If and when my portfolio grows large enough to be a "qualified purchaser" (i.e., $5M invested), I plan to consider adding private equity through an investment in Harbourvest at Vanguard. I think it is very unlikely that it will make much practical difference, but at that portfolio size I also think it is very unlikely that purchasing extra publicly traded stocks and bonds will make much practical difference either, and there is some small prospect that the diversification could be meaningful.Agree.Unless I am missing something, it seems that the differences between the Doeswijk market portfolio reflected in the paper and, say, someone who owned a home and put the rest in the Bill Sharpe-style market portolio would be that: (i) homeownership likely would cause this person to have a much higher exposure to real estate than than Doeswijk portfolio (because real estate never exceeds 5.9% in any year);Agree, but as you say, the private equity piece seems to be growing.(ii) the equity portion of the Bill Sharpe portfolio would not have the small slice of private equities from the Doeswijk portfolio (vanishingly small in early years, but now approaching ~10% of the overall equity position);Agree.(iii) the Bill Sharpe portfolio would not have the rounding-error-sized allocations to inflation-linked bonds, sub-investment grade bonds, or commodities that are included in the Doeswijk portfolio (although, of course, Bill Sharpe's overall advice generally would include a large allocation to inflation-linked bonds not included in his market portfolio);I found it interesting that someone who wishes to replicate the global portfolio should indeed own physical gold. Although, as Dr. Doeswijk pointed out, the proportion is minimal (2% of the global portfolio).(iv) there also would have been a brief period of a few years around 1980 when the commodities piece would have been more than a rounding error.
I am not sure that the 14-year holding period, minimum investment, etc. will make it more trouble than it is worth, but I don't think it is a crazy idea. It's reasonably likely I will be there in my late 40s or early 50s, in which case the holding period doesn't seem like a big deal to me. In my 60s, I think I would feel differently about needing to wait 14 years. I also don't see this as any kind of "must have." If there are a bunch of other strings attached (e.g., at some point I heard you needed to have the $5M invested through PAS), then I would scrap the idea, and who knows what changes there may be before I get there (or if early retirement or some other factor will prevent me from getting there in the first place).
I would also consider buying a smallish amount of physical gold somewhere around that level or perhaps a bit lower. I currently have some precious metals in the form of coins/jewelry, but it's much closer to 0.1% than to 1%. Again, the scenarios where I think it might make a difference are very low probability, but I could see it seeming like a reasonable use of additional dollars at the margins given what I would anticipate to be a rapidly declining marginal utility of additional stocks and bonds at those levels.
For now, I am happy with leaving these things out. As I said earlier in the thread, I think the global market portfolio is useful as a baseline allocation, with the idea that I can and should tilt away from it when I have a firm conviction that my personal circumstances, risk profile or needs differ from those of the average market participant. Simplicity is also a valuable thing, of course.
I am, admittedly, more interested in finding solid support for the ways that my investments should differ from the global market portfolio, and more skeptical of backtesting, than the majority of Bogleheads seem to be. But backtesting seems to me like it provides even less useful information in evaluating these kinds of additions to a portfolio than usual. The data available is so limited, and the potential value of these investments seems to sit out in the tails. The point of them, in my mind, isn't to juice your "expected returns," provide "alpha," or whatever, and I don't believe in any of that stuff anyway. So I don't see exactly what information a backtest is supposed to give you. Some people use the same kind of backtesting to suggest that you should add much, much larger amounts of gold to your portfolio because it would have happened to help you out in one particular historical incident. That just doesn't seem terribly relevant to me either.
Statistics: Posted by HootingSloth — Sun Sep 29, 2024 7:15 pm — Replies 71 — Views 3316