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Lately MarketWatch is putting out articles with eye-catching titles. This AANA appears to be a tactical allocation portfolio, but there is no public record.
Doug Ramsey is the Leuthold manager. Dave Ramsey is the arrogant theocratic investment adviser who tells his clients to invest in growth stock mutual funds returning 12% chosen by his Endorsed Local Providers who of course charge their own management fees. Also, if you can't invest for retirement and tithe at the same time, just make sure you don't stop tithing !
At the very top of the page, in very tiny letters, appear these words: Advertisement
(bold print mine)
I’d be very careful investing money on the basis of an advertisement, whether published on Market Watch, The WSJ or anywhere else. Not saying they’re lying, but likely the Ad has been slanted in one direction so as to sell something.
Coffeehouse, for example, suggests you can ignore the whims of Wall Street and turn your creative energy towards things in your life that matter like financial planning, your career, family, and community.
I did a quick read of the advertisement / article. Was only allowed to access it once on M/W and was cut off from subsequent reading.
This did not seem to be written in any kind of objective manner. Those who read the WSJ, Barrons, fund reports and prospectuses are not accustomed to simplistic analysis (using words like “crazy, amazing, simple”). However, if you think the world of equities, bonds, commodities, previous metals, real estate, derivatives can be boiled down to a “simplistic” formula that even a 12-year old could grasp - than by all means study the author’s scheme and take away his suggestions.
If the intent of the writer is to emphasize the importance of diversification across asset classes and regular rebalancing, I agree. In the past I recall more discussion on this board and its predecessor about both of those issues. Threads like “How much do you allocate to commodities?” or “How frequently do you rebalance?” were quite common. Today, less is said of that for whatever reason.
Does the plan involve owning ETFs? How many were available to retail investors 50 years ago - the date from which the success of this plan is purportedly measured?
50 years is a long time if the author’s assessment is accurate. While past performance does not necessarily predict future performance, I’d think it entirely possible to generate a 9% annual return over very long time periods with a well diversified portfolio and annual rebalancing.
As I said, I no longer have the article / Ad to view, so am going here with what I rirst glimpsed.
The permanent portfolio devised by Harry Browne in the 1980s. consists of an equal allocation of stocks, bonds, gold, and cash, or Treasury bills.
Michael Cuggino's Permanent Portfolio Fund (PRPFX) follows a similar strategy, investing "fixed percentages in gold, silver, Swiss Franc assets, stocks of real estate and natural resource companies, aggressive growth stocks, and US Treasury securities."
” The average stock market return is about 10% annually in the U.S. over time — but realistically, that figure varies widely from year to year, and it’s more like 6% to 7% when accounting for inflation. For context, it’s rare that the average stock market return is actually 10% in a given year. When looking at nearly 100 years of data, as of September 8, 2022, the yearly average stock market return was between 8% and 12% only eight times. In reality, stock market returns are typically much higher or much lower.” Source
Since gold has been mentioned, personally I’ve held small exposures to it through “thick and thin”. But more “thin” than thick. Nonetheless I remain optimistic. Folks are usually referring to p/m mining funds when they reference gold - albeit it is possible to buy ETFs that invest in the less volatile metal itself. Be aware gold funds have in the past declined by as much as 70% over shorter periods (3-4 years). How many small investors possess the fortitude to hold an asset like that when it’s in a downtrend?
Not promoting or discouraging gold. Just pointing out why you don’t hear a lot about it here. Hasn’t shined for at least a decade - few really good years over my 50+ years investing. Recently it has been hot. Friday alone my fund (OPGSX) and one mining stock I own were both up well over 3% on the day.
This ‘crazy’ retirement portfolio has just beaten Wall Street for 50 years
by Brett Arends
This strategy beats the market with less risk, fewer upsets and no ‘lost’ decades
You could call it crazy.
You could call it genius.
Or maybe you could call it a little of both.
We’re talking about a simple portfolio that absolutely anyone could follow in their own 401(k) or IRA or retirement account. Low cost, no muss, no fuss. And it’s managed to do two powerful things simultaneously.
