Bill Bernstein Sheltered Sam 90/10 Portfolio: ETF allocation and returns (2024)

FAQs

What is the historical return of the 90 10 portfolio? ›

The Bill Bernstein Sheltered Sam 90/10 Portfolio obtained a 8.72% compound annual return, with a 13.74% standard deviation, in the last 30 Years. Video Player is loading. The Warren Buffett Portfolio obtained a 9.91% compound annual return, with a 13.66% standard deviation, in the last 30 Years.

The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds.

Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need. The mix includes stocks, bonds, and cash or money market securities. The percentage of your portfolio you devote to each depends on your time frame and your tolerance for risk.

The 60:40 (equity-debt) asset allocation is universally accepted as the most basic allocation and has been widely popular for decades. And over the years, it worked well.

Understanding the 90/10 Rule

Kiyosaki's 90/10 rule says this: 90% of people earn only 10% of the world's money. The secret to being part of the wealthy minority, he says, lies in positioning yourself to have low income and high expenses.

The 90-10 principle, or the Pareto Principle, asserts that approximately 90% of outcomes result from 10% of efforts. This concept originated from the observations of Italian economist Vilfredo Pareto, who noted that 80% of the land in Italy was owned by 20% of the population.

The three-fund portfolio consists of a total stock market index fund, a total international stock index fund, and a total bond market fund. Asset allocation between those three funds is up to the investor based on their age and risk tolerance.

This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, Fixed Income asset classes with a target allocation of 90% equities and 10% Fixed Income.

The AQR researchers found that Berkshire Hathaway's Sharpe Ratio (a measure of returns after adjusting for risk) is 0.79 from 1976-2017. That's about twice that of the broad market, but it's not spectacular.

At age 60–69, consider a moderate portfolio (60% stock, 35% bonds, 5% cash/cash investments); 70–79, moderately conservative (40% stock, 50% bonds, 10% cash/cash investments); 80 and above, conservative (20% stock, 50% bonds, 30% cash/cash investments).

What is the best portfolio balance by age? ›

The common rule of asset allocation by age is that you should hold a percentage of stocks that is equal to 100 minus your age. So if you're 40, you should hold 60% of your portfolio in stocks. Since life expectancy is growing, changing that rule to 110 minus your age or 120 minus your age may be more appropriate.

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.

For most retirees, investment advisors recommend low-risk asset allocations around the following proportions: Age 65 – 70: 40% – 50% of your portfolio. Age 70 – 75: 50% – 60% of your portfolio. Age 75+: 60% – 70% of your portfolio, with an emphasis on cash-like products like certificates of deposit.

This principle recommends investing the result of subtracting your age from 100 in equities, with the remaining portion allocated to debt instruments. For example, a 35-year-old would allocate 65 per cent to equities and 35 per cent to debt based on this rule.

Calculating Historical Returns

To begin calculating the historical returns, the difference between the most recent price and the past price needs to be computed and then divided by the past price multiplied by 100 to get the result as a percentage.

As a result, 60/40 returned 17.2%, far above its historical annual median return of +7.8%. In 2022, central banks raised interest rates to tame the highest inflation rate in 40 years amid the tightest labor market in 50 years. This was the most aggressive rate-hiking cycle since the Paul Volcker era in the early 1980s.

Stock market returns since 1990

If you invested $100 in the S&P 500 at the beginning of 1990, you would have about $2,953.46 at the end of 2024, assuming you reinvested all dividends. This is a return on investment of 2,853.46%, or 10.36% per year.

The Stocks/Bonds 80/20 Portfolio is a Very High Risk portfolio and can be implemented with 2 ETFs. It's exposed for 80% on the Stock Market. In the last 30 Years, the Stocks/Bonds 80/20 Portfolio obtained a 9.36% compound annual return, with a 12.51% standard deviation.