Basic Assumptions
Short-Term Debt is 2 year short term Treasury
US Bonds are TIPS
Non-US Bonds are:
a. JP Morgan Global Gov Bond Unhedged 1987-1996
b. Pimco Global Bond unhedged PIGLX Instl ER 0.55% 1997-2007
c. Spreadsheet data at end of post.
US Stocks are Total Stock Market.
Non-US Stocks are Total Intl Stock
From Gibson's Asset Allocation 4th ed. borrowed from this thread
Gibson Asset Allocation 4th ed. Portfolio Results
Code: Select all
1987-2007
Portfolio Sharpe Sortino Max Draw Max Draw
ID Total CAGR Std.Dev Ratio Ratio C-US C-Intl Rebal Unrebal
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2GR $53,098 8.27 3.94 0.91 1.80 0.68 0.49 0.0% 0.8%
2MOD 52,702 8.24 4.18 0.85 1.94 0.78 0.54 0.0 1.4
2LTD 52,481 8.21 4.56 0.78 1.99 0.85 0.50 0.0 3.7
2US 52,203 8.19 5.27 0.67 2.37 0.90 0.44 0.0 9.8
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3GR $67,475 9.52 5.78 0.85 4.45 0.75 0.68 1.1% 4.3%
3MOD 66,636 9.45 6.22 0.78 3.20 0.84 0.70 1.5 8.3
3LTD 65,862 9.39 6.91 0.70 5.14 0.92 0.65 2.3 14.6
3US 64,644 9.29 8.20 0.59 1.81 0.96 0.56 7.9 21.3
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4GR $84,706 10.71 7.94 0.78 2.19 0.75 0.74 4.5% 7.5%
4MOD 83,156 10.61 8.53 0.72 2.73 0.85 0.75 5.7 14.9
4LTD 81,610 10.51 9.44 0.65 2.58 0.93 0.70 10.7 21.4
4US 78,415 10.30 11.33 0.54 1.43 0.98 0.60 20.1 28.8
1. US only equities is bad.
2. The "greater diversification" of more equities can be less "risky" measured by Std.Dev than lesser equities of a US only portfolio.
3. Sortino calculations may be broke?
4. The more diversification the less the draw down. Commodities are probably above most peoples comfort level for greater diversification.
Info on Global Bonds
I've been looking at PIMCO's foreign bond fund vs. global bond fund both unhedged. The only difference between the two is the global fund is also allowed to invest in US bonds. By using US bonds the unhedged fund can "hedge" and this appears to capture most of the upside and less of the downside. The problem is the data here is spotty because PIMCO's foreign fund only has three years of history so I wouldn't give it much weight if any.
Comparing PIGLX to BEGBX does show returns for the global bond fund aren't as extreme. So the allowance of US bonds in the global bond fund moderates quite a bit of the downside and doesn't appear to hurt that much on the upside.
The global unhedged bond fund's strategy also appears to be similar to DFA's new international bond fund that engages in some hedging.
PIMCO Global Bond (Unhedged) Instl (PIGLX)
American Century International Bd Inv (BEGBX)
PIMCO Foreign Bond (Unhedged) I (PFUIX)
Vanguard Total Bond Market Index (VBMFX)
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Year PFUIX BEGBX PIGLX VBMFX
=====================================
2007 10.46 9.89 9.26 6.92
2006 6.64 8.25 5.85 4.27
2005 -9.06 -8.23 -6.36 2.40
2004 13.10 11.57 4.24
2003 19.91 16.60 3.97
2002 23.53 21.33 8.26
2001 -1.66 2.48 8.43
2000 -1.20 0.43 11.39
1999 -10.36 -4.28 -0.76
1998 17.87 12.44 8.58
Global Unhedged Bonds 1987-2007
2.20 <--1987
6.80
14.00
8.60
15.50
4.60
12.30
1.30
19.30
4.40
-0.90
12.50
-4.29
0.43
2.48
21.33
16.59
11.56
-6.36
5.85
9.26 <--2007