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Figure 25.2: "Strategic" Weight ETF Portfolio
and PREMX, namely VWOB (Vanguard Emerging Markets Government Bond ETF) and BNDX
(Vanguard Total International Bond ETF). The latter two only began trading in late 2013, which
only admits the possibility of a 36-month period backtest. Such a duration is not sufficiently
long to produce representative performance for a monthly rebalance strategy.
Hence the universe was reduced to eight ETFs compared to ten in the aforementioned post.
They are outlined above in the "Data" section. Instead the portfolio is weighted 30% to US
equities, 25% to emerging markets equities, 25% to US bonds, 10% to commodities and 10% to
real estate.
The performance of this strategy is far worse than the 60/40 portfolio. It has a negative
CAGR. Some of the pressure on the returns comes from the transaction costs of trading in eight
separate securities every month. However nearly all other ETFs in the portfolio underperformed
SPY by a wide margin, dragging the returns down significantly.
Commodities and fixed income in particular have not had good performance over the last