It’s beaten the standard Wall Street portfolio of 60% U.S. stocks and 40% bonds. Not just last year, when it beat them by an astonishing 7 percentage points, but for half a century.
And it’s done so with way less risk. Fewer upsets. Fewer disasters. And no “lost” decades.
Last year, 2022, marked the 50th year of this unheralded portfolio, which is termed “All Asset No Authority,” and which we’ve written about here before.
It’s the brainchild of Doug Ramsey. He’s the chief investment officer of Leuthold & Co., a long-established fund management company that has sensibly located itself in Minneapolis, a long, long way away from Wall Street.
AANA is amazingly simple, surprisingly complex, and has been astonishingly durable. It consists simply of splitting your investment portfolio into 7 equal amounts, and investing one apiece in U.S. large-company stocks (the S&P 500 SPX, +2.28% ), U.S. small-company stocks (the Russell 2000 RUT, +2.26% ), developed international stocks (the Europe, Australasia and Far East or EAFE index), gold GC00, +0.04%, commodities, U.S. real-estate investment trusts or REITS, and 10 year Treasury bonds TMUBMUSD10Y, 3.562%.
It was Ramsey’s answer to the question: How would you allocate your long-term investments if you wanted to give your money manager no discretion at all, but wanted to maximize diversification?
AANA covers an array of asset classes, including real estate, commodities and gold, so it’s durable in periods of inflation as well as disinflation or deflation. And it’s a fixed allocation. You spread the money equally across the 7 assets, rebalancing once a year to put them back to equal weights. And that’s it. The manager — you, me, or Fredo — doesn’t have to do anything else. They not allowed to do anything else. They have no authority.
AANA did way better than the more usual Wall Street investments during 2022’s veil of tears. While it ended the year down 9.6%, that was far better than the S&P 500 (which plunged 18%), or a balanced portfolio of 60% U.S. stocks and 40% U.S. bonds, which fell 17%.
Crypto? Er, let’s not talk about that.
Last year’s success of AANA is due to two things, and them alone: Its exposure to commodities, which were up by about a fifth, and gold, which was level in dollars (and up 6% in euros, 12% in British pounds, and 14% when measured in Japanese yen). Ramsey’s AANA portfolio has underperformed the usual U.S. stocks and bonds over the past decade, but that’s mainly because the latter have gone through a massive — and, it seems, unsustainable — boom. The key thing about AANA is that in 50 years it has never had a lost decade. Whether the 1970s or the 2000s, while Wall Street floundered, AANA has earned respectable returns.
Since the start of 1973, according to Ramsey’s calculations, it has earned an average annual return of 9.8% a year. That’s about half a percentage point a year less than the S&P 500, but of course AANA isn’t a high risk portfolio entirely tied to the stock market. The better comparison is against the standard “balanced” benchmark portfolio of 60% U.S. stocks and 40% Treasury bonds.
Since the start of 1973, according to data from New York University’s Stern business school, that 60/40 portfolio has earned an average compound return of 9.1% a year. That’s less than AANA. Oh, and this supposedly “balanced” portfolio fared very badly in the 1970s, and badly again last year.
You can (if you want) build AANA for yourself using just 7 low-cost ETFs: For example, the SPDR S&P 500 SPY, +2.29%, iShares Russell 2000 IWM, +2.25%, Vanguard FTSE Developed Markets VEA, +2.76%, abrdn Physical Gold Shares SGOL, +1.94%, a commodity fund such as the iShares S&P GSCI Commodity-Indexed Trust ETF GSG, +0.55%, the iShares 7-10 Year Treasury Bond ETF IEF, +1.29%, and the Vanguard Real Estate ETF VNQ, +2.69%.
The list is illustrative only. There are competing ETFs in each category, and in some — such as with commodities and REITs — they vary quite a lot. GSG happens to follow the particular commodity index that Ramsey uses in his calculations.
