: 6.3%
PP Lowest 10 Year Real Rate of Return: 3.4%
I think these charts tell a truly honest story for what it is like to be an investor in either portfolio. We can clearly see that the PP is not perfect, but it has significantly less variability in real returns.