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Lily Profile picture
@nope_its_lily
May 9 • 6 tweets • 1 min read Twitter logo Read on Twitter
Year to date, the Lily Forever Portfolio has returned 8.57% versus pure SPY exposure of 8.77%. It is beating SPY since 1 year ago at lower volatility/higher Sharpe with 66% gross equity exposure after the worst drawdown in duration in 40 years.
Approx 0.5 Sharpe since May 8 2022 to SPY’s 0.35 Sharpe, less drawdown, and 6.4% return vs 5.4% return.
Again this is all using things that if managed smartly and using low expense ratio ETFs quite literally any investor can implement without professional money manager help.
I do recommend trying to put it in a tax advantaged account like an IRA or consulting a professional who can implement direct indexing for you cheaply to harvest tax losses.
Also if anyone has a better name for this portfolio I would be thrilled to rename it.
Also this is extremely not financial advice but I’m confident enough in this design to start using it for my own passive portfolio and my parents’

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More from @nope_its_lily

Lily Profile picture
May 11
In the most important update of your day, Lily’s Forever Portfolio again pulls ahead year to date of SPY, 8.4% to 8.3%. It realizes a 2.36 Sharpe ratio YTD to SPY’s 1.5%.
I will try soon ish some dynamic rebalancing stuff and also replace the gold weight with a more comprehensive commodities breakdown and see if it changes positively the analysis
My very unscientific guess is the reason this portfolio is fairly robust is a combination of low volatility and quality factors with the added negative correlation of bonds usually and gold in times of inflation. Dynamic rebalancing based on realized correlations may be helpful.
Read 5 tweets
Lily Profile picture
May 10
One critical thing to understand in tactical allocation is rebalance timing including how to initially allocate.
Important point:
Since May 9 2020 to now LFP has trailed SPX by 16%-ish
Since Jan 1 2020 LFP has beat SPX by around 2%
This is because by design the LFP is defensive and long term outperformance comes from low downside capture and decent but not full upside capture. So if you were very unlucky and allocated on May 2020 you’d hate me!
As we think about improving portfolio design further we can test out different modes of rebalance (initial allocation is essentially just rebalancing from cash to the portfolio):
- time based full rebalancing (pick a day of the year)
- rolling tranche rebalancing
Read 5 tweets
Lily Profile picture
May 8
“Alternatives are attractive but risk is poor manager selection” = “I am trying to convince you to not look up what survivorship bias means”
“US Equities have consistently outperformed inflation” = “past returns are guaranteed future returns trust me bro”
“Gold doesn’t consistently perform well in inflation” = “I don’t want you to remember what real rates and monetary debasement is”
Read 6 tweets
Lily Profile picture
Mar 31
The final iteration of the forever "lose your brokerage password" portfolio.
I may update it or tweak it according to longer tested data, but this goes across several market cycles. It's similar to Harry Browne's permanent portfolio, but slightly different in weightings.
All you do is rebalance it once a year and reinvest dividends.
Don't touch it.
If you want to be fancy you can lever it up some.
Don't touch it.
Depending on your preference, you can swap IEF for TLT and slightly perform better, depending on your bias on rates.
Read 5 tweets
Lily Profile picture
Mar 31
Want to talk about a recent trade I did (not concluded, FYI) involving capital structure arbitrage. This as always is not a recommendation to buy or sell a specific security and should not be construed as investment advice. 1/
PacWest, like many other banks, has been hit massively due to the ongoing banking crisis. Doubly because it's Californian and has similar exposures as First Republic and Silicon Valley Bank. PacWest common equity remains down about 65% from pre-crisis close.
PacWest also has a capital structure which involves two companies:
Pacific Western Bank (the operating company "opco")
Pacwest Bancorp (the holding company "holdco")

As mentioned in my prior series post, the opco holds the actual assets, and the holdco itself holds equity
Read 28 tweets
Lily Profile picture
Mar 30
Fellow Californians, I did some work on the best low risk bond mutual funds, ETFs, and money markets you can buy.
Munis are attractive at high tax brackets because they're fully tax exempt for us.
VCTXX - Money market, very low duration, right now 3.68% 7-day SEC yield (!!!)
VWSTX - National munis (fed exempt, state not example), 2.75% 30 day SEC yield
VCLAX - California long duration (15.6 years), can't get without being RIA (ask your financial advisor), 3.47% 30-day SEC yield
NAC - Nuveen California Quality Muncpl IncmFnd, closed end fund (important - trades right now at big discount to NAV!!!), levered, 3.4% yield (tax exempt), 3.97% yield at current market price
Read 4 tweets

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