There are many worse investment portfolios out there, and it’s a question how many are better. AANA will underperform regular stocks and bonds in a booming bull market, but do better in a lost decade.
For those interested, Ramsey also offers a twist. His calculations also show that over the past 50 years the smart move to make at the start of each year was to invest in the asset class in the portfolio that performed second best in the previous 12 months. He calls that the “bridesmaid” investment. Since 1973 the bridesmaid has earned you on average 13.1% a year — a staggering record that trounces the S&P 500. Last year’s bridesmaid, incidentally, was terrible (it was REITs, which tanked). But most years it wins, and wins big.
If someone wants to take advantage of this simple twist, you could split the portfolio into 8 units, not 7, and use the eighth to double your investment in the bridesmaid asset. For 2023 that would be gold, which trailed commodities last year but broke even.
Crazy? Genius? For anyone creating a longterm portfolio for their retirement there are certainly many worse ideas — including many embraced by highly paid professionals, and marketed to the rest of us.
Well it may not be an ad but it is crazy. IMHO if you're going to submit an article claiming that this group of ETF's has beaten Wall Street for 50 years it just seems to me that you would select funds/stocks & bonds/ whatever that have been in existence for those 50 years. So do we have a make believe history here or what? Saying that his chosen 7 are close enough or can be substituted doesn't quite cut it for me.
"Last year, 2022, marked the 50th year of this unheralded portfolio, which is termed “All Asset No Authority,” and which we’ve written about here before."
Q: what were the exact components of this portfolio on day one? I'll wait.
"It consists simply of splitting your investment portfolio into 7 equal amounts, and investing one apiece in U.S. large-company stocks (the S&P 500 SPX, +2.28% ), U.S. small-company stocks (the Russell 2000 RUT, +2.26% ), developed international stocks (the Europe, Australasia and Far East or EAFE index), gold GC00, +0.04%, commodities, U.S. real-estate investment trusts or REITS, and 10 year Treasury bonds TMUBMUSD10Y, 3.562%."
Absolutely not taking any particular "side" here, but the way that I read the substance of the above is that by dividing a portfolio into seven specific groups of dissimilar securities, one can achieve a good return over a long period of time.
What specific vehicle is used (etfs, etc.) to represent each group may change over time- the main thrust of the article is to observe those seven groups, not any specific vehicles.
Added note- not having followed this thread previous to this post, I just took a look at the page generated by the original link... it certainly looks like a financial article, not an advertisement, to me.
While I agree with the idea of diversification and disagree with posting articles’ texts in their entirety here, my main comment revolves around the hindsight is 20/20 and past performance is no guarantee of future results caveat. If anyone here could travel back to 1973, is this the asset allocation your younger self would have believed would work back then? OK, now how do you imagine the U.S. and the world will look like in 2073? Do you think history just repeats itself?
The advantage of this strategy though is it has different asset classes that work at different times in an economic cycle, inflationary and deflationary ones. But there’s no reason to believe that equal weighting these asset classes will produce optimal or even good results again in the next fifty years. It feels like too much reverse engineering/data mining with a flurry of new equal-weighted asset class ETFs in mind. These I expect will soon be launched with this backward looking data as their primary marketing tool. The ticker symbol could likely be AANA.
Figuring what has worked in the past and what will work in the future are two separate things. It is fair to ask if conditions today are similar to past ones and allocate accordingly, but I think nuance is necessary, asking what’s different today from the past and what remains the same.
@OJ and others who might have the same criticism this is why I asked about the specific composition of the initial portfolio. What was the makeup of alternative portfolios he's comparing AANA to? How does it compare to handing it all over to Warren Buffett and going hiking? If someone is going to say that AANA was a great way to go I'd want to see what they started with and changed over 50 years so that I could dig up my own back tested alternates also if I was OCD enough.
My question is when will the new AANA ETF be launched? I imagine the existing LCR ETF will get investors part of the way there, both with more nuance regarding current conditions—good thing—and much higher fees for active management—bad thing. @davidrmoran Looked over the articles you linked. I think the one about gold is the most interesting.
