Ray Dalio's (surprising) recommended AA

[chang]

From "How To Invest Like Ray Dalio":
finance.yahoo.com/news/invest-ray-dalio-134959357.html

"Dalio told CNBC that a diversified portfolio might consist of 30% stocks, 40% long term U.S. bonds, 15% intermediate U.S. bonds, 7.5% gold and 7.5% other commodities."

Hmm, I am little surprised to see 55% intermediate/long bonds. (Maybe he means corporates, not Treasuries.) retiredat48 I know you would not agree with this.

15% commodities? Maybe. I am buying some gold every month, although at my current pace it will take me 7.5 years to get to 7.5% PV. Maybe I should speed up a little.

Note: Dalio is also a China bull. See this thread.

[FD1000]

I have been saying it for years, retirees should pay attention to bonds, stocks are easy, you can just use indexes long term.
Bonds are the real answer, some bonds have higher dist, some bonds are ballast, some bonds correlate to stocks.
It takes me about 2 minutes to be all in cash or fully invested, after all, how long it takes to trade only 2-3 funds 

[chang]

Jan 25, 2021 21:09:55 GMT FD1000 said:

I have been saying it for years, retirees should pay attention to bonds, stocks are easy, you can just use indexes long term.
Bonds are the real answer, some bonds have higher dist, some bonds are ballast, some bonds correlate to stocks.
It takes me about 2 minutes to be all in cash or fully invested, after all, how long it takes to trade only 2-3 funds 

More than one road to Dublin. I don't pay much attention to bonds (ballast only) and focus instead on stocks. Stocks have vastly greater potential than bonds. I don't need to hit home runs, although most of us did so in 2020. Even a double (or just a stolen base) with stocks is the equivalent of a grand slam in the bond world. So in terms of reward for time and effort spent, I believe bonds are a waste of my time and stocks are where I should focus my energy to develop ideas.

I also do not believe in frequent trading, nor in the actionable value of "momentum". So your strategy does not work for me.

It is perfectly OK that we have different, even opposite strategies. Our goals and needs are probably not the same either. The important thing is to recognize that sometimes we are right, and sometimes we are wrong, and (IMO) not to say the same thing for years!

[FD1000]

Jan 25, 2021 22:46:19 GMT chang said:

Jan 25, 2021 21:09:55 GMT FD1000 said:

I have been saying it for years, retirees should pay attention to bonds, stocks are easy, you can just use indexes long term.
Bonds are the real answer, some bonds have higher dist, some bonds are ballast, some bonds correlate to stocks.
It takes me about 2 minutes to be all in cash or fully invested, after all, how long it takes to trade only 2-3 funds 

More than one road to Dublin. I don't pay much attention to bonds (ballast only) and focus instead on stocks. Stocks have vastly greater potential than bonds. I don't need to hit home runs, although most of us did so in 2020. Even a double (or just a stolen base) with stocks is the equivalent of a grand slam in the bond world. So in terms of reward for time and effort spent, I believe bonds are a waste of my time and stocks are where I should focus my energy to develop ideas.

I also do not believe in frequent trading, nor in the actionable value of "momentum". So your strategy does not work for me.

It is perfectly OK that we have different, even opposite strategies. Our goals and needs are probably not the same either. The important thing is to recognize that sometimes we are right, and sometimes we are wrong, and (IMO) not to say the same thing for years!

Maybe you didn't get my main point.  This is not how I invest, this was a generic comment. I joined a men's club last year, we have several activies, most of these men age is 70-75%. Most have about 60-70% in bonds, the well off, mainly MDs have about 50-60% in stocks, but a few have 75-80% in bonds, they are fine with this allocation and don't want to lose more than10%. Last March was an eye opener.  Most use indexes.  Tot bond index is one of them + they were scared of rising rates so they have been using ST high-rated munis.  At the end of April I told them, the market gave us one of the best opportunities, it makes no sense to stay with high-rated bonds, they should invest at least 50% of their bonds in a HY Muni such as MMHAX (only 2 listen to me).  The chart below shows that since 5/1...MMHAX was up +15.2%...VBTLX+VWUSX made less than 2%.

