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The article actually talks about their record: > in late 1997, as the S&P 500 passed its previous 1929 peak of 21x earnings, we rapidly sold down our discreti

The article actually talks about their record: > in late 1997, as the S&P 500 passed its previous 1929 peak of 21x earnings, we rapidly sold down our discretionary U.S. equity positions then watched in horror as the market went to 35x on rising earnings. We lost half our Asset Allocation book of business but in the ensuing decline we much more than made up our losses. For the average investor it might be overly bold to step out of the stock market entirely in times like these. However, there's nothing wrong with moving to a more conservative allocation that will do better in crashes, but still perform reasonably well if you hold it that way forever. A great place to start is the sample portfolios at portfoliocharts.com. If you're 25 and saving to retire at 65 then maybe don't worry about it, but if you're 50 that's another matter.

throw0101a 6y ago
> However, there's nothing wrong with moving to a more conservative allocation that will do better in crashes, but still perform reasonably well if you hold it that way forever. Rates of return are not the only reason to hold an particular type of asset, which is why bonds may be worth having even if yields are low: * https://awealthofcommonsense.com/2020/08/why-would-anyone-own-bonds-right-now/ https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...
- DennisP 6y ago
  Yep exactly. More bonds, more foreign stocks, even gold can help smooth out returns.
ProjectArcturis 6y ago
The article that GMO wrote puts the best spin on their record. The actual performance can be seen here: https://finance.yahoo.com/quote/GMWAX?p=GMWAX https://finance.yahoo.com/quote/GMWAX?p=GMWAX Going back to its inception in 1996, their global allocation mutual fund has returned roughly 15%. Not annualized, 15% TOTAL during a period when the S&P tripled. GMO are worthless as advisors.
- gruez 6y ago
  >their global allocation mutual fund has returned roughly 15%. nitpick: the price went up 15%, but not necessarily the return, which can be much higher due to distributions.
  - ProjectArcturis 6y ago
    Fair, but I'm also excluding dividends from the S&P.
- dasudasu 6y ago
  Doesn't account for distributions. Current yield is quoted as 4%. Still, they look to have been wrecked in 2008 and 2014-16 (a global downturn that barely made a blip in the US).
- fractionalhare 6y ago
  As other commenters already pointed out, you're only accounting for price and not distributions. The actual average annual return over the past 10 years is about 6%, and since inception is about 7%. [1] [2] That far exceeds the 15% price return spread over 24 years. A 7% average annual return over 24 years is not necessarily bad. On an absolute average basis that trails the market by 3%. [3] That return could still be legitimately superior to investing in SPY, depending on risk goals, if its volatility and beta exposure is sufficiently low that it beats SPY on a risk-adjusted basis. Then you may even be able to beat the S&P on a total basis, safely, with leverage, depending on the volatility ratio. Therefore the point you're trying to make would be better construed with an analysis of the beta, volatility and Sharpe of GMWAX. By definition the beta of SPY is 1, and the historical Sharpe is around 0.72. It's correlation with the market is about 1 and it has (again, almost by definition), 0 alpha. GMWAX has close to total correlation with the market, with a beta of 1.02 and negative alpha less than that of SPY. It has a Sharpe ratio of only 0.34. That means this GMO asset allocation fund is not beating the market, even on a risk adjusted basis. Moreover the explicit mandate of the fund, to avoid market downturns but otherwise track the market's upswings, is not being met. It is both underperforming the market and highly correlated with the market. 1. https://www.schwab.com/public/schwab/investing/investment_help/investment_research/mutual_fund_research/mutual_funds.html?path=%2FProspect%2FResearch%2Fmutualfunds%2Fperformance.asp%3Fsymbol%3DGMWAX https://www.schwab.com/public/schwab/investing/investment_he... 2. https://www.morningstar.com/funds/xnas/gmwax/performance https://www.morningstar.com/funds/xnas/gmwax/performance 3. https://www.morningstar.com/etfs/arcx/spy/risk https://www.morningstar.com/etfs/arcx/spy/risk
staticman2 6y ago
The average investor has little money to save and can't afford more conservative investments with lower expectes returns to meet their goals.

throw0101a 6y ago

> However, there's nothing wrong with moving to a more conservative allocation that will do better in crashes, but still perform reasonably well if you hold it that way forever. Rates of return are not the only reason to hold an particular type of asset, which is why bonds may be worth having even if yields are low: * https://awealthofcommonsense.com/2020/08/why-would-anyone-own-bonds-right-now/ https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...

DennisP 6y ago
Yep exactly. More bonds, more foreign stocks, even gold can help smooth out returns.

ProjectArcturis 6y ago

The article that GMO wrote puts the best spin on their record. The actual performance can be seen here: https://finance.yahoo.com/quote/GMWAX?p=GMWAX https://finance.yahoo.com/quote/GMWAX?p=GMWAX Going back to its inception in 1996, their global allocation mutual fund has returned roughly 15%. Not annualized, 15% TOTAL during a period when the S&P tripled. GMO are worthless as advisors.

gruez 6y ago
>their global allocation mutual fund has returned roughly 15%. nitpick: the price went up 15%, but not necessarily the return, which can be much higher due to distributions.
- ProjectArcturis 6y ago
  Fair, but I'm also excluding dividends from the S&P.
dasudasu 6y ago
Doesn't account for distributions. Current yield is quoted as 4%. Still, they look to have been wrecked in 2008 and 2014-16 (a global downturn that barely made a blip in the US).
fractionalhare 6y ago
As other commenters already pointed out, you're only accounting for price and not distributions. The actual average annual return over the past 10 years is about 6%, and since inception is about 7%. [1] [2] That far exceeds the 15% price return spread over 24 years. A 7% average annual return over 24 years is not necessarily bad. On an absolute average basis that trails the market by 3%. [3] That return could still be legitimately superior to investing in SPY, depending on risk goals, if its volatility and beta exposure is sufficiently low that it beats SPY on a risk-adjusted basis. Then you may even be able to beat the S&P on a total basis, safely, with leverage, depending on the volatility ratio. Therefore the point you're trying to make would be better construed with an analysis of the beta, volatility and Sharpe of GMWAX. By definition the beta of SPY is 1, and the historical Sharpe is around 0.72. It's correlation with the market is about 1 and it has (again, almost by definition), 0 alpha. GMWAX has close to total correlation with the market, with a beta of 1.02 and negative alpha less than that of SPY. It has a Sharpe ratio of only 0.34. That means this GMO asset allocation fund is not beating the market, even on a risk adjusted basis. Moreover the explicit mandate of the fund, to avoid market downturns but otherwise track the market's upswings, is not being met. It is both underperforming the market and highly correlated with the market. 1. https://www.schwab.com/public/schwab/investing/investment_help/investment_research/mutual_fund_research/mutual_funds.html?path=%2FProspect%2FResearch%2Fmutualfunds%2Fperformance.asp%3Fsymbol%3DGMWAX https://www.schwab.com/public/schwab/investing/investment_he... 2. https://www.morningstar.com/funds/xnas/gmwax/performance https://www.morningstar.com/funds/xnas/gmwax/performance 3. https://www.morningstar.com/etfs/arcx/spy/risk https://www.morningstar.com/etfs/arcx/spy/risk

staticman2 6y ago

The average investor has little money to save and can't afford more conservative investments with lower expectes returns to meet their goals.