@Charles or @LynnBolin2021 is it to much to ask what MutliSearch says about AANA for using 7 l ETFs: 14% each in SPDR S&P 500 SPY, iShares Russell 2000 IWM, Vanguard FTSE Developed Markets VEA, , abrdn Physical Gold Shares SGOL, ,iShares S&P GSCI Commodity-Indexed Trust ETF GSG, the iShares 7-10 Year Treasury Bond ETF IEF, and the Vanguard Real Estate ETF VNQ? My MFO lapsed but I am intrigued by what MultiSearch comes up with. She's the best IMHO.
I seems to me, although I haven’t looked at the 50 year chart that the major advantage this portfolio has is avoiding the two “lost decades”
“The key thing about AANA is that in 50 years it has never had a lost decade. Whether the 1970s or the 2000s, while Wall Street floundered, AANA has earned respectable returns.”
There have been two periods of almost ten years before the SP 500 returned to it’s previous high and stayed there. Not hard to beat that if you had any return at all, especially with roaring inflation in the 70s
I have seen several other “ simple portfolios” proposed. But if we used them, MFO would collapse!
With our debt approaching $250,000 for every US taxpayer...one day we will wake up and everything about gold will change. Taleb writes about retrospective distortion.
Comments
Good catch, @hank.
(bold print mine)
I’d be very careful investing money on the basis of an advertisement, whether published on Market Watch, The WSJ or anywhere else. Not saying they’re lying, but likely the Ad has been slanted in one direction so as to sell something.
https://www.marketwatch.com/lazyportfolio
Coffeehouse, for example, suggests you can ignore the whims of Wall Street and turn your creative energy towards things in your life that matter like financial planning, your career, family, and community.
https://coffeehouseinvestor.com/resources/portfolio
I did a quick read of the advertisement / article. Was only allowed to access it once on M/W and was cut off from subsequent reading.
This did not seem to be written in any kind of objective manner. Those who read the WSJ, Barrons, fund reports and prospectuses are not accustomed to simplistic analysis (using words like “crazy, amazing, simple”). However, if you think the world of equities, bonds, commodities, previous metals, real estate, derivatives can be boiled down to a “simplistic” formula that even a 12-year old could grasp - than by all means study the author’s scheme and take away his suggestions.
Reading Level / Text Analyzer
If the intent of the writer is to emphasize the importance of diversification across asset classes and regular rebalancing, I agree. In the past I recall more discussion on this board and its predecessor about both of those issues. Threads like “How much do you allocate to commodities?” or “How frequently do you rebalance?” were quite common. Today, less is said of that for whatever reason.
Does the plan involve owning ETFs? How many were available to retail investors 50 years ago - the date from which the success of this plan is purportedly measured?
50 years is a long time if the author’s assessment is accurate. While past performance does not necessarily predict future performance, I’d think it entirely possible to generate a 9% annual return over very long time periods with a well diversified portfolio and annual rebalancing.
As I said, I no longer have the article / Ad to view, so am going here with what I rirst glimpsed.
Michael Cuggino's Permanent Portfolio Fund (PRPFX) follows a similar strategy, investing "fixed percentages in gold, silver, Swiss Franc assets, stocks of real estate and natural resource companies, aggressive growth stocks, and US Treasury securities."
Since gold has been mentioned, personally I’ve held small exposures to it through “thick and thin”. But more “thin” than thick. Nonetheless I remain optimistic. Folks are usually referring to p/m mining funds when they reference gold - albeit it is possible to buy ETFs that invest in the less volatile metal itself. Be aware gold funds have in the past declined by as much as 70% over shorter periods (3-4 years). How many small investors possess the fortitude to hold an asset like that when it’s in a downtrend?
Not promoting or discouraging gold. Just pointing out why you don’t hear a lot about it here. Hasn’t shined for at least a decade - few really good years over my 50+ years investing. Recently it has been hot. Friday alone my fund (OPGSX) and one mining stock I own were both up well over 3% on the day.
