Golden Butterfly retirement strategy

older_and_no_wiser

Good morning all.

I'm interested in hearing your thoughts on the Golden Butterfly withdrawal strategy as detailed in portfoliocharts.com and discussed in some detail in a recent 
 video on the Pensioncraft YouTube channel.

I'm several years from retirement so not quite ready to rebalance for this, but I'm keen to learn from those who are closer to and in retirement to see what strategy you've employed for your retirement lifestyles.

Prism

The Golden Butterfly is one of the portfolios that I have looked into and the historical performance is good. I do have some issues with it though.

Firstly the 20% allocation to gold is much higher than I would like and it is unlikely that we will ever see the gains of the 1970s happen again. Then there is the 40% allocation to bonds which are now at a point that they are unlikely to go much higher in price. Having a split between long and short bonds is the way to get the equivalent of intermediate duration bonds in the UK as there are no single bond index funds that do that. The equity part seems pretty standard, although would likely need to be made global as the original portfolio is US only. The small cap tilt is something I would do, though not specifically small cap value.

gm0

It is just a portfolio asset allocation - an example being 40% stocks 40% bonds 20% (gold). Which could be used with any overall withdrawal strategy or methods for income and overall tax planning provided the method guides "what to sell" upon taking income and rebalancing however trivial the rule. 

Full market equities tilted hard to small cap.  Bonds are medium (equal mix of short and long duration). 
As an exercise in backtesting it's fine.  There are some backtested cohorts and sequences where gold helped.  Small has delivered in some periods and some markets at some times.  People have views over whether any small cap premium is still present and similarly if value factor will make a comeback vs growth i.e. whether this is sort of approach is any good from here on in.

My own take on the Golden Butterfly approach is that adding some small(er) cap to whole of market by weight large cap is a mildly helpful diversification within equities.  (if treated within that % asset class allocation).  I also take the view 50% is too much and sub 10% is marginal.  so 10% < x < 50% depending upon what other funds I am building into the portfolio design for the platforms used.  Medium duration quality bonds are a fairly harmless compromise (mainstream). 

The 20% gold is the key feature from a half equities multi-asset or homebrew and a choice some people make. I don't.

GB isn't uniquely clever or especially mad or bad.  In fact it's rather a good model to look at it and unpack to see if the assumptions suit you in reviewing/designing your portfolio.  I found it useful in that context.

Is that too many or too few equities (for individual need and risk appetite) (For me too few)
Do I want small cap and how much of it  (Yes but not half)
Do I want any other factor investing tilts  (No)
How many bonds do i want and is "medium" duration right for me ?  (Not as many but short/medium vs long is fine)
Gold yes or no (For me - No).

AND

How much short term cash buffering (SORR) is in the overall design.

In the end it's about what returns are needed to support income and tolerance for volatility.  If the mix looks plausible to provide enough income sustainably for the desired term along the way WR%  and the reduced potential volatility appeals more than a bigger potential heritable pot (accompanied by more volatility) then this approach may well appeal for being good enough with a lowered volatility/overall risk envelope.

It borrows from Permanent Portfolio which at the extreme end includes the hold physical gold not funds thinking which is concerned about fiat and financial asset collapse (a category of long tail low probability high impact risks).

bostonerimus

This is just another portfolio/asset allocation. I wish people would put as much thought into their budget and spending strategies as the do into portfolios.