Charles Rotblut, CFA is a vice president at AAII and editor of the AAII Journal. Follow him on Twitter at twitter.com/charlesrotblut.


Discussion

Ed from New Jersey posted about 1 year ago:

Those looking for an alternative portfolio should consider Harry Browne's "Permanent Portfolio".

Browne developed what he thought was the optimal portfolio: 25% broad-based equity, 25% long-term Treasuries, 25% gold and 25% moeny markets. Browne believed that this was a "portfolio for all economies" (inflation, deflation, etc..).

Before you scoff, consider that this portfolio has an average 8-9% average annual return over the past 30+ years with lower volatility than the S&P 500.

Those interested in learning more can go to "crawlingroad.com".


Morton from North Carolina posted about 1 year ago:

Suggest you also consider Business Development Companies. They are like private equity cos but pubically traded and specializing in smallish companies. There is an EFT from Wells Fargo that tracks a BDC index by UBS, I believe. Interesting ideas.


Robert from Massachusetts posted about 1 year ago:

Very helpful article. Thanks.


Floyd from Florida posted about 1 year ago:

There is a great deal of information here that should be closely evaluated as to how it fits into your financial situation and goals.


Billy from Colorado posted about 1 year ago:

MUCH MUCH too long.


David from Washington posted about 1 year ago:

Thank you for the correlations! I have trouble finding them on the web and I'm not sure how to figure them myself. I think they are crucial to asset allocation decisions. I will be making some adjustments to my portfolio when valuations are right. A good, timely article. Well done!


Teck See from Illinois posted about 1 year ago:

are the correlations available from Morningstar?


Charles Rotblut from Illinois posted about 1 year ago:

Teck, I had Morningstar specifically run the data for this article. -Charles


Hwan Perreault from Washington posted about 1 year ago:

Where can I find more information on your comment:
MLPs do have the potential to create tax headaches, particularly if unrelated business income exceeds more than $1,000 a year from securities held within an IRA. (The specific tax that could be triggered is referred to as UBTI.)

An IRA is normally tax exempt until withdrawal.


R Herrera from Texas posted about 1 year ago:

Interesting, but I believe it requires more studying before going into it. Investing in the SSR stocks seems more fitting to me. Also, the portfolio in small stock and mutual fund/ETF are good choices. I'm interesting in Phil Towns's style of investment but will more to read about it.

Rey from Texas


Ed from New Jersey posted 8 months ago:

An alternative portfolio that generates higher average returns than the S&P 500 is good, but doing so with greater volatility is not good.

Diversification is supposed to lower risk and volatility, not increase it.


Michael Henry from Oregon posted 8 months ago:

Is the additional risk (volatility) worth it? I'm surprised you did not include the Sharpe ratios.

(10.8-1.5)/13.4 = 69%

(8.1-1.5)/11 = 60%

(7-1.5)/10.4 = 55%

Not only does the alternative portfolio provide higher absolute returns, it also provides higher risk adjusted returns.

For correlations try:
http://www.assetcorrelation.com/
Keep in mind that correlations tell you what happened in the past.

Yes?


Barry P. from Illinois posted 8 months ago:

To Michael Henry:
As a modestly knowledgeable investor, I would appreciate a little more explanation regarding how the alternative portfolio provides a higher risk adjusted return. I understand Sharpe ratio's, but can't figure why the $40,625 loss for the alternative portfolio is a better risk adjusted return than the $32,921 loss for the supplemental portfolio or the $28,809 loss for the benchmark portfolio. Thanks.
Barry P.


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