Review of the Golden Butterfly Portfolio

A subscriber requested review of the Golden Butterfly (GB) portfolio, which assigns equal weights to the total stock market, small-capitalization value stocks, long-term government bonds, short-term government bonds and gold. To investigate, we use the following exchange-traded funds (ETF) as asset class proxies, respectively:

• Vanguard Total Stock Market Index Fund (VTI)
• iShares S&P Small-Cap 600 Value Fund (IJS)
• iShares Barclays 20+ Year Treasury Bond (TLT)
• iShares 1-3 Year Treasury Bond (SHY)
• SPDR Gold Shares (GLD)

We consider either monthly or annual rebalancings to equal weight, ignoring associated trading frictions. Using monthly dividend-adjusted prices for the five ETFs during November 2004 (limited by GLD) through December 2022, we find that: (more…)