William Bernstein’s Coward’s Portfolio – 2018 Update

william_bernstein-William Bernstein, investment manager and author, first introduced a version of his “Coward’s portfolio” in 1996.

The “coward” refers not to the investor’s risk tolerance but to the strategy of hedging one’s bets and having slices of a number of asset classes.

An indexed 60% equity/ 40% fixed income Coward’s portfolio would consist of the following asset classes:

  • US large blend: 15%
  • US large value: 10%
  • US small blend : 5%
  • US small value: 10%
  • US REIT: 5%
  • European equity: 5%
  • Pacific region equity: 5%
  • Emerging markets equity: 5%
  • US short-term bond: 40%

In 2018 the Coward’s portfolio produced the following return:

Year Return
2018 -5.01%

Note that the portfolio has a value tilt to US equity, providing an even split between US blend and US value funds (20%/20%). The US REIT and regional international allocations are all set at equal 5% slices of the portfolio.

The chart below (click image to enlarge) illustrates the 60/40 allocation.

Bernsteincowards

Bernstein’s Cowards Portfolio 60/40 allocation

Returns

Vanguard offered index funds for the Coward’s portfolio’s suggested asset classes from 1999 onward. The following tables give return data using Vanguard index funds. Starting in 2018, we use Vanguard index fund admiral shares as Vanguard lowered the minimum investment for index fund admiral shares in many index funds. Prior to 2018, we base returns of investor shares. The returns period covers portfolio performance during the two bear markets in the 2000 -2010 decade, as well as subsequent recoveries. Keep in mind that past performance does not forecast future performance.

Fund Ticker Allocation Expense ratio
S&P 500 Index VFIAX 15% 0.04%
Value Index VVIAX 10% 0.05%
Small cap Index VSMAX 5% 0.05%
Small value Index VSIAX 10% 0.07%
REIT Index VGSLX 5% 0.12%
Europe Index VEUSX 5% 0.10%
Pacific Index VPACX 5% 0.10%
Emerging markets Index VEMAX 5% 0.14%
Short-term Investment grade VFSTX 40% 0.20%

Annual returns

Year Portfolio
2018 -5.01%
2017 11.76%
2016 9.02%
2014 -0.82%
2013 15.98%
2012 12.06%
2011 -1.18%
2010 13.01%
2009 24.32%
2008 -24.55%
2007 4.56%
2006 14.76%
2005 7.07%
2004 12.16%
2003 23.70%
2002 -7.29%
2001 -0.07%
2000 2.82%
1999 13.79%

Compound returns

Period Return Standard deviation Sharpe Ratio
3yr CAGR 5.02% 9.02% 0.45
5yr CAGR 4.10% 7.01% 0.50
10yr CAGR 8.23% 8.93% 0.90
15yr CAGR 6.00% 11.43% 0.46
20yr CAGR 6.00% 11.30% 0.41

See William Bernstein’s Coward’s Portfolio, google drive spreadsheet, for computations.

About

Barry Barnitz, administrator of both the Bogleheads® wiki and of Financial Page, a Bogleheads® blog. In addition I serve as an administrator of finiki, the Canadian financial wiki, as an administrator of la Wiki Bogleheads® España, and as an administrator of the John C. Bogle Center for Financial Literacy site.

Tagged with:
Posted in Market statistics, Portfolios
Archives
Categories
Follow Financial Page on WordPress.com
%d bloggers like this: