5 briefcases for passive investor

If the investor does not know how to independently distribute assets in different classes, it can use ready-made solutions for long-term investments in the form of model portfolios. We asked for a financial consultant and general director of the company «Personal Capital» Vladimir Savenka to tell about the most famous strategies for passive investment.

Portfolio composition:

This is one of the simplest and most popular portfolios. It includes the US short-term treasury bond fund (essentially it is an analog of cache) and the Index Fund of US Shares (S & P 500).

The attractiveness of this portfolio consists primarily that it is formed only two funds (ETF) and is available to almost any investor in any country.

How much can you earn with long-term investments

For 25 years, the portfolio has shown an average annual income of 9.47% in dollars with volatility of 13.77%. Attractive yield, but high volatility. One without another, as a rule, does not happen.

For 10 years, the result is even more impressive — yield 14.84% with volatility of 11.74%.

How can a portfolio

But if Warren Buffett is ready to calmly invest money into this portfolio, then for a less experienced and more restless investor, it will not fit — a large share of shares guarantees the investor large fluctuations in the value of the portfolio. It is enough to look at how he asked in 2008 — minus 45%.

Portfolio composition:

Another well-known passive portfolio was created by a financial consultant and the author of 12 Books Harry Brown in the 1980s. In it, everything is almost simple, like Warren Buffett. Only one significant difference — gold is included in the portfolio.

And such a portfolio (like the Buffett’s portfolio) can be formed from the minimum number of funds — 4 or even 3 (if we consider that Harry Brown short-term bonds included in the portfolio as an alternative to money).

How much can you earn with long-term investments

Despite the fact that, according to the simplicity, the portfolio is not inferior to Buffett, their results are distinguished in 10 and 25 years old. Thus, the average annual yield over 25 years of the Harry Brown portfolio was 6.99% with volatility of 6.43%, in 10 years — 5.74% per annum with volatility 6.07%.

As you can see, the income is lower, but also unrest (volatility) is two times less.

How can a portfolio

The maximum drawdown of this portfolio was in 2008 — minus 12.6%. Full acceptable oscillations for the crisis year. Such a portfolio is good for cautious investors who are not ready to calmly look at the significant fluctuations in the stock market.

Portfolio composition:

This portfolio distributes investors’ capital in stocks and bonds around the world. In this and in the very balance of shares and bonds, of course, the difference between the reference portfolio from the Buffett portfolio.

And again the strategy attracts its simplicity — only two classes of assets. Although more than 2 funds will need for the formation of such a global portfolio.

How much can you earn with long-term investments

The results of the portfolio of the portfolio for 25 years. Such: yield of 6.78% and volatility of 10%, for 10 years — yield 8.59% and volatility is 8.42%.

How can a portfolio

In 2008, the drawdown of the reference portfolio reached 36.7%.

Portfolio composition:

Another portfolio with a beautiful distribution of 25%. But unlike Harry Brown, here the capital is distributed in total in two asset classes — 75% in stocks and 25% in bonds. That is, the portfolio is slightly less aggressive than the Buffett portfolio with 90% of the shares.

How much can you earn with long-term investments

For 25 years, the portfolio showed the yield of 7.8% per annum with volatility of 11.9%. In 10 years, yield was 9.92% with volatility of 10.24%.

How can a portfolio

In 2008, the portfolio asked 40%. This strategy attracts its simplicity — only 4 positions. But in the composition of the portfolio aggressive and not suitable for each investor.

Portfolio composition:

This is one of the most popular portfolios for passive investors. Here, capital is distributed between three assets. And everything seems to be interesting, but if you look at the number of funds, there are quite a lot of them in the portfolio:

Total — 8 different funds. Therefore, such a portfolio is not for the middle investor with a small capital.

How much can you earn with long-term investments

For 25 years, the profitability of the portfolio was 7.98% per year with volatility of 6.87%. For 10 years, it brought 7.18% per annum with volatility of 6%.

How can a portfolio

The maximum drawdown was in 2008, it amounted to 12.2%.

The highest yield gives a portfolio with the highest volatility (Warren Buffetta). But this portfolio is only for calm and cold-blooded investors. The same can be said about the Bill Burnstine portfolio — 75% of the shares make a portfolio aggressive.

The best results for profitability and volatility showed the All-weather portfolio of Ray Dalio:

With all its complexity, this portfolio is the best of the five portfolios under consideration.

This is not a complete list of existing strategies for passive investment. But the perfect portfolio and ideal structure does not exist for all. You need to choose a portfolio based on your profile risk. After all, all the portfolios that we looked at this review differ mainly at risk.

And another very important rule for passive investors — in the formation of a portfolio, it is necessary to plan to invest in it for a period of 10-20 years and more. Only in this case he will give a good result, regardless of all crises in the economy and in the markets. Therefore, the structure of the portfolio is not so important (the main thing is that there is diversification), as the disciplined behavior of the investor. And the rest takes care time.

The opinion of the authors of the columns may not coincide with the opinion of the FINEX edition. The decision on the use of securities and any other financial instruments the user accepts independently. Information in the text is not an individual investment recommendation. Form an individual portfolio for the purpose, risk and horizon can be using

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