I was playing around with Portfolio Visualizer, and I found that a 40% Small Cap Value, 60% Long Term Treasury mix appears to perform just as well as the wider stock market, at much lower volatility. This appears to hold true in multiple time periods, and it seems like the small cap amplifies stock market gains, while the long-term treasury bonds appreciate in value during recessions to smooth everything out. The small cap indexes probably also filter out the massively hyped stocks during bubbles.
Obviously, this shouldn't happen. Is there something about the 1978-now that makes this combination especially good? Or can I expect this rather weird combo to work better than a broad stock market index in the future?
(I found this combination by starting with the rather infamous golden butterfly portfolio and simplifying things. Contrary to what lots of people might suspect, the golden butterfly doesn't appear to outperform due to "overfitting" with gold --- instead pretty much all of its low-volatility high gains seems to come from small cap + long term treasury)
Submitted July 23, 2019 at 09:33PM by ithisa https://ift.tt/30RSwmq
