"All Weather" Investing?

[bitchstewie]

I read a lot of threads on here where my perception is that most people invest either in either 100% equities or bonds.

Just perception and of course I might be wrong but mentions of the likes of Fundsmith and Lindsell Train seem to outweigh mention of boring bond and index linked treasury funds

In the current climate what do people make of the like of "Harry Browne" style portfolios?

Permanent Portfolio

The nearest "off the shelf" example that leaps to mind is something like Troy's Trojan fund.

[egor110]

Wouldn't a vanguard life strategy allow you to chop and change the % of bonds to stocks you hold at any one time ?

[DoubleSix]

If you are genuinely looking for smoothed returns (dampened volatility) at the expense of total return then ‘with profits funds’ have traditionally sought to offer this.

Check out something like the Pru Fund.

[bitchstewie]

egor110 said:

Wouldn't a vanguard life strategy allow you to chop and change the % of bonds to stocks you hold at any one time ?

Yes but it would always "only" balance between bonds and stocks.

No gold and no cash (at lease not within the funds).

[anonymous-user]

Vanguard lifestrategy 40% seems to be holding up well. It's 40% equity, 60% bonds, a passive tracker but with a UK bias.

100% equity is up 3% past 12 months. The above index is up 8% due to the rally in bonds. I'm sure it's not perfect, but it seems to be a good middle ground.

Too late this time around though? Safe assets are ballooning in price.

[DoubleSix]

A basket of shares and bonds will still exhibit volatility and correct in macro economic downturns.

If a genuinely ‘all weather’ approach is required, as I interpreted the term, then a different product is required...

For example

[egor110]

bhstewie said:

egor110 said:

Wouldn't a vanguard life strategy allow you to chop and change the % of bonds to stocks you hold at any one time ?

Yes but it would always "only" balance between bonds and stocks.

No gold and no cash (at lease not within the funds).

Surely cash you sort out yourself ?

It doesn't balance stocks/bonds you pick how deep into stocks you want to go or how safe into bonds you want to go , it's not a 50/50 split unless you want that to be the ratio.

Surely now you've missed the boat to do much ?

To late to buy more stocks cheap and sit on them and let the value rise but to late to buy bonds because there prices have gone up .

[bitchstewie]

egor110 said:

Surely cash you sort out yourself ?

It doesn't balance stocks/bonds you pick how deep into stocks you want to go or how safe into bonds you want to go , it's not a 50/50 split unless you want that to be the ratio.

Surely now you've missed the boat to do much ?

To late to buy more stocks cheap and sit on them and let the value rise but to late to buy bonds because there prices have gone up .

It wasn't a "what should I do?" question it was what do others do

I've been impressed by how LifeStrategy 40 seems to have held up so far.

But it's one approach and in one set of conditions and it will always re-balance to 40% equities and 60% bonds whatever conditions might be.

A lot of the "defensive" funds (including Intelligent Money I believe) hold a reasonable amount of cash.

[Derek Chevalier]

DoubleSix said:

A basket of shares and bonds will still exhibit volatility and correct in macro economic downturns.

If a genuinely ‘all weather’ approach is required, as I interpreted the term, then a different product is required...

For example

If you compare Prufund's drawdown during the GFC with a globally diversified portfolio of equities and bonds that has given broadly similar subsequent returns it's not immediately clear what problem it is solving.

[DoubleSix]

Bit glib, it clearly offers smoothed return for those seeking it.

[Derek Chevalier]

bhstewie said:

I read a lot of threads on here where my perception is that most people invest either in either 100% equities or bonds.

Just perception and of course I might be wrong but mentions of the likes of Fundsmith and Lindsell Train seem to outweigh mention of boring bond and index linked treasury funds

In the current climate what do people make of the like of "Harry Browne" style portfolios?

Permanent Portfolio

The nearest "off the shelf" example that leaps to mind is something like Troy's Trojan fund.

You could argue it's part of an investor's learning journey. Someone starting out may

1. Buy into someone claiming to be able to outsmart the market.
2 Believe in market timing.
3. Pick the best performing "star" managers.
4. Take too much, or too little risk.


