Includes Cash

Richer Retirement Portfolio

The Richer Retirement Portfolio by William Bengen aims to elevate the old 4% rule by expanding the one’s asset allocation to modern asset options.

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Home Country
currency, inflation, & funds
% Asset Class
22% United States Large Cap Blend Stocks
22% United States Small Cap Blend Stocks
11% Developed ex-US Large Cap Blend Stocks
40% United States Intermediate Term Treasury Bonds
5% United States Treasury Bills
Asset Notes

1. Bengen specifically recommends 11% large cap blend and 11% mid cap blend. Since I don’t have data for mid caps, I grouped them into the large cap allocation. Note that most large cap funds already cover mid caps.

2. Bengen specifically recommends 11% small cap blend and 11% micro caps. Since I don’t have data for micro caps, I grouped them into the small cap allocation.

Author

Bill Bengen

Bill Bengen is an MIT-educated financial advisor most well-known for quantifying the original 4% rule for retirement. You can read about the Richer Retirement Portfolio in the book A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More.

Overview

As the original creator of the ubiquitous “4% rule” for retirement that so many investors today take for granted, Bill Bengen has always been in a strange position. On the one hand, his ability to convince an entire generation of retirement planners that effective backtesting is highly important must surely be a pride point. But on the other, Bill has always been refreshingly candid about the limits of his assumptions. And even he will tell you that there’s more to retirement planning than just building your life around a single number without looking deeper.

The Richer Retirement portfolio is named after the book in which he aims to expand upon his classic retirement insights. A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More is more than just a treatise on the benefits of expanding his analysis to assets not before considered. It’s a full guide to withdrawal strategies, tax management, and planning in general with the ultimate goal of putting your money to the best use possible to empower a better life.

While the original 4% rule was based on data from US stocks and intermediate term bonds, the Richer Retirement portfolio not only expands the playing field to various sizes of stocks but also looks beyond US shores to the benefits of international investing. By taking the Classic 60-40 framework and simply subdividing the stock portion to multiple modern options while adding a dash of practical cash, the benefits to safe withdrawal rates are unmistakable. It’s a great new addition to a solid investing foundation for any retiree.

Bengen fans may notice that the asset allocation listed here is a little simpler than the one outlined in his book. He advocates for equal parts large, mid, small, and micro caps, while I simplified it to equal parts large and small caps to match my available data. You can see in the Withdrawal Rates chart that the 4.8% 30-year SWR is virtually identical to the 4.7% SWR he calculated for his specific recommendation. So no matter which version you choose, you should be in the same ballpark.

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Alternatives

Portfolios with a similar structure or design intent

Classic 60-40 — The original idea that the Richer Retirement portfolio builds upon.

Three-Fund Portfolio — Similar concept with international diversification but no small caps.

No-Brainer Portfolio — Same choice of stocks in equal weight with short term bonds.

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Golden Ratio Portfolio

The Golden Ratio Portfolio by Frank Vasquez is a risk parity asset allocation that mixes modern assets in classic percentages to balance risk.

Asset Allocation

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Home Country
currency, inflation, & funds
% Asset Class
21% United States Large Cap Growth Stocks
21% United States Small Cap Value Stocks
26% United States Long Term Treasury Bonds
6% United States Treasury Bills
16% Global Gold
10% Global Commodities
Asset Notes
  1. Frank specifically calls for 10% managed futures. I don’t have data for that asset, so I allocated it to commodities (which tracks an index of commodities futures). That at least covers a portion of many managed futures funds and is similarly uncorrelated to both stocks and bonds.

Managed futures are complex instruments with lots of moving parts, and this is admittedly not an ideal match. So be aware that there may be significant tracking error with this portion of the portfolio in the Portfolio Charts numbers.

For another asset option consistent with past iterations of the Golden Ratio Portfolio, you might also consider REITs. That’s what Frank allocated to the 10% slot before switching the default recommendation to managed futures.

Author

Frank Vasquez

Frank Vasquez holds degrees in economics, engineering, and law while applying them all in the financial independence community. You can learn about his investing ideas on his podcast Risk Parity Radio. Frank encourages fans to show their support by donating to his favorite local charity, the Father McKenna Center.

Overview

The Golden Ratio Portfolio is named after an ancient mathematical fascination with the specific ratio 1.618 that appears often in nature and has long been associated with elegance and beauty. The portfolio percentages thus flow down from the largest 42% stock allocation to the smallest 6% following the golden ratio at each step along the way.

