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How I Built A $3 Million High-Yield Portfolio With 11 Blue-Chips

Happiness inspired by a boat ride

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Investing in a bear market can be scary or even downright terrifying. What do you do if you have a lot of money to put to work or just an amount that is very significant to you?

How can you sleep well at night when competing blue-chip economist teams predict the market will rally 30% by year-end (JPMorgan) or crash 30% in a matter of months (Morgan Stanley)?

How can you protect your nest egg when stagflation is raging, and the traditional 60/40 is suffering its worst year since 1931?

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Charlie Bilello

These are the kinds of questions I get all the time at Dividend Kings.

People understand that bear markets are the best time to buy blue-chips, but fear of an impending market crash makes it very hard to pull the trigger.

One of my favorite things in life is to help family and friends build sleep-well-at-night bunker retirement portfolios that are perfectly suited to their individual needs.

In the above articles, I showed how even painful and costly mistakes, including losses up to $1 million, can still be overcome with the right mix of world-beater blue-chips.

My best friend Sean, father, and uncle are examples of very smart people who blew up their retirement portfolios through poor risk management and speculation.

Today I wanted to share the story of Rose, a family friend who has a similar problem. This story can hopefully help you make the kind of smart long-term portfolio decisions that can help you not just sleep well at night through the rest of this bear market but hopefully retire in safety and splendor.

Meet Rose: One Of Life’s Great Winners

Rose is a 67-year-old family friend who got lucky with real estate investment in Florida. She recently sold a large home for several million dollars. After taxes, she now has $3 million to put to work, but she is very worried about the stock market.

  • rising recession risk (83% according to the bond market)
  • the fastest interest rate increases in 41 years
  • the worst bond bear market in 234 years
  • the highest inflation in four decades
  • the 11th worst bear market in US history (and it might not be over)
  • geopolitical risks from Russia and China

Rose’s financial planner recommended she take the easy and low-cost option of a 60/40 portfolio. After all, with $3 million, even if things go very badly for many years, Rose isn’t going to starve.

But Rose is worried about forecasts from PIMCO, about the potential for decades of higher inflation, interest rates, and a lost decade for stocks and bonds.

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Bloomberg

Rose knows that stocks always go up if you wait long enough. But then again, as Keynes quipped, “in the long run, we’re all dead.”

She doesn’t want to suffer through a lost decade, but she’s read a lot of my articles and knows that, historically speaking, stocks are likely to be up about 4X in the next 10 years.

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Charlie Bilello

Like many of you, whether old or young, rich or poor, Rose is torn between fear of missing out on the next great bull market and fear of a stagflationary hellish worst-case scenario.

  • UBS’s stagflation hell scenario forecasts a 52% peak decline in stocks
  • A 42% further plunge from today’s levels

Rose is well off enough that she doesn’t need this money to live on; she wants to become a philanthropist and set up a foundation, a legacy she can leave on the world when she’s gone.

So even though she’s the same age as many retirees, her time horizon is long. But that doesn’t mean that, as a passionate follower of stocks for many years (who on SA isn’t 😉 look forward to the potential for a multi-year bear market.

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Michael Batnick

The tech crash was a three-year bear market (the longest in history) with six bear market rallies, including the final two, both 21%.

Rose is worried that the perfect storm of sticky inflation and stocks and bonds both starting out historically overvalued could possibly lead to a three to five-year bear market.

While she understands intellectually that just parking all $3 million into the S&P 500 (as Buffett recommends) for years is a virtually guaranteed way to make money, she knows herself.

  • Rose is addicted to Bloomberg TV
  • and can’t help but watch her portfolio and the stock market every day

In other words, Rose needs somewhere to invest $3 million with the following goals.

  1. Maximum fundamental safety (only the world’s safest blue-chips)
  2. generous but very safe yield (she plans to use the dividends to fund her philanthropy)
  3. good long-term returns over time (at least as good as the 60/40 her advisor initially recommended)
  4. minimal volatility over time
  5. Especially during severe market crashes
  6. No K1 tax forms (personal preference)

What Rose is looking for, in other words, is a hedge fund.

Why Most People Need A Hedge Fund Retirement Portfolio… But A Low Cost And Simple One

When you hear “hedge fund,” you probably think of some super fancy firm like Bridgewater, the world’s largest hedge fund firm with $140 billion in assets under management. It employs an army of quants, supercomputers, and some of the world’s best commodities, currencies, and futures trading specialists.

You also probably think of super high fees, the famous “2%, and 20%.”

  • 2% of assets
  • and 20% of profits above a certain hurdle rate
  • the average hedge fund charges 5% fees over time

Actually, a hedge fund is any portfolio that owns a diversified mix of assets, including ones that are non-correlated, and thus delivers smoother returns over time.

Stocks, bonds, cash, and alternative assets are all things you can own, and the 60/40 retirement portfolio is the simplest and lowest-cost hedge fund ever devised.

  • historically speaking 33% allocation to cash/bonds/alternatives (hedges) is the optimal allocation to minimize market crashes
  • and still generate strong returns
  • 30% to 40% hedging allocation is optimal for most portfolios depending on what assets you own

This is based on the concept of risk-adjusted returns, or more correctly described volatility-adjusted returns.

  • the Sharpe ratio is total returns/annual volatility
  • it’s what most hedge funds optimize for

The better ratio to use for most people is called the Sortino ratio.

  • total return – 10-year treasury yield (excess total return) divided by NEGATIVE Volatility

Most people are happy when their portfolios soar quickly (volatility to the upside). It’s the fast crashes that cost people sleep.

  • think of the Sortino Ratio as the “SWANiness” of a portfolio

I’ve spent several years studying how to build a long-term recession-optimized portfolios, that optimize for the Sortino ratio.

And that’s how I created the Dividend Kings ZEUS strategy.

  • Zen Extraordinary Ultra SWAN (sleep well at night) = ZEUS

Helping Rose Build Her Perfect ZEUS High-Yield Ultra-Low Volatility Portfolio

My research has been corroborated by Nick Maggiulli, the chief data scientist for Ritholtz Wealth Management.

  • 33% hedging assets (cash/bonds/alternatives) is the optimal allocation for most blue-chip portfolios
  • to optimize for the Sortino ratio
  • and achieve good returns with minimal volatility
  • and much smaller declines in market crashes

Here is how anyone can build a ZEUS portfolio.

  • 33% ETFs
  • 33% hedging assets (bonds/cash/alternative assets)
  • 33% individual blue-chips

This is called asset allocation, and it’s the cornerstone of a diversified and prudently risk-managed portfolio. Studies show that 90% of long-term returns are based on asset allocation, or the “asset buckets” you own.

Get your asset allocation right, and you’re 90% of the way to achieving your financial goals.

  • young people or those who don’t mind volatility don’t need hedges
  • though most people can’t stomach market crashes without them

Think of asset allocation as the buckets your portfolio is made of. You can have as many or as few buckets as you want based on your goals, risk profile, and time horizon.

  • some people enjoy being 100% blue-chips
  • others like combining blue-chips with ETFs
  • and others are so conservative they are 60% bonds/cash and 40% equities

Unlike my uncle, father, or best friend, Rose has plenty of money already, and she’s most interested in safe yield.

After I helped Rose through the process (free of charge since I’m not an RIA), of thinking through her goals, risk profile, and the options she has, here is the $3 million ZEUS High-Yield Ultra Low Volatility portfolio she built.

ETF Bucket: 33%

SCHD is the gold standard of high-yield dividend blue-chip ETFs.

  • the best returns over time
  • and the highest safe yield
  • a strong track record of growing its dividend every year (better than even NOBL, the dividend aristocrat portfolio)

It’s also relatively low volatility but not as much as IYK, VHY, and VPU. In the linked articles, I explain in detail why each of those is the best sector-specific ETF I’ve found in my research.

Hedging Bucket: 33%

  • 5% cash (VGSH)
  • 14.17% Vanguard Extended Duration US Treasury ETF (EDV) – the best long-term hedge in history according to Duke University
  • 14.17% iMGP DBi Managed Futures Strategy ETF (DBMF) – the Vanguard of hedge funds

Since WWII, bonds are stable or go up 92% of the time when stocks fall.

Since 1980 managed futures (which use options to go long/short stocks, commodities, currencies, and bonds) are effective hedges in times of stagflation when both stocks and bonds go down together.