And what about stocks? as I said, just use simple indexes.  Look at the following indexes and select what you want between SP500/Total US index/Tech/Value/SC/EM (SPY,VTI,QQQ,SCHD,IWM,EEM).

So for some retirees the options are not only stocks + only ballast bonds, they can improve on their bonds...as you said, more than one road to Dublin

Attachments:

[chang]

Just as some bond categories have excelled, so some stock categories have excelled: Communications (PRMTX), Technology, Asia (FSEAX), etc. up 50-60-70% in a year. It's always a revolving door. You can watch the door and jump in and out—in the bond world—or the stock world—or the CEF world—or any other world. I happen to think the stock world offers bigger pay-offs.

But I should repeat that I belong to the Edmund Burke School of Investing: a gentle nudge here and there, nothing quick or drastic; 95% B&H.

It's all a matter of preference, inclination, experience and passion level. We agree on that: many roads to Dublin.

[Norbert]

There actually aren't that many roads to Dublin. I count only seven:



The N7 is best.

FD thinks that retirees should focus on bond OEFs.  I don't know how he knows that, but it's definitely an alternative.

Yes, there are several different kinds of bonds. The challenge is that you have to trade in and out of the various sectors and funds to achieve substantial returns and to avoid significant volatility (e.g., if using SEMMX, IOFIX or TLT). As FD tells it, most people shouldn't try that. So, it's not clear to me how this can work for most retirees.

As for indexing the stock market, that's a possibility too. Many things are possible.

Personally, I don't understand this. If I'm smart enough to pick and choose bond sector trends going forward, why can't I do the same with stocks? The trends evident in LC Growth, energy, tech, health care, and Asia have been very strong.

[Chahta]

I agree and have my equities in index ETFs with 1 managed fund in my taxable. Bond funds are so much more complicated to me and I admit I am fascinated by them. I have never held a bond fund more than 1 year since I started getting ready to retire in 2017. I am running an experiment of sorts. I sold down to a small position in IT core and plan to hold it thru thick and thin. History tells me it is OK to do that with quality funds with a long record. Last March taught me to keep my eye on them though. But no more being sucked in by miraculous funds that have a risk free 5% yield. Also last March taught me that bonds are like stocks. When they go on sale is the time to make real money.

"So for some retirees the options are not only stocks + only ballast bonds, they can improve on their bonds...as you said, more than one road to Dublin"

This is kind of what I am doing by adding some good quality MS and HY muni. I am too dumb to get the best performance. I want good performance.

[FD1000]

Jan 26, 2021 9:03:28 GMT Norbert said:

There actually aren't that many roads to Dublin. I count only seven:

View Attachment

The N7 is best.

FD thinks that retirees should focus on bond OEFs.  I don't know how he knows that, but it's definitely an alternative.

Yes, there are several different kinds of bonds. The challenge is that you have to trade in and out of the various sectors and funds to achieve substantial returns and to avoid significant volatility (e.g., if using SEMMX, IOFIX or TLT). As FD tells it, most people shouldn't try that. So, it's not clear to me how this can work for most retirees.

As for indexing the stock market, that's a possibility too. Many things are possible.

Personally, I don't understand this. If I'm smart enough to pick and choose bond sector trends going forward, why can't I do the same with stocks? The trends evident in LC Growth, energy, tech, health care, and Asia have been very strong.

No need to trade and I can't find where I mentioned SEMMX,IOFIX. Can you please show it?

The next several years would not look pleasant for high-rated bond indexes. Suppose you have 70% of your money in BND and ST Munis, there is a good chance you will make about 1-1.5%% in the next several years. At a minimum, I would switch to BIV, but why would I settle on BIV if I can use a managed fund such as GIBLX. I wouldn't stop there, ST Munis? nope, at a minimum I would use VWALX. I would also use funds such as PTIAX and TSIIX.
Of course, you can combine both indexes+managed and use BIV+PTIAX+TSIIX+VWALX.
Basically, you may double your return in bonds. 

