The "Golden Ratio" portfolio backtested over 33 years: 10.7% CAGR, 1.17 Sharpe, -21.6% max drawdown
Sharing some backtest results on a fixed portfolio that was originally shared on Bogleheads forums. I ran it through 33 years of data using proxy chains for tickers that didn't exist in the early 90s (e.g. DBMF proxied via RYMFX scaled to match volatility, AVUV via DFA Small Cap Value fund data).
Golden Ratio Portfolio:
- 21% US Large Cap Growth (VUG)
- 21% US Small Cap Value (AVUV)
- 26% Long-Term Treasuries (VGLT)
- 16% Gold (GLD)
- 10% Managed Futures (DBMF)
- 6% T-Bills (BIL)
Backtest: March 1993 to April 2026, annual rebalance:
| Metric | Golden Ratio | Classic 60/40 | All-Weather |
|---|---|---|---|
| CAGR | 10.7% | ~7.5% | ~7.2% |
| Sharpe | 1.17 | ~0.75 | ~0.72 |
| Max Drawdown | -21.6% | ~-30% | ~-22% |
A 1.17 Sharpe ratio for a fixed, no-signal, annual-rebalance portfolio is genuinely impressive. For context, most tactical strategies struggle to beat 1.0 Sharpe over this period.
What makes it work: the growth/value barbell in equities picks up two historically persistent factors (momentum via growth, value premium via SCV). Long-term treasuries provide crisis protection and negative equity correlation. Gold hedges against inflation and currency debasement. And managed futures provide genuine "crisis alpha" - they tend to make money when everything else falls (2008, 2022).
The key insight is that these five asset classes have structurally low correlation to each other over long periods, not just during backtested cherry-picked windows. The 33-year backtest covers the dot-com crash, GFC, 2018 vol spike, COVID crash, and 2022 bond crash.
No signals, no rebalancing triggers, no tactical timing. Annual rebalance is all you need. Credit to the Bogleheads community for this allocation.
Anyone else running something similar? Curious how it's performing in live portfolios vs the backtest.