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The Asset Buckets

This page lists and describes the various Asset Categories, or Asset Buckets, that are used by The DoubleBucket™ Method.  The 2 criteria we use to select these categories are as follows:

  1. The Asset Category has a well-known verifiable historical record for a substantial number of years (preferably, 40 years or more).

  2. Going forward, the Asset Category can be confidently tracked by a market fund.  ETFs (Exchange Traded Funds) are preferred because of lower fees but if we found a Mutual Fund that performs better than an ETF we would use the Mutual Fund.

Identifying a fund that tracks an asset category is not always an exact science.  For asset categories like the S&P 500 and NASDAQ, it's pretty straight forward.  The ETF SPY tracks the S&P 500 and the ETF QQQ does the same for the NASDAQ.  However, with asset classes like International Stocks, Corporate Bonds & Real Estate, it's not so simple.  We have found some funds that we think are similar to the historical record.  Our suggestion would be to do your own research on our suggestions below, or pick your own funds if you think you can do better.  If you are undecided as to what fund is "best" you could split some of them equally across that asset class. 

 

One problem we ran into with some of the historical data is it did not include dividend returns.  The NASDAQ data. for example, does not include dividends.  However, if you purchase an ETF like the QQQ, it does include dividends.  To estimate that difference, we added in a "dividend factor" of 1.5%.  The QQQ has been traded for about 20 years, and in our analysis, adding 1.55% to our recorded historical returns over those 20 years has tracked the QQQ nicely.   On the other hand, the data for the other asset classes does include dividends and so a dividend factor was not required.

 

Management fees are another factor that need to be taken into the equation for yearly returns.  We use the management fees listed on the Schwab.com web-site and have rounded those up to be conservative.  In regards to transaction costs, they are typically zero when buying/selling ETFs.  However, Schwab, Etrade, etc... make money on the difference between the Buy/Ask quotes.  If you trade often, this can add up, but if you only re-balance your portfolio once or twice a year, transaction costs should be negligible so we have not factored them in.

One asset class that may seem to be missing is the Dow Jones Industrials.  We have considered that class.  However, our research has shown that the Dow's performance is no better than the S&P 500 and/or Value Stocks, so we've decided not to include it.

The following table lists all the assets categories and a reference to the source of where we found the historical data.  Also, we list the tracking fund(s) along with estimated management fees, "dividend factor" and the first year in which the data was recorded (Estb).  Also listed is the Consumer Price Index (CPI) which is used to measure inflation.

One special note about the Real Estate (REIT) Category.  The returns there seem a little optimistic.  While we believe the historical data, we are not sure it will continue on a similar path.  It may be somewhat tainted by significant returns in the 70s.  You may want to tread cautiously with expecting REITs to continue at the same pace as the historical recordings.

Asset
Estb
Fund
Mgmt %
Div Adj %
Source
REITs
1972
VNQ, IYR
.5
0
https://novelinvestor.com/historical-returns/
Cash
1934
VGSH
.1
0
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html#_msoanchor_2
S&P 500
1928
SPY
.2
0
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html#_msoanchor_2
Corp Bonds
1928
SPLB, VCLT
.2
0
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html#_msoanchor_2
Value Stocks
1972
SCHD, VTV
.3
0
https://www.mindfullyinvesting.com/historical-returns-of-small-cap-and-value-stocks/
NASDAQ
1972
QQQ
.3
1.5
http://1stock1.com/1stock1_140.htm
US 10 Year Bonds
1928
IEF, VGIT
.2
0
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html#_msoanchor_2
Gold
1929
GLD
.5
0
https://www.thebalance.com/gold-price-history-3305646
Intl Stocks
1970
EFG, VXUS
.5
0
https://novelinvestor.com/historical-returns/
CPI
1928
0
0
https://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx

*Note:  Capturing historical data from free web-sites can be challenging.  Some are not updated while some may go away altogether.  The data we use for historical analysis was captured en masse from the above (or similar) sites at the end of 2019.  Starting in 2020, we've added in the subsequent years from the same source, or possibly other sources depending on availability.  Not all sources are the same.  Some may use Dec 31st as the start/end date, while others may use Jan 2nd.  Open & Close prices can differ as well.  Regardless, we are confident that the figures we use are "close enough" and are reflective of the generic asset class.  If you find any glaring discrepancies, please let us know.

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