Stocks? no need to select any hot sector/category/region. SPY,VTI,QQQ,SCHD,IWM,EEM should cover most of what you want, sure, I can come up with several alternatives starting with my 2 allocation LT funds VWIAX+PRWCX and definitely I can make more bold choices.

For years, I have been saying, that you can use indexes for stocks and the higher % you have in bonds, you should use some managed bond funds.  

I know it's very difficult for you to distinguish between what I do to what I post about generic ideas.

Below is a real life story why KISS is what most investors need:

An older relative retired around 2001-2 and told me he saw several financial advisors and thinks they just to charge him 1% and he really doesn't trust him and markets got volatile and he wants a stable LT simple portfolio and all his money is at Vanguard. Based on his portfolio, he needed about 3.5% yearly withdrawal. I told him he can be in just 35-40% stocks and the rest bond and to invest in just 2 funds VWIAX+VCCGX. Every 2-3 years this guy calls me and thank me how I saved him so much money and how it works.

I knew VWIAX would be better but I wanted to diversify a bit more. Below are the results(link)


As I expected VWIAX was the best, my combo was pretty good and both beat the indexes for risk/reward and why Sharpe+Sortino are better.

That was 18-19 years ago. Looks to me pretty good LT risk/reward

Attachments:

[Norbert]

FD1000

"Stocks? no need to select any hot sector/category/region. SPY,VTI,QQQ,SCHD,IWM,EEM should cover most of what you want ..."

I can't agree.

Looking at Emerging Markets (EEM), I don't want to own the entire global emerging market. I want selected stocks in the Asia region only. Look at the five year performance difference between EEM, FSEAX, and MATFX, below.

The numbers are amazing. This is an example of why my focus is on both stocks and bonds and why I don't index most markets.

Don't get me wrong. Unlike chang, I don't simply use bonds as ballast. There are excellent multi-sector funds that work for me.

Vive la difference!

[fred495]

FD said: " I told him he can be in just 35-40% stocks and the rest bond and to invest in just 2 funds VWIAX+VCCGX."



There is no "VCCGX" ticker symbol that I could find, did you mean to type "VSCGX" instead? That would be a good two-fund combo for someone who wants a 40/60 stock/bond portfolio.

Fred

[yogibearbull]

I put Dalio's suggested portfolio to the effective-equity test using 3-yr month-to-month PV data with SPY 30%, BLV 40%, BIV 15%, GLD 7.5%, USCI 7.5% LINK

It has effective-equity of 44% [conservative-allocation] but CAGR of moderate-allocation. So, look at how the components work together and the result is not bad for what he called a diversified portfolio.

[FD1000]

Jan 26, 2021 15:57:59 GMT fred495 said:

FD said: " I told him he can be in just 35-40% stocks and the rest bond and to invest in just 2 funds VWIAX+VCCGX."



There is no "VCCGX" ticker symbol that I could find, did you mean to type "VSCGX" instead? That would be a good two-fund combo for someone who wants a 40/60 stock/bond portfolio.

Fred

Yep, my mistake, it should be VSCGX and what you also see in the PV link.

[FD1000]

Jan 26, 2021 14:55:56 GMT Norbert said:

FD1000

"Stocks? no need to select any hot sector/category/region. SPY,VTI,QQQ,SCHD,IWM,EEM should cover most of what you want ..."

I can't agree.

Looking at Emerging Markets (EEM), I don't want to own the entire global emerging market. I want selected stocks in the Asia region only. Look at the five year performance difference between EEM, FSEAX, and MATFX, below.

The numbers are amazing. This is an example of why my focus is on both stocks and bonds and why I don't index most markets.

Don't get me wrong. Unlike chang , I don't simply use bonds as ballast. There are excellent multi-sector funds that work for me.

Vive la difference!

View Attachment

You are correct, I'm sure several M* posters can do much better selecting funds, I'm talking about simplicity. 
Another important point is that in order to improve performance you must use a lower number of funds.

I have done that with stocks too, I have held SGIIX, FAIRX, OAKBX from 2000 to 2010, between 8 to 10 years.  My longest hold of any fund was SGENX then into SGIIX.