While the structure of the portfolio reflects the depth of Frank Vasquez’s knowledge in the history of art and science, the economic concepts are strictly contemporary. Frank is an accomplished portfolio voice in his own right with a particular skill in explaining risk parity concepts to normal people.

Within the golden ratio framework, each asset is positioned into the right spot to balance the portfolio as a whole. With specific allocations to both growth and value stocks and also a sizable allocation to alternatives like commodities and gold, it utilizes modern investing concepts in classic percentages to survive and thrive in any market condition.

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Beautiful Constants and the Golden Ratio Portfolio

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Alternatives

Portfolios with a similar structure or design intent

Golden Butterfly — Very similar concept with more cash and different large caps

All Seasons Portfolio — A similar investing philosophy built around economic risk parity

Weird Portfolio — A different twist including international diversification

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7Twelve Portfolio by Craig Israelsen

7Twelve Portfolio

The 7Twelve Portfolio by Craig Israelsen is an asset-based approach to diversification that balances portfolio returns by investing in a wide variety of unique asset types.

Asset Allocation

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Asset Notes

1. Israelsen specifically recommends equal parts large cap blend, mid cap blend, and small cap blend. The data here simplifies that to half large caps and half small caps. Because most large cap index funds include mid caps and many small cap funds also have more mid caps than you might expect, the results should be very similar. But if you want to follow his recommendation to the letter, you might consider looking for a separate mid-cap fund.

2. Israelsen specifically recommends equal parts nominal bonds and TIPS.  Since I don’t have specific data for TIPS, I allocated this portion to intermediate term bonds.  While this is a pretty good proxy that should model the design intent reasonably well, be sure to read Israelsen’s justifications for why he chooses the bonds he does.

3. He specifically recommends 8.3% commodities and 8.3% natural resources, but good data for natural resources is not available.  Keeping with his theme of having two equal segments in the “resources” category, I allocated the natural resources to the commodities portion.  There’s a decent amount of overlap in commodities and natural resources ETFs, so I anticipate this will not change the results all that much.

4. The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.

Author

Craig Israelsen

Craig L. Israelsen, Ph.D., is an Executive-in-Residence in the Financial Planning Program at Utah Valley University. He talks about the 7Twelve Portfolio in his book 7Twelve: A Diversified Investment Portfolio with a Plan.

Overview

In contrast to the old-school definition of diversification in terms of company count, the 7Twelve Portfolio seeks to enhance performance and reduce risk by diversifying among a wide variety of different asset types. The name is derived from the 12 different funds in the portfolio spread across 7 different asset classes.

  1. US Stock (large, mid, and small caps)
  2. Non-US Stock (developed, emerging)
  3. Real Estate
  4. Resources (natural resources, commodities)
  5. US Bonds (nominal, TIPS)
  6. Non-US Bonds
  7. Cash

Israelsen describes the thought process of mixing asset types as similar to making salsa, where individual ingredients may seem bland or way too spicy on their own but are all critical to the success of the recipe. The 7Twelve Portfolio assets are weighted in equal proportions, and he classifies it as a “core” portfolio that should be built around rather than tweaked. For example, his age based models all equally weight the same assets where the only difference is the percentage of cash that can be increased to reduce risk for older investors.

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The 7Twelve Portfolio And The Power Of Broad Diversification

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Alternatives

Portfolios with a similar structure or design intent

Ivy Portfolio — Broad equal weight diversification across many of the same asset categories

Golden Butterfly — Similar percentages of stocks, bonds, and real assets

Pinwheel Portfolio — Domestic and international diversification with targeted tilts

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The Ideal Index Portfolio by Frank Armstrong

Ideal Index Portfolio

The Ideal Index Portfolio by Frank Armstrong seeks to increase return and reduce risks through smart asset choices and modern portfolio principles.

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Home Country
currency, inflation, & funds
% Asset Class
9% United States Large Cap Value Stocks
9% United States Small Cap Value Stocks
7% United States Large Cap Blend Stocks
6% United States Small Cap Growth Stocks
31% Developed ex-US Large Cap Blend Stocks
30% United States Short Term Treasury Bonds
8% United States Real Estate Investment Trusts
Asset Notes

The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.

