Forever Portfolios
Posted: September 3rd, 2022, 6:41 am
Over the years I've read lots on here around forever portfolio's, including the baskets of Investment trusts and it's inspired me to take a look my self. One of the things that occured to me is that the risk of failure is front loaded so you need a mechanism of some sort to potentially stave off bad market conditions at the start of retirement. I'm also a believer in KISS. To this end I've been researching portfolio's with two investments, with one being physical gold. What became apparent to me is that rebalancing just isn't worth it. With the data I have used you are in most cases worst off rebalancing and thats without considering costs.
This is what I propose for the portfolio upon inception:
50% invested in SGLN
50% invested in an Investment Trust/OIEC/ETF (or could be combinations which I haven't modelled yet)
Take income in equal proportions from each investment
Never rebalance
4% drawdown from capital per annum
First up VRWL a well known global tracker ETF:
sgln vrwl Income Capital
Year
2015 44112.00 46358.40 3769.60 90470.40
2016 55187.29 47588.20 4282.31 102775.48
2017 53340.06 56183.00 4563.46 109523.06
2018 52926.99 48207.71 4213.95 101134.71
2019 57735.31 58113.05 4827.01 115848.36
2020 65918.01 64151.23 5419.55 130069.24
2021 60863.95 72257.89 5546.74 133121.84
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 4.17%
No rebalancing Income CAGR: 4.78%
Total income received: £32622.62
Sure this only has 7 years of data but you can see increasing capital and income. Let try Law Debenture IT:
sgln lwdb Income Capital
Year
2012 47980.80 62856.00 4618.20 110836.80
2013 32058.85 76766.79 4534.40 108825.64
2014 32130.66 75258.47 4474.55 107389.14
2015 28346.96 69257.06 4066.83 97604.02
2016 35464.08 72523.78 4499.49 107987.86
2017 34277.03 84396.79 4944.74 118673.82
2018 34011.59 70844.69 4369.01 104856.28
2019 37101.47 84020.67 5046.76 121122.14
2020 42359.79 91121.43 5561.72 133481.22
2021 39111.98 104342.05 5977.25 143454.03
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 3.67%
No rebalancing Income CAGR: 4.10%
Total income received: £48092.95
Lets try Fundsmith:
sgln fundsmith Income Capital
Year
2012 47980.80 53520.00 4229.20 101500.80
2013 32058.85 63864.35 3996.80 95923.20
2014 32130.66 74981.85 4463.02 107112.51
2015 28346.96 82564.02 4621.29 110910.97
2016 35464.08 100820.57 5678.53 136284.65
2017 34277.03 117113.18 6307.93 151390.20
2018 34011.59 113777.79 6157.89 147789.38
2019 37101.47 136096.44 7216.58 173197.92
2020 42359.79 153255.48 8150.64 195615.27
2021 39111.98 178168.69 9053.36 217280.67
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 8.07%
No rebalancing Income CAGR: 8.51%
Total income received: £59875.24
Now that's tasty with minimal drawdown
What about racier, HG Capital Trust:
sgln hgt Income Capital
Year
2012 47980.80 50323.20 4096.00 98304.00
2013 32058.85 48498.68 3356.56 80557.53
2014 32130.66 50609.34 3447.50 82740.01
2015 28346.96 52267.71 3358.94 80614.67
2016 35464.08 71316.57 4449.19 106780.66
2017 34277.03 81013.35 4803.77 115290.38
2018 34011.59 79740.47 4739.67 113752.05
2019 37101.47 112124.02 6217.73 149225.50
2020 42359.79 131534.94 7245.61 173894.73
2021 39111.98 175267.67 8932.49 214379.65
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 7.92%
No rebalancing Income CAGR: 8.37%
Total income received: £50647.46
Fundsmith has been much superior.
Lets try SMT:
sgln smt Income Capital
Year
2012 47980.80 61944.00 4580.20 109924.80
2013 32058.85 82539.14 4774.92 114597.99
2014 32130.66 95370.35 5312.54 127501.01
2015 28346.96 102807.71 5464.78 131154.66
2016 35464.08 114032.66 6229.03 149496.75
2017 34277.03 153336.53 7817.23 187613.56
2018 34011.59 152546.54 7773.26 186558.13
2019 37101.47 181239.93 9097.56 218341.41
2020 42359.79 364492.36 16952.17 406852.15
2021 39111.98 383014.40 17588.60 422126.38
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 15.49%
No rebalancing Income CAGR: 15.96%
Total income received: £85590.29
Now that's unbelievably good, but has to be put into context that this year its currently around 40% down.