It is NOT an ad.
Brett Arends has been a v smart financial writer for decades
https://en.wikipedia.org/wiki/Brett_Arends
The article:
Brett Arends's ROI
This ‘crazy’ retirement portfolio has just beaten Wall Street for 50 years
by Brett Arends
This strategy beats the market with less risk, fewer upsets and no ‘lost’ decades
You could call it crazy.
You could call it genius.
Or maybe you could call it a little of both.
We’re talking about a simple portfolio that absolutely anyone could follow in their own 401(k) or IRA or retirement account. Low cost, no muss, no fuss. And it’s managed to do two powerful things simultaneously.
It’s beaten the standard Wall Street portfolio of 60% U.S. stocks and 40% bonds. Not just last year, when it beat them by an astonishing 7 percentage points, but for half a century.
And it’s done so with way less risk. Fewer upsets. Fewer disasters. And no “lost” decades.
Last year, 2022, marked the 50th year of this unheralded portfolio, which is termed “All Asset No Authority,” and which we’ve written about here before.
It’s the brainchild of Doug Ramsey. He’s the chief investment officer of Leuthold & Co., a long-established fund management company that has sensibly located itself in Minneapolis, a long, long way away from Wall Street.
AANA is amazingly simple, surprisingly complex, and has been astonishingly durable. It consists simply of splitting your investment portfolio into 7 equal amounts, and investing one apiece in U.S. large-company stocks (the S&P 500 SPX, +2.28% ), U.S. small-company stocks (the Russell 2000 RUT, +2.26% ), developed international stocks (the Europe, Australasia and Far East or EAFE index), gold GC00, +0.04%, commodities, U.S. real-estate investment trusts or REITS, and 10 year Treasury bonds TMUBMUSD10Y, 3.562%.
It was Ramsey’s answer to the question: How would you allocate your long-term investments if you wanted to give your money manager no discretion at all, but wanted to maximize diversification?
AANA covers an array of asset classes, including real estate, commodities and gold, so it’s durable in periods of inflation as well as disinflation or deflation. And it’s a fixed allocation. You spread the money equally across the 7 assets, rebalancing once a year to put them back to equal weights. And that’s it. The manager — you, me, or Fredo — doesn’t have to do anything else. They not allowed to do anything else. They have no authority.
AANA did way better than the more usual Wall Street investments during 2022’s veil of tears. While it ended the year down 9.6%, that was far better than the S&P 500 (which plunged 18%), or a balanced portfolio of 60% U.S. stocks and 40% U.S. bonds, which fell 17%.
Crypto? Er, let’s not talk about that.
Last year’s success of AANA is due to two things, and them alone: Its exposure to commodities, which were up by about a fifth, and gold, which was level in dollars (and up 6% in euros, 12% in British pounds, and 14% when measured in Japanese yen).
Ramsey’s AANA portfolio has underperformed the usual U.S. stocks and bonds over the past decade, but that’s mainly because the latter have gone through a massive — and, it seems, unsustainable — boom. The key thing about AANA is that in 50 years it has never had a lost decade. Whether the 1970s or the 2000s, while Wall Street floundered, AANA has earned respectable returns.
Since the start of 1973, according to Ramsey’s calculations, it has earned an average annual return of 9.8% a year. That’s about half a percentage point a year less than the S&P 500, but of course AANA isn’t a high risk portfolio entirely tied to the stock market. The better comparison is against the standard “balanced” benchmark portfolio of 60% U.S. stocks and 40% Treasury bonds.
Since the start of 1973, according to data from New York University’s Stern business school, that 60/40 portfolio has earned an average compound return of 9.1% a year. That’s less than AANA. Oh, and this supposedly “balanced” portfolio fared very badly in the 1970s, and badly again last year.