Author

Frank Armstrong

Frank Armstrong is a financial adviser and the founder of Investor Solutions. He writes about the Ideal Index Portfolio in the book The Informed Investor.

Overview

A true student of financial theory, Armstrong presents the Ideal Index Portfolio as a well-considered way to use modern portfolio theory to improve investing outcomes. By demonstrating how smart asset choices can create a portfolio that both increases returns and reduced risk relative to more traditional options, he offers an intelligent and data-backed proposal suitable for any investor.

One of the most notable features of the Ideal Index portfolio is its inclusion of small cap growth stocks in the allocation. Combined with a healthy value tilt and a strong international flavor, it’s a good portfolio choice for investors less married to large cap US stocks and more interested in casting a wider net for portfolio returns.

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The Ideal Index Portfolio And The Many Paths To Perfection

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Alternatives

Portfolios with a similar structure or design intent

Coffeehouse Portfolio — Similar assets, but with less international stocks

Merriman Ultimate — The same basic idea that subdivides international

Larry Portfolio — A shared philosophy with a different allocation approach

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The Merriman Ultimate Portfolio by Paul Merriman

Ultimate Buy and Hold Portfolio

The Ultimate Buy and Hold Portfolio by Paul Merriman seeks to diversify investments as broadly as possible across countries, company size, and valuation.

Asset Allocation

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Asset Notes
  1. Merriman specifically calls for 8% short term TIPS and 12% short term bonds.  I don’t have good data for TIPS, but in an effort to maintain his design intent I added it to the short term bond allocation.  Be sure to read Merriman’s explanation for why he chooses the funds he does.
Other Versions

Merriman describes several different versions of the portfolio that vary by the percentage of bonds. The one shown here is the “Moderate” version with 40% bonds.

Author

Paul Merriman

Paul Merriman is a retired investing adviser who continues to dedicate his time to investing education. You can read about the Ultimate Buy and Hold portfolio at The Merriman Financial Education Foundation.

Overview

The Ultimate Buy and Hold portfolio (also sometimes referred to as the Merriman Ultimate portfolio) is a very broadly diversified portfolio that takes international, size, and value diversification to their logical extremes.

Domestic

  1. Large Cap
    • Blend
    • Value
  2. Small Cap
    • Blend
    • Value
  3. REITs

International

  1. Large Cap
    • Blend
    • Value
  2. Small Cap
    • Blend
    • Value
  3. Emerging Markets

Merriman often describes the choice of these ten assets by adding them one at a time and noting the progressive improvement of portfolio returns with every step. The resulting allocation represents his vision of the pinnacle of thoughtful diversification, which is the origin of the “Ultimate” name.

To determine the final percentages, Merriman advocates for equal weighting of each stock asset while adjusting the overall percentage to accommodate as many bonds that are necessary to dial the volatility back to whatever is comfortable for the investor. It thus combines an advanced factor investing mindset for stocks with an old-school view of bonds into a portfolio that a lot of investors can appreciate.

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Alternatives

Portfolios with a similar structure or design intent

Sandwich Portfolio — Similar structure but with less factor diversity

Ideal Index Portfolio — The same basic idea with a single international fund

Larry Portfolio — A shared factor philosophy with a different allocation approach

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The No-Brainer Portfolio by William Bernstein

No-Brainer Portfolio

The No-Brainer Portfolio by William Bernstein is a simple and straightforward approach to asset, region, and factor diversification that accomplishes all three in just four assets.

Asset Allocation

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Home Country
currency, inflation, & funds
% Asset Class
25% United States Large Cap Blend Stocks
25% United States Small Cap Blend Stocks
25% Developed ex-US Small Cap Blend Stocks
25% United States Short Term Treasury Bonds
Other Versions

While they’re not all direct iterations of the No-Brainer Portfolio, Bernstein talks about all types of asset allocations in his writings. Here are just a few examples, and you can also model any version you like using the Charts.

Four Pillars Medium — Expanding the No-Brainer into value factors and real estate

Coward’s Portfolio — A modest proposal for a naive allocation that beats the experts

Sheltered Sam 60-40 — A unique portfolio designed for a specific investing persona

Author

William Bernstein

William Bernstein is a neurologist and financial author who writes prolifically on asset allocation. You can read his thoughts on the No-Brainer Portfolio in his book The Intelligent Asset Allocator.

