30% SCV 70% S&P

Research on Safe Withdrawal Rates

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Mike
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Posts: 278
Joined: Sun Jul 06, 2003 4:00 am

30% SCV 70% S&P

Post by Mike »

have modified the inflation adjusted calculation results matrix in the SCV/S&P mod to include only the period for which SCV returns are available (1927 to 2003). Simply change the $V$15 to $V$71 in the formulas for 10 year inflation ajusted returns (cells D49-D60). The intial results are interesting, and consistent with MPT. Adding 30% SCV to an S&P portfolio increased returns, while decreasing volatility These are the 10 year terminal values, sorted by percentile:

30% SCV
...
$4,773.57...100%
$3,363.11...90%
$3,106.53...80%
$2,753.89...70%
$2,476.77
$2,307.20
$2,100.53
$1,979.95
$1,683.95
$1,110.64
$749.03

S&P
...
$4,547.83
$3,575.65
$2,833.53
$2,645.41
$2,491.21
$2,038.24
$1,700.39
$1,458.24
$1,219.79
$915.53
$698.57

SCV
...
$5,104.36
$3,598.00
$2,925.98
$2,473.28
$2,271.10
$2,100.65
$1,792.40
$1,639.16
$1,441.87
$979.74
$481.61

It appears that adding about 30% of a higher return/higher volatility asset class to the S&P boosts 10 year performance at all percentiles except 90%. This is consistent with Markowitz's findings that adding 30% S&P to a bond portfolio improves performance without adding volatility. A general rule may be that adding about 30% of a higher return, higher volatility asset class to a portfolio increases return without increasing overall volatility. Top percentile returns are lower, of course, for the combined portfolio than for the high return asset class alone. Annual rebalancing is carried out in the above with a .2% expense ratio.
Mike
*** Veteran
Posts: 278
Joined: Sun Jul 06, 2003 4:00 am

Post by Mike »

Thirty year results, sorted by decile:

30% SCV
...
$31,114
$17,635
$14,726
$13,176
$9,391
$8,131
$6,488
$5,930
$5,246
$4,912
$4,366

S&P
...
$15,462
$12,516
$10,222
$8,808
$7,334
$6,475
$5,466
$4,480
$3,869
$3,478
$3,063

SCV
...
$51,321
$20,684
$13,927
$8,175
$7,301
$5,795
$4,449
$3,988
$3,237
$2,669
$1,946

Over this longer period, the 90th decile anomaly drops out. Performance is improved more or less accross the board over the S&P alone. Lower decile performance is improved over SCV alone, but upper decile performance suffers compared to pure SCV.
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