You are also correct about EM, I wanted to look for only Asia ETF but my Bridge game already started....but, but, you selected top funds, did you own these funds in the last 5 years and at high %. These funds use high tech companies. For only Asia maybe AIA. I can play the same game, how about ARKG (chart).  

Can you believe it? I said you were correct twice.

[steadyeddy]

This thread is an example of how the actual topic of the thread gets completely hijacked. Are we falling back into the old habits? I urge all to introspect.


Admin\chang - How do I leave this group? No one will miss me if I leave but I came to this board with different expectations.

[chang]

steadyeddy As hijackings go I don't think this one is too bad. The posts have continued to revolve around AA. Conversations meander; that's a fact of internet life. Norbert actually made a comment that caught my attention and I opened a new question about it.

Virtual personalities also vary; sometimes one has to look past some people whose style isn't to their liking.

I know there's a way to leave a group because I left AC. But I cannot see it on my Profile, probably because I created this forum. I would encourage you to stay awhile longer.

[yogibearbull]

steadyeddy , chang , 

1st, be aware that posters have ProBoards (global) login.

2nd, they select one or more of 3 million forums within it and each requires a separate login - the username will remain the same but Display name can be same or unique to each forum.

This means that one can sign up for multiple ProBoards forums and can leave some if one wants to as:
Profile/Edit Profile/Settings/Delete Forum Account

But this way is not permitted for forum administrators, just as pilots are not allowed to jump out of planes during flight   . If they want to delete their forum(s), they can do that from Dashboard, www.proboards.com/account/forum .

Just as Recent Threads/Posts were added to the Navigation bar, a Dashboard button can also be added to it. That makes it easy for posters to move across ProBoard forums if they belong to several of them.

This is probably more than you wanted to know  .

[steadyeddy]

Thanks Admin and YBB.

[Norbert]

Jan 27, 2021 1:31:55 GMT steadyeddy said:

This thread is an example of how the actual topic of the thread gets completely hijacked. Are we falling back into the old habits? I urge all to introspect.


Admin\chang - How do I leave this group? No one will miss me if I leave but I came to this board with different expectations.

The off topic meanderings of certain posters drives me crazy too. Unfortunately, I'm one of the worst offenders. Will try to be more disciplined.

[steadyeddy]

I want to request all to set high standards for this board. Which means: 1) No self-boasting, 2) No hijacking, and 3) Staying to the topic of the thread.

If you have nothing to add, just don't participate. If you participate, please try to follow the high standards we want from this board.

Happy Investing!

[Norbert]

Growth of $10,000 ...

Blue = Wellesley
Red = Dalio Portfolio
Yellow = S&P 500

(Click to enlarge.)




The Dalio portfolio is VTSMX, TLT, PIGIX, GLD, and DBC, using the percentages cited above.

Using Dec 31 prices.

[steadyeddy]

Jan 28, 2021 6:00:21 GMT Norbert said:

Growth of $10,000 ...

Blue = Wellesley
Red = Dalio Portfolio
Yellow = S&P 500

(Click to enlarge.)

View Attachment


The Dalio portfolio is VTSMX, TLT, PIGIX, GLD, and DBC, using the percentages cited above.

Using Dec 31 prices.

Interesting chart... thanks for posting. I think I am happy with Wellesley as the tortoise (as opposed to a hare). 

[Chahta]

I am not familiar with Mr. Dalio. Never followed any “gurus”. But his portfolio seems to be generic for a long term B&H investor looking for safety and low growth. It appears his portfolio has supported a 4% WR in the past. Not sure about how it will work the next 10 years.

[yogibearbull]

Ray Dalio has a Wiki entry.

He gave a generic public recommendation for this time. He started his hedge fund from his apartment & it became the biggest hedge fund in the world at one time. Of course, this wasn't his portfolio that made him rich & famous.

[Deleted]

Wealthy man, four sons, one is bipolar with depression and history of physical outburst(s), and another crashed his car into a Verizon store dying in the flames of the wreckage.