Overview

The No-Brainer Portfolio, also sometimes called the Simpleton’s Portfolio, is an interesting study in asset allocation. Bernstein is a self-described “asset junkie” who enjoys discussing all types of increasingly sophisticated portfolios custom designed for unique investor needs and fine-tuned with advanced concepts like efficient frontiers. While the No-Brainer Portfolio is just the simplest introductory idea in The Intelligent Asset Allocator, I also think it uniquely expresses some of his most fundamental insights.

Bernstein tends to talk about his ideas self-deprecatingly in terms of naive but effective diversification, but the thing I find most interesting is how the No-Brainer Portfolio tackles three different types of diversification in the most efficient way possible. By adding small cap stocks, international stocks, and short term bonds to a traditional large cap stock fund, it demonstrates how easy it is to construct a well-considered asset allocation that doesn’t depend so much on the handful of large cap companies that tend to dominate stock returns. For a lot of people looking for maximum diversification with minimum effort, that really is a no-brainer.

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Alternatives

Portfolios with a similar structure or design intent

Permanent Portfolio — Another 4-asset approach that focuses on diversification

Ideal Index Portfolio — Similar portfolio structure showcasing value and growth tilts

Core Four Portfolio — Similar percentage of stocks with REITs instead of small caps

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Permanent Portfolio by Harry Browne

Permanent Portfolio

The Permanent Portfolio by Harry Browne aims to protect and grow your money in an unpredictable world by diversifying across four fundamental economic conditions.

Asset Allocation

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Home Country
currency, inflation, & funds
% Asset Class
25% United States Large Cap Blend Stocks
25% United States Long Term Treasury Bonds
25% United States Treasury Bills
25% Global Gold
Other Versions

Browne specifically chooses T-bills for the cash portion of the portfolio, and the charts all show the returns according to his recommendation. However, if you read about the Permanent Portfolio it’s pretty common for its followers to choose short term bonds. The charts with short term bonds are pretty similar.

Author

Harry Browne

Author, politician, and investment adviser. An advocate for free markets and free people, Harry Browne was the Libertarian presidential nominee in 1996 and 2000. He talks about the Permanent Portfolio in his book Fail-Safe Investing.

Overview

The Permanent Portfolio is built on the idea that while the future is unknowable, the economy fluctuates between a few known states — prosperity, recession, inflation, and deflation. While some portfolio managers apply the idea of “risk parity” to balance the volatility risk between assets, Harry Browne believed in using the same idea to balance economic risk. So he chose four assets that he saw as uniquely qualified to respond positively in each of the four economic conditions.

Prosperity: stocks
Recession: cash
Inflation: gold
Deflation: long term treasuries

Brown equally weighted the four assets to protect and grow his money no matter what happens in the market. And the resulting portfolio has proven to be one of the most consistent on record with dependable returns, low drawdowns, and high withdrawal rates.

In addition to Browne’s own writings, An excellent modern guide is The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy by Craig Rowland and J. M. Lawson.

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Alternatives

Portfolios with a similar structure or design intent

Golden Butterfly — My own evolution of the Permanent Portfolio tilted towards prosperity

All Seasons Portfolio — A similar investing philosophy built around economic risk parity

7Twelve Portfolio — A portfolio that broadly diversifies across many asset categories

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The Pinwheel Portfolio by Tyler

Pinwheel Portfolio

The Pinwheel Portfolio by Tyler provides broad asset diversification that builds upon the four traditional asset classes with performance-enhancing tilts.

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Home Country
currency, inflation, & funds
% Asset Class
15% United States Large Cap Blend Stocks
10% United States Small Cap Value Stocks
15% Developed ex-US Large Cap Blend Stocks
10% Emerging Markets Large Cap Blend Stocks
15% United States Intermediate Term Treasury Bonds
10% United States Treasury Bills
15% United States Real Estate Investment Trusts
10% Global Gold

Author

Tyler

I’m a mechanical engineer, investing researcher, spreadsheet aficionado, and the author of Portfolio Charts. The Pinwheel Portfolio is a portfolio idea born of my ongoing exploration.

Overview

Browse enough portfolios and you’ll start to notice a pattern where a large number of financial professionals all recommend the same common assets — domestic stocks, international stocks, intermediate bonds, and real estate. The Pinwheel Portfolio adopts each of those four assets in equal weights, and adds one complementary asset of each type to boost returns and minimize risk.

