The current disastrous period for every asset class except for commodities has made me wonder how a very conservative, very diverse portfolio would have performed over these past few months. Say hello to the RPC Stability portfolio, which I will now track going forward.
It has been a little bit tough to start off an investing website ostensibly helping people to figure out better ways to invest, only to find yourself in the midst of a pretty bad contraction. We just officially entered “bear market” territory this week, and I can’t say good times are just around the corner. The search for better portfolios has thus become a search for the cleanest dirty shirt in the laundry bin, only if all the shirts looked to have just been through the Tough Mudder obstacle race.
Anyway, the economic news got me thinking: What RP inspired portfolio might survive? I wanted to make a realistic one, and of course, I wasn't just going to cheat and say 98% commodities, 1% equities and 1% bonds. I also wanted an unlevered portfolio, to complement my two existing RPC original portfolios which have +60% (the RPC Income) and +100% leverage (the RPC Growth).
I thus present the RPC Stability portfolio, comprised of ten assets, each equally weighted to create a diverse but still easy to manage portfolio:
Based on a backtest since 1970, it has an expected return of 6% and a standard deviation of 8.3%, both comparable to other conservative portfolios like the Golden Butterfly of the All Seasons. To read the full overview of the RPC Stability portfolio, please read the portfolio write-up below:
Justin
To track the portfolio, I decided to do a full look back to the same starting point as the others, July 1st, 2021. This will allow an “apples to apples”comparison of it with the other test portfolios. You can see its performance for the same periods I have been using for the others (Quarterly for 2021; monthly starting in 2022) in this spreadsheet:
The headline number is that the $1,000,000 starting figure is down to $945,210 as of June 1st, 2022. This is a loss, yes, but would still be the highest of the eleven portfolios and about $34,000 above the RPC Growth, which had been the best. Keep in mind, of course, that this figure is net of withdrawals for living expenses, so as for the key question - can the portfolio endure a 4% withdrawal rate - the answer would be, not quite, but close.
Looking at the data from previous months, though, gives you a sense of this portfolio’s limitations, as well. As of January 1st, 2022, when all portfolios were doing fairly well and in positive territory, the RPC Stability would have ranked eleventh at $1,003,537, or about $57,000 below the leader at that time, the RPC Growth portfolio.
I’m eager to see how this portfolio does going forward. If bas times persist, then just how bad will it be for this portfolio? If the bad times reverse, how long before it is passed by the others?
The whole purpose behind these test portfolios is to put various constructions through their paces, and I think this one will be an instructive one in the mix.