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Explorer ○○

Is this crazy (50% PRNHX/ 50% TLT)

What do you think of this simple portfolio?

50% PRNHX (TR Price New Horizons) / 50% TLT  (ishares 20+ year treasury bond etf)

Since 2003

Worst year -2.43%

CAGR 12.12

Sharpe 1.15

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Frequent Contributor

Re: Is this crazy (50% PRNHX/ 50% TLT)

This idea was mentioned several times before. Both higher performer + volatility but they complement each other in a crash.

You can also use QQQ which has better performance for YTD 5 + 15 years and more importantly for YTD + 1 year and doing pretty well in a meltdown too.

Total Return % (04/22/2020)1-Day1-Week1-Month3-MonthYTD1-Year3-Year5-Year10-Year15-Year
PRNHX2.093.124.47-8.03-310.4418.0113.6616.7313.29
QQQ2.970.7423.85-5.56-0.5613.2217.7615.2716.6113.63

 

I just selected a starting point of 01/2007 and QQQ has better performance + volatility (link)

PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
PRNHX+TLT11.85% 9.51%25.92%-2.43%-16.82% 1.131.84
QQQ+TLT12.22% 9.24%26.54%-3.90%-17.65% 1.22.05
QQQ12.86% 17.58%54.68%-41.73%-49.74% 0.731.1
PRNHX12.20% 17.99%49.11%-38.78%-49.92% 0.681

 

If I use 5 years (link) QQQ looks even better. Yes, I know, PRNHX is a mid-cap fund and QQQ is the top high tech, there is always someone who comes along and says you can't compare it  :-)

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Participant ○○○

Re: Is this crazy (50% PRNHX/ 50% TLT)

I'm thinking I should replace our Intermediate Term Treasuries for Long Term Treasuries. I like that it works as a better buffer.

But with these low interest rates for every 1% increase that Long Term Treasury ETF will go down by 20%. That's scary.

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Participant ○○○

Re: Is this crazy (50% PRNHX/ 50% TLT)

Why not VTI + TLT?

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Explorer ○○○

Re: Is this crazy (50% PRNHX/ 50% TLT)

You are crazy if this doesn't work and a genius if it works. 

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@galeno wrote:

I'm thinking I should replace our Intermediate Term Treasuries for Long Term Treasuries. I like that it works as a better buffer.

But with these low interest rates for every 1% increase that Long Term Treasury ETF will go down by 20%. That's scary.


That’s the great thing about investing by backtesting. No need to consider current conditions or the impact of future events. Just search, sort, filter, calculate, and invest!

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@FD1001 wrote:

This idea was mentioned several times before. Both higher performer + volatility but they complement each other in a crash.

You can also use QQQ which has better performance for YTD 5 + 15 years and more importantly for YTD + 1 year and doing pretty well in a meltdown too.

Total Return % (04/22/2020)1-Day1-Week1-Month3-MonthYTD1-Year3-Year5-Year10-Year15-Year
PRNHX2.093.124.47-8.03-310.4418.0113.6616.7313.29
QQQ2.970.7423.85-5.56-0.5613.2217.7615.2716.6113.63

 

I just selected a starting point of 01/2007 and QQQ has better performance + volatility (link)

PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
PRNHX+TLT11.85% 9.51%25.92%-2.43%-16.82% 1.131.84
QQQ+TLT12.22% 9.24%26.54%-3.90%-17.65% 1.22.05
QQQ12.86% 17.58%54.68%-41.73%-49.74% 0.731.1
PRNHX12.20% 17.99%49.11%-38.78%-49.92% 0.681

 

If I use 5 years (link) QQQ looks even better. Yes, I know, PRNHX is a mid-cap fund and QQQ is the top high tech, there is always someone who comes along and says you can't compare it  :-)


Will you please re-run your test with a start date of July 9, 2020?

TIA.

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Contributor ○

Re: Is this crazy (50% PRNHX/ 50% TLT)

Is not PRNHX closed to new investors?  Is this day dreaming at a different level?

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Participant ○○○

Re: Is this crazy (50% PRNHX/ 50% TLT)

While a majority of my portfolio is in PRWCX and VWENX,  in the remaining 40% that I manage, I am now in VGLT (LT Treasuries) + BIV (IT Investment Grade) in a roughly 4:1 ratio for the bond portion.  Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.

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Explorer ○○○

Re: Is this crazy (50% PRNHX/ 50% TLT)

It's closed, but there are ways to get into it. Call Price. 

Sent from Yahoo Mail on Android
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Re: Is this crazy (50% PRNHX/ 50% TLT)


@SJ60 wrote:

Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Trenchant logic. Nicely said.

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@Warren1 wrote:
It's closed, but there are ways to get into it. Call Price. 

Sent from Yahoo Mail on Android

I talked to my rep at TRP a few months ago and he said there are no exceptions, unless you are rolling over from an employer plan.  Same exception as with PRWCX and other closed TRP funds.  Folks are not going to quit their jobs to get into a TRP fund.  Please let us know how else to get in. 

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@chang wrote:

@SJ60 wrote:

Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Trenchant logic. Nicely said.


There are plenty of times when both went down at the same time.  2018?

edit: there is a new thread on Equity Diversifiers.

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Re: Is this crazy (50% PRNHX/ 50% TLT)



@Anitya wrote:

@chang wrote:

@SJ60 wrote:

Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Trenchant logic. Nicely said.


There are plenty of times when both went down at the same time.  2018?

edit: there is a new thread on Equity Diversifiers.


@Anitya wrote:

@chang wrote:

@SJ60 wrote:

Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Trenchant logic. Nicely said.


There are plenty of times when both went down at the same time.  2018?

edit: there is a new thread on Equity Diversifiers.


There are times when both went up at the same time. 2019. Long term treasuries are not a hedge but they are a great diversifier to equities.  I believe in risk parity but IMO 50% TLT and 50% in a mid-cap actively managed growth fund is not enough diversification.  There are some days when nothing works and I'm glad to have cash in the bank.

helmut

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@Anitya wrote:

@chang wrote:

@SJ60 wrote:

Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Trenchant logic. Nicely said.


There are plenty of times when both went down at the same time.  2018?


True, but VGLT dropped 1.5% in 2018, virtually flat. SPY dropped 4.5%. In the big picture (for a volatile portfolio), basically a flat year.

In 2013, VGLT dropped 12.5%, a fairly significant drop. But SPY was up 32%.

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@SJ60 wrote:

While a majority of my portfolio is in PRWCX and VWENX,  in the remaining 40% that I manage, I am now in VGLT (LT Treasuries) + BIV (IT Investment Grade) in a roughly 4:1 ratio for the bond portion.  Yes, LT Treasuries are at risk if interest rates go up - but I am betting that the Fed will not be raising rates for a year or two.  If I'm wrong, and rates go up, it will be because the stock market, and my stocks with it, would have shot way higher than it is now - in which case, I won't care if my VGLT drops 20%.


Why would the fed raise rates just because stocks go up when the purpose of 0 interest rates is to encourage businesses and individuals to borrow at low rates to raise the GDP into positive territory? When economy crashed at the end of of 2008 the fed lowered the fed funds rate to 0 and then flooded the banking system with $3T in cash to encourage spending. Rate remained at 0 for 7 years as GDP grew by 2% a year and inflation remained below fed 2% target. Right now economy is in a recession and fed is doing everything to encourage an increase in spending to  drive up employment without fear of inflation. Fed has stated that 0 percent rate will remain in effect to 2022.

0 interest rates will keep fixed income yields lower for the foreseeable future which is why equities with increasing earnings will be the only option for returns greater than the rate of inflation and why I am 90% equities.

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Re: Is this crazy (50% PRNHX/ 50% TLT)

Intruder.

Investment grade bonds suck. I'd rather increase equity allocation than take on non investment grade bond credit risk. Our weak stocks drag our dead bonds.

Sometimes I think going 100% SCHD (for us VHYD) is the right way to go. Develop an income investor mentality instead of a total return investor mentality. 

The gross 12 month yield of VHYD = 3.31%. Net for us = 2.98%. Call it 3%.

We'd have to cut our expenses by 25% to do this.

 

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Re: Is this crazy (50% PRNHX/ 50% TLT)


@galeno wrote:

Intruder.

Investment grade bonds suck. I'd rather increase equity allocation than take on non investment grade bond credit risk. Our weak stocks drag our dead bonds.

Sometimes I think going 100% SCHD (for us VHYD) is the right way to go. Develop an income investor mentality instead of a total return investor mentality. 

The gross 12 month yield of VHYD = 3.31%. Net for us = 2.98%. Call it 3%.

We'd have to cut our expenses by 25% to do this.

 


I have an idea since "Investment grade bonds suck".  You go with 100% stocks + you take margin(link) from interactive brokers at only 1.21% for $300K.  

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Re: Is this crazy (50% PRNHX/ 50% TLT)

@Intruder 

I think you misunderstood what I was saying. The Fed will not raise rates because the stock market is up, but any circumstances that would could cause the Fed to raise rates will almost certainly include a stock market boom.  I am pretty sure the Fed will not raise rates if the market is swooning.

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Re: Is this crazy (50% PRNHX/ 50% TLT)

Time Horizon?

Medium term likely OK but you only really need 20% TLT for a sufficient equity hedge.

Long term--no.  Not compensated enough for the interest rate risk.

I would investigate other diversifiers.  Since we are now out of the liquidity crisis, and likely in the foreseeable future thank to the Fed, some other options in the backstopped credit markets offer better risk/return.

I've noticed some of my other bond funds starting to zig with the rest of the market zags now.

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