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SPY-EFA-BND 50-25-25?

Steve LeCompte | | Posted in: Strategic Allocation

A subscriber observed and asked: "Many Bogleheads at Vanguard prefer a buy and hold portfolio of 50% SPY, 25% each BND and EFA [rebalanced annually]. How does this compare to your current strategy? And how does it compare to buy and hold QQQ?" To compare, we compute gross monthly returns for the following six strategies:

  1. SPY-EFA-BND Portfolio: the specified combination of SPDR S&P 500 ETF Trust (SPY), iShares MSCI EAFE ETF (EFA) and Vanguard Total Bond Market Index Fund (BND), rebalanced at the end of each June.
  2. Simple Asset Class ETF Value Strategy (SACEVS) Best Value: the best SACEVS asset, reselected monthly.
  3. SACEVS Weighted: the weighted combination of undervalued SACEVS assets, rebalanced monthly (probably the most closely related to SPY-EFA-BND Portfolio)..
  4. Simple Asset Class ETF Momentum Strategy (SACEMS) EW Top 2: the equal-weighted combination of the top two SACEMS assets, reformed monthly.
  5. Best Value - EW Top 2: the monthly rebalanced combination of 50% SACEVS Best Value and 50% SACEMS EW Top 2.
  6. Buy-and-hold QQQ: buy and hold Invesco QQQ Trust (QQQ).

We focus on compound annual growth rate (CAGR) and maximum drawdown (MaxDD) as essential performance statistics. Using monthly dividend-adjusted prices for SPY, EFA, BND and QQQ and monthly gross returns for SACEVS and SACEMS during April 2007 (limited by inception of BND) through June 2024, we find that:

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