a very common mistake - iese€¦ · thereturn (and risk) of the portfolio small‐caps value...

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1.Assets&Products• Relevantassets• Financialproducts

2.ReferencePortfolios• 100%equity• The60‐40portfolio• Thepermanentportfolio• Variationsofthepermanentportfolio• Aggressiveportfolios• Otherportfolios

WinningInvestmentStrategiesReferencePortfolios

JavierEstradaWinter,2014

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

AVeryCommonMistake

Donotfear‘simple’approaches

Simplemaystillbesophisticated

Simpletypically implieslowcost(Time/$)

Simpletounderstand≠Simpletoimplement

Go

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JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

Assets&Products

Stocks

Bonds

Cash

Gold

∙iSharesMSCIACWI(ACWI)∙VanguardTotalWorldStock(VT)

∙iSharesGlobalInflationLinkedBondFund(GTIP)

∙Moneymarketfund∙Bankdeposit

∙iSharesGoldTrust(IAU)∙SPDRGoldShares(GLD)

Focusonthree(four)assets

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

100%Equity

An‘aggressive/conservative’portfolio

Fullyinvestedinstocks/Broadlydiversified

3

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

The60‐40Portfolio

The‘industrystandard’

Blendofthetwomajorassetclasses

Go

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ThePermanentPortfolio

4

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ThePermanentPortfolio

Prosperity

Recession

Inflation

Deflation

∙Stocks

∙Cash

∙Gold

∙Bonds

Go

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ThePPWithoutCash

25%incash?!

Equally‐weightedportfolioofstocks/bonds/gold

5

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

The60‐30‐10Portfolio

SamethreeassetsasPP withoutcash

Differentweighting(60S‐ 30B‐ 10G)

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ReferencePortfolios

(*)Annualrebalancing

6

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

AMoreAggressivePortfolio?

Enhancingthereturnof100%equity

Aninvestormayneed/wantahigherreturnthan thatexpectedfromthe(world)equitymarket

Core(Neutralposition)

Satellites(Tilts)+

‘Core‐satellite’approach

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

AMoreAggressivePortfolio?

Neutralposition:Worldmarket(Avoidthe‘homebias’)

Introducetiltstoenhancethe return(andrisk)oftheportfolio

Small‐caps

Value

Emergingmarkets

Frontiermarkets

iSharesMSCIACWI(0.34%)

VanguardTotalWorldStock(0.19%)

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JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

TheKISSPortfolio

KeepItSimple, Saver

USstocks

Internationalstocks

USBonds

Invarying‘personalized’proportions

Samegeneralidea:Buy/Hold/Rebalance

Go

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

TheGoneFishin’Portfolio

Buy/Hold/Rebalance (60‐30‐10)

VanguardTotalStockMarketIndex 15%

VanguardSmall‐CapIndex 15%

VanguardEuropeanStockIndex 10%

VanguardPacificStockIndex 10%

VanguardEmergingMarketsIndex 10%

VanguardShort‐TermBondIndex 10%

VanguardHigh‐YieldCorporatesFund 10%

VanguardInflation‐ProtectedSecuritiesFund 10%

VanguardREITIndex 5%

VanguardPreciousMetalsFund 5%Go

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JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

KeepInMind

Simplemaybegood…

…foryou, whichiswhatreallymatters

…andyetdifficulttoimplement

…andevenbetterthanmany(very)costlyalternativesoffered intheindustry

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

InShortSimplemaybegood– andevenbetterthanmanyverycostlyalternativesofferedintheindustry Fewassets/productsareoftenmorethanenoughforindividualinvestors Alwaysask:WhatdoIgain bymakingmyportfoliomorecomplexthansomeofthesesimpleportfolios?

Modelportfolios AresimpleandsophisticatedatthesametimeHaveperformedwell(thoughyoushouldaskwhetherthatisgoodperformanceforyou) Canbeimplementedataverylowcost Considerthemonlyareference(thatmayormaynotbeappropriateforyou)

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JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

Appendix

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

SimpleApproaches

Back

10

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

The60‐40Portfolio

Back

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ThePermanentPortfolio

Go

11

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

ThePermanentPortfolio

Go Back

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

TheKISSPortfolio

12

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

TheKISSPortfolio

Back

JavierEstrada

IESEBusinessSchool

BarcelonaSpain

WININVWinter,2013

TheGoneFishin’Portfolio

BackGo