  • Domestic Stocks > Small Cap Value
  • International Stocks > Emerging Markets
  • Intermediate Bonds > Cash
  • Real Estate > Gold

The end result is a uniquely balanced portfolio with an intelligently modern twist on a traditional 4-asset foundation. Featuring high returns and healthy withdrawal rates, it’s a good portfolio choice for both accumulators and retirees. And it’s also an easy evolution for many investors looking to add new assets to the ones they already own.

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Try A Modern Spin On A Classic Idea With The Pinwheel Portfolio

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Alternatives

Portfolios with a similar structure or design intent

Core-4 Portfolio — The same four primary assets in different percentages

Swensen Portfolio — Similar portfolio structure with fewer assets to manage

Golden Butterfly — Another original idea designed for portfolio consistency

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The Sandwich Portfolio by Bob Clyatt

Sandwich Portfolio

The Sandwich Portfolio by Bob Clyatt is an easily investable version of sophisticated allocation concepts designed to help you escape the rat race.

Asset Allocation

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Asset Notes

1. Clyatt recommends a specific Vanguard international small cap growth fund that was the only international small option available at the time the book was published. Keeping with the spirit of his overall philosophy, I allocated this portion to international small cap blend.

Author

Bob Clyatt

Bob Clyatt is an economics major and business professional who semi-retired at 42 to become an accomplished sculptor. He talks about the Sandwich Portfolio at his website Work Less, Live More.

Overview

The Sandwich Portfolio is based on the sophisticated market insights of Bob Clyatt, a successful business professional who earned degrees in finance and economics at Berkeley and MIT. While Clyatt’s full Rational Investing Portfolio includes lots of assets regularly accessible only to institutional investors, he describes the Sandwich Portfolio as a simplified version suitable for everyday investors. With small cap tilts, international diversification in stocks as well as bonds, an overall balanced allocation in terms of risk, and even a practical slice of cash, the Sandwich Portfolio is a thoughtful portfolio built to last.

That practical mindset is no accident. The Sandwich Portfolio is more than just an asset allocation by a stuffy economist in a tie. In fact, Clyatt left the rat race at 42 and is best known today as an award-winning artist. So his ideas are more than purely academic, and his proposed portfolio is just one component of a larger strategy with a greater purpose — to escape the work treadmill that keeps you down and empower you to pursue life on your own terms.

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A Meeting, a Book, a Portfolio, and a Better Life

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Alternatives

Portfolios with a similar structure or design intent

Merriman Ultimate — Similar structure with multiple assets and additional value tilts

Pinwheel Portfolio — Shared high-level diversification philosophy

Swensen Portfolio — Same percentage of stocks and domestic bonds with more real assets

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The Golden Butterfly Portfolio by Portfolio Charts

Golden Butterfly Portfolio

The Golden Butterfly Portfolio by Tyler prioritizes consistently desirable investment growth by balancing economic conditions with an eye towards prosperity.

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Home Country
currency, inflation, & funds
% Asset Class
20% United States Large Cap Blend Stocks
20% United States Small Cap Value Stocks
20% United States Long Term Treasury Bonds
20% United States Short Term Treasury Bonds
20% Global Gold

Author

Tyler

I’m a mechanical engineer, investing researcher, spreadsheet aficionado, and the author of Portfolio Charts. The Golden Butterfly is a portfolio idea born of my ongoing exploration.

Overview

The Golden Butterfly Portfolio is built on the idea of economic risk parity, similar to the Permanent Portfolio which shares four of its five assets. But while the Permanent Portfolio equally balances prosperity, recession, inflation, and deflation, the Golden Butterfly tilts the assets towards prosperity with an additional allocation to small cap value.

While to some that may seem like a trendy choice destined to underperform, the data reveals a remarkable truth. The Golden Butterfly is one of the best risk-adjusted portfolios out there, pairing the famous consistency of the Permanent Portfolio and the growth rates of far more aggressive options. With a tight band of growth paths that are helpful for future estimates and notably high withdrawal rates that are great for retirees, it’s a particularly dependable portfolio option suitable for both accumulators and retirees alike.

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The Theory Behind the Golden Butterfly

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Alternatives

Portfolios with a similar structure or design intent

Permanent Portfolio — The same fundamental portfolio without small cap value

All Seasons Portfolio — A similar investing philosophy built around economic risk parity

Pinwheel Portfolio — Another original idea designed for portfolio consistency

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