But as they mature, and go through a few market cycles (and get burnt) their approach might changeRegarding something like the Harry Browne portfolio, it really depends what objective you are attempting to fulfil. If you are a client in drawdown and want your money to last as long as possible it might give you a different answer to someone that is very nervous of market falls.

It might be worth understanding why offerings from Vanguard et al do not contain gold and (not much) cash.

Also it might be worth investigating the worst downside that your portfolio would have historically given (1 year, peak to trough etc) and be as sure as you can be that you would stay the course.

[Derek Chevalier]

DoubleSix said:

Bit glib, it clearly offers smoothed return for those seeking it.

It didn't during GFC.

https://www.pruadviser.co.uk/knowledge-literature/...

[DoubleSix]

Derek Chevalier said:

DoubleSix said:

Bit glib, it clearly offers smoothed return for those seeking it.

It didn't during GFC.

https://www.pruadviser.co.uk/knowledge-literature/...

Not suggesting with-profits are immune to market crises but in the context of the discussion I think they should be mentioned, non?

[bitchstewie]

Derek Chevalier said:

You could argue it's part of an investor's learning journey. Someone starting out may

1. Buy into someone claiming to be able to outsmart the market.
2 Believe in market timing.
3. Pick the best performing "star" managers.
4. Take too much, or too little risk.


But as they mature, and go through a few market cycles (and get burnt) their approach might changeRegarding something like the Harry Browne portfolio, it really depends what objective you are attempting to fulfil. If you are a client in drawdown and want your money to last as long as possible it might give you a different answer to someone that is very nervous of market falls.

It might be worth understanding why offerings from Vanguard et al do not contain gold and (not much) cash.

Also it might be worth investigating the worst downside that your portfolio would have historically given (1 year, peak to trough etc) and be as sure as you can be that you would stay the course.

One of the reasons I asked is that I've not been investing for long but I think I've learned by own tolerance for volatility and I find it interesting whenever there are volatility flare ups seeing some people choose to cash in and sometimes at a loss whilst maybe if they'd been more cautiously positioned in the first place it wouldn't have happened.

I'm fascinated by how well asset allocations like the Harry Browne portfolio have historically performed and how little they've drawn down.

Even modest growth can compound massively over the long term if simply left to do it.

I wonder if people focus on making money whilst perhaps neglecting that one way to make money is not to lose money?

[mikeiow]

I'm sure you've read much of the IM sticky....the PH Equity selection looks a pretty solid way to invest for "all weathers".
That and a decent passive index fund (IM 80/100, Vanguard LS80/100) would pretty well suit me.
If you prefer active, go ahead!

With the odd punt on some out there things for kicks (I have a minuscule amount in p2p with Kuflink, & thinking about popping a bit more in - they seem a fair IF-ISA option....albeit probably more risky than most, but if it is money that could afford to be lost in worst-case scenario.....)

£1 on ManU v ManC looked fair at 80:1 too (albeit I would firmly expect to lose that quid, & in case anyone is in doubt, that IS gambling, not investing

[bitchstewie]

It's more that if you look to the past (all we have to go on) it's quite remarkable how little equity exposure you need to get consistent long term returns without large drawdowns.

You see this in a lot of institutional and endowment type portolios.

Ray Dalio is probably a good example and is used in quite a few examples.

Maybe it's trying to be a bit too smart? Who knows?

[anonymous-user]

bhstewie said:

how little they've drawn down.

bhstewie said:

without large drawdowns

What is "drawn down"?

[bitchstewie]

Probably me using the wrong term

Peak to trough for a given period.

I just wonder how many investors are prepared for what history has shown can and has happened?

[NickCQ]

DoubleSix said:

Bit glib, it clearly offers smoothed return for those seeking it.

You can smooth your return by checking your portfolio less often - that’s all the Pru fund is doing as they still have the underlying market risk.

[DoubleSix]

NickCQ said:

You can smooth your return by checking your portfolio less often - that’s all the Pru fund is doing as they still have the underlying market risk.

Thanks. I’m well aware of how the PruFund works.