You can (if you want) build AANA for yourself using just 7 low-cost ETFs: For example, the SPDR S&P 500 SPY, +2.29%, iShares Russell 2000 IWM, +2.25%, Vanguard FTSE Developed Markets VEA, +2.76%, abrdn Physical Gold Shares SGOL, +1.94%, a commodity fund such as the iShares S&P GSCI Commodity-Indexed Trust ETF GSG, +0.55%, the iShares 7-10 Year Treasury Bond ETF IEF, +1.29%, and the Vanguard Real Estate ETF VNQ, +2.69%.
The list is illustrative only. There are competing ETFs in each category, and in some — such as with commodities and REITs — they vary quite a lot. GSG happens to follow the particular commodity index that Ramsey uses in his calculations.
There are many worse investment portfolios out there, and it’s a question how many are better. AANA will underperform regular stocks and bonds in a booming bull market, but do better in a lost decade.
For those interested, Ramsey also offers a twist. His calculations also show that over the past 50 years the smart move to make at the start of each year was to invest in the asset class in the portfolio that performed second best in the previous 12 months. He calls that the “bridesmaid” investment. Since 1973 the bridesmaid has earned you on average 13.1% a year — a staggering record that trounces the S&P 500. Last year’s bridesmaid, incidentally, was terrible (it was REITs, which tanked). But most years it wins, and wins big.
If someone wants to take advantage of this simple twist, you could split the portfolio into 8 units, not 7, and use the eighth to double your investment in the bridesmaid asset. For 2023 that would be gold, which trailed commodities last year but broke even.
Crazy? Genius? For anyone creating a longterm portfolio for their retirement there are certainly many worse ideas — including many embraced by highly paid professionals, and marketed to the rest of us.
"Last year, 2022, marked the 50th year of this unheralded portfolio, which is termed “All Asset No Authority,” and which we’ve written about here before."
Q: what were the exact components of this portfolio on day one? I'll wait.
What specific vehicle is used (etfs, etc.) to represent each group may change over time- the main thrust of the article is to observe those seven groups, not any specific vehicles.
Added note- not having followed this thread previous to this post, I just took a look at the page generated by the original link... it certainly looks like a financial article, not an advertisement, to me.
The advantage of this strategy though is it has different asset classes that work at different times in an economic cycle, inflationary and deflationary ones. But there’s no reason to believe that equal weighting these asset classes will produce optimal or even good results again in the next fifty years. It feels like too much reverse engineering/data mining with a flurry of new equal-weighted asset class ETFs in mind. These I expect will soon be launched with this backward looking data as their primary marketing tool. The ticker symbol could likely be AANA.
Figuring what has worked in the past and what will work in the future are two separate things. It is fair to ask if conditions today are similar to past ones and allocate accordingly, but I think nuance is necessary, asking what’s different today from the past and what remains the same.
9mos ago:
https://www.marketwatch.com/story/feeling-seasick-these-simple-low-cost-retirement-portfolios-are-holding-up-well-11652387274
https://kritik.com.my/russia-just-made-a-case-for-owning-gold-and-nobody-noticed/
a month later:
https://www.msn.com/en-us/money/savingandinvesting/do-you-have-the-right-investments-for-your-retirement-savings-this-idiot-proof-portfolio-might-help/ar-AAXeMtJ
LB, I posted the text because responders here had not actually read through the article (of course it's an article) or said it could not be accessed.
@davidrmoran Looked over the articles you linked. I think the one about gold is the most interesting.
I find gold almost completely uninteresting myself, but always want to see what Arends thinks (also like how equivocal he is much of the time)
The previous link to a “Reading level / Text analyzer” I moved up to an earlier post in same thread if folks want to play around with it.
“The key thing about AANA is that in 50 years it has never had a lost decade. Whether the 1970s or the 2000s, while Wall Street floundered, AANA has earned respectable returns.”
There have been two periods of almost ten years before the SP 500 returned to it’s previous high and stayed there. Not hard to beat that if you had any return at all, especially with roaring inflation in the 70s
I have seen several other “ simple portfolios” proposed. But if we used them, MFO would collapse!