𝐓𝐡𝐞 𝟔𝟎/𝟒𝟎 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐭𝐡𝐞 𝐝𝐞𝐟𝐚𝐮𝐥𝐭 𝐟𝐨𝐫 𝐟𝐨𝐮𝐫 𝐝𝐞𝐜𝐚𝐝𝐞𝐬. 𝐒𝐭𝐚𝐧𝐟𝐨𝐫𝐝 𝐣𝐮𝐬𝐭 𝐛𝐞𝐚𝐭 𝐢𝐭 𝐰𝐢𝐭𝐡 𝐭𝐡𝐫𝐞𝐞 𝐄𝐓𝐅𝐬 𝐚𝐧𝐝 𝐟𝐫𝐞𝐞 𝐝𝐚𝐭𝐚. 📈 𝑆𝑖𝑚𝑝𝑙𝑒 𝐷𝑦𝑛𝑎𝑚𝑖𝑐 𝑆𝑡𝑜𝑐𝑘/𝐵𝑜𝑛𝑑/𝐺𝑜𝑙𝑑 𝑃𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜𝑠, by Stephen Boyd and co-authors. The recipe is almost boringly simple. Hold stocks, bonds and gold. Reba

𝐓𝐡𝐞 𝟔𝟎/𝟒𝟎 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐭𝐡𝐞 𝐝𝐞𝐟𝐚𝐮𝐥𝐭 𝐟𝐨𝐫 𝐟𝐨𝐮𝐫 𝐝𝐞𝐜𝐚𝐝𝐞𝐬. 𝐒𝐭𝐚𝐧𝐟𝐨𝐫𝐝 𝐣𝐮𝐬𝐭 𝐛𝐞𝐚𝐭 𝐢𝐭 𝐰𝐢𝐭𝐡 𝐭𝐡𝐫𝐞𝐞 𝐄𝐓𝐅𝐬 𝐚𝐧𝐝 𝐟𝐫𝐞𝐞 𝐝𝐚𝐭𝐚. 📈 𝑆𝑖𝑚𝑝𝑙𝑒 𝐷𝑦𝑛𝑎𝑚𝑖𝑐 𝑆𝑡𝑜𝑐𝑘/𝐵𝑜𝑛𝑑/𝐺𝑜𝑙𝑑 𝑃𝑜𝑟𝑡𝑓𝑜𝑙𝑖𝑜𝑠, by Stephen Boyd and co-authors. The recipe is almost boringly simple. Hold stocks, bonds and gold. Rebalance once a month. No leverage, no shorting, nothing you cannot download for free. Then two tweaks: 🧊 When markets get rough, move some money into cash so the risk you carry stays steady. 🎯 Use a rough forecast of next month's returns to tilt the mix, with a hard cap on how much risk you take. Twenty years of results, after trading costs. Measured as return per unit of risk, the Sharpe ratio: • Classic 60/40 → 𝟎.𝟓𝟔 • Add gold and the cash buffer → 𝟎.𝟖𝟐 • Add the forecast → 𝟏.𝟎𝟖 Annual return 𝟖.𝟏% 𝐭𝐨 𝟏𝟏.𝟔%. Worst loss 𝟑𝟒% 𝐝𝐨𝐰𝐧 𝐭𝐨 𝟏𝟖%. It even made money in 2008. Code is public. The lesson is not the maths. It is that a rough forecast next to a firm risk limit beats a fixed rule. 🔍 One caveat the authors raise themselves: this is a single 20 year backtest, and their strictest test cannot fully rule out luck. #QuantitativeFinance #Quant #PortfolioManagement #AssetAllocation #RiskManagement #Investing #Finance #FinancialMarkets #MachineLearning #DataScience #ConvexOptimization #Optimization #Markowitz #SharpeRatio #VolatilityTargeting #ETFs #Gold #FixedIncome #WealthManagement #QuantResearch Link to the paper: I started a monthly digest that cuts out all the noise in #Quant Finance & #AI/#LLM research.