Food for thought?
This is what I propose for the portfolio upon inception:
50% invested in SGLN
50% invested in an Investment Trust/OIEC/ETF (or could be combinations which I haven't modelled yet)
Take income in equal proportions from each investment
Never rebalance
4% drawdown from capital per annum
First up VRWL a well known global tracker ETF:
sgln vrwl Income Capital
Year
2015 44112.00 46358.40 3769.60 90470.40
2016 55187.29 47588.20 4282.31 102775.48
2017 53340.06 56183.00 4563.46 109523.06
2018 52926.99 48207.71 4213.95 101134.71
2019 57735.31 58113.05 4827.01 115848.36
2020 65918.01 64151.23 5419.55 130069.24
2021 60863.95 72257.89 5546.74 133121.84
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 4.17%
No rebalancing Income CAGR: 4.78%
Total income received: £32622.62
Sure this only has 7 years of data but you can see increasing capital and income. Let try Law Debenture IT:
sgln lwdb Income Capital
Year
2012 47980.80 62856.00 4618.20 110836.80
2013 32058.85 76766.79 4534.40 108825.64
2014 32130.66 75258.47 4474.55 107389.14
2015 28346.96 69257.06 4066.83 97604.02
2016 35464.08 72523.78 4499.49 107987.86
2017 34277.03 84396.79 4944.74 118673.82
2018 34011.59 70844.69 4369.01 104856.28
2019 37101.47 84020.67 5046.76 121122.14
2020 42359.79 91121.43 5561.72 133481.22
2021 39111.98 104342.05 5977.25 143454.03
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 3.67%
No rebalancing Income CAGR: 4.10%
Total income received: £48092.95
Lets try Fundsmith:
sgln fundsmith Income Capital
Year
2012 47980.80 53520.00 4229.20 101500.80
2013 32058.85 63864.35 3996.80 95923.20
2014 32130.66 74981.85 4463.02 107112.51
2015 28346.96 82564.02 4621.29 110910.97
2016 35464.08 100820.57 5678.53 136284.65
2017 34277.03 117113.18 6307.93 151390.20
2018 34011.59 113777.79 6157.89 147789.38
2019 37101.47 136096.44 7216.58 173197.92
2020 42359.79 153255.48 8150.64 195615.27
2021 39111.98 178168.69 9053.36 217280.67
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 8.07%
No rebalancing Income CAGR: 8.51%
Total income received: £59875.24
Now that's tasty with minimal drawdown
What about racier, HG Capital Trust:
sgln hgt Income Capital
Year
2012 47980.80 50323.20 4096.00 98304.00
2013 32058.85 48498.68 3356.56 80557.53
2014 32130.66 50609.34 3447.50 82740.01
2015 28346.96 52267.71 3358.94 80614.67
2016 35464.08 71316.57 4449.19 106780.66
2017 34277.03 81013.35 4803.77 115290.38
2018 34011.59 79740.47 4739.67 113752.05
2019 37101.47 112124.02 6217.73 149225.50
2020 42359.79 131534.94 7245.61 173894.73
2021 39111.98 175267.67 8932.49 214379.65
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 7.92%
No rebalancing Income CAGR: 8.37%
Total income received: £50647.46
Fundsmith has been much superior.
Lets try SMT:
sgln smt Income Capital
Year
2012 47980.80 61944.00 4580.20 109924.80
2013 32058.85 82539.14 4774.92 114597.99
2014 32130.66 95370.35 5312.54 127501.01
2015 28346.96 102807.71 5464.78 131154.66
2016 35464.08 114032.66 6229.03 149496.75
2017 34277.03 153336.53 7817.23 187613.56
2018 34011.59 152546.54 7773.26 186558.13
2019 37101.47 181239.93 9097.56 218341.41
2020 42359.79 364492.36 16952.17 406852.15
2021 39111.98 383014.40 17588.60 422126.38
Starting capital: £100000
Income rate: 4%
No rebalancing Capital CAGR: 15.49%
No rebalancing Income CAGR: 15.96%
Total income received: £85590.29
Now that's unbelievably good, but has to be put into context that this year its currently around 40% down.
Food for thought?