  • They also tend to perform very strongly in times of crisis

Hedge Fund Returns Since 1980

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(Source: Barclays)

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(Source: Barclays)

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(Source: Barclays)

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(Source: Barclays)

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(Source: Barclays)

  • From 1980 to 1982, during the double-dip stagflation recession and bear market, hedge funds delivered 137% total returns (inflation peaked at 15% in March 1980)
  • in 1987 (Black Monday crash), they soared 57%
  • in the 1990 oil spike recessionary bear market (-20% S&P), they rose 21%
  • in the 1997 Asian currency crisis, they rose 11%
  • during the tech crash, they delivered positive returns every year
  • in 2002 the S&P fell 22%, and hedge funds were up 12%
  • in 2008 the S&P fell 37%, and hedge funds were up 14%
  • YTD hedge funds are up 8% in the 2022 bear market (another stagflationary shock) – gold is down 5%

DBMF uses the consensus of the top 20 hedge funds to change its asset allocation every Monday.

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(Source: iMGP Funds)

DBMF targets the 11 core hedge fund positions that drive 80% to 100% of long-term returns with the most liquid options available.

  • fed funds rate
  • 2 year US treasuries
  • 10-year US treasuries
  • 30-year US treasuries
  • EUR/USD
  • USD/Yen
  • gold
  • oil
  • U.S. stocks
  • international developed market stocks
  • emerging market stocks

Cash is the one asset you can rely on to remain stable in the rare instances when managed futures, stocks, and bonds are falling simultaneously.

  • the dividend stream helps with short-term liquidity as well

Blue-Chip Bucket: 33%

I linked to deep dive articles exploring each company’s investment thesis, growth outlook, risk profile, valuation, and total return potential.

The goal with the blue-chips is simple:

  • generous and very safe yield
  • 100% world-beater Ultra SWAN (sleep well at night) quality
  • low volatility (22% or less average volatility over the last 15 years)
  • double-digit long-term return potential

ZEUS High-Yield Ultra Low Volatility (ZEUS HYULV) Fundamentals

First, let’s take a big-picture view of Rose’s ZEUS HYULV portfolio.

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(Source: Morningstar)

Schwab recommends 20% to 30% international exposure, and she has that through three world-beater Ultra SWANs.

Through DBMF, she has some short exposure to bonds to hedge against potentially higher for longer interest rates hurting bonds for years.

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(Source: Morningstar)

It’s a conservative 64% value-focused portfolio focused on yield rather than growth.

  • In higher rate environments, value tends to outperform growth.
  • but Rose is 36% growth and core just in case rates return to low levels

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(Source: Morningstar)

Rose’s desire for ultra-low volatility means a 61% defensive tilt with exposure to every sector. How can that be when the portfolio only owns four companies?

Don’t forget it owns four ETFs that own hundreds of companies.

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(Source: Morningstar)

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(Source: Morningstar)

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(Source: Morningstar)

Rose’s 67% stock allocation is comprised of 174 of the world’s safest and most dependable dividend blue-chips.

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(Source: Morningstar)

The typical expense ratio for a portfolio like this would be 0.43%, but by using low-cost ETFs from iShares, Vanguard, and Schwab, Rose is saving 0.14% per year.

  • $4200 per year in fee savings
  • The average hedge fund would charge Rose 5% or $150,000 per year in fees

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(Source: Morningstar)

While the market trades at 17X earnings, the stocks in this portfolio are just 13.6, the low end of the historical S&P 500 bear market bottom range of 13 to 15.

  • the world’s 174 best dividend blue-chips priced for recession lows already

OK, so that’s the big macro picture. But what about brass tacks? What kind of income and returns can this $3 Million ZEUS High-Yield Ultra Low Volatility portfolio deliver in the future?

Total Return Fundamentals

Metric 60/40 ZEUS High-Yield Ultra Low Volatility Portfolio X Better Than 60/40
Yield 1.6% 5.0% 3.13
Growth Consensus 5.1% 4.9% 0.96
LT Consensus Total Return 6.7% 9.9% (S&P 500 is 10.1%) 1.48
Risk-Adjusted Expected Return 4.7% 6.9% 1.48
Safe Withdrawal Rate (Risk And Inflation-Adjusted Expected Returns) 2.5% 4.7% 1.91
Conservative Time To Double (Years) 29.1 15.3 1.91

(Source: DK Research Terminal, FactSet)

The goal of any balanced portfolio is to provide superior fundamentals to the default option, which in Rose’s case was the 60/40 her advisor recommended.

3X higher yield, 50% higher long-term consensus return potential, and almost 2X the safe withdrawal rate (for charity, not living off) certainly shows this combination of 11 blue-chip stocks is superior to a 60/40.

  • long-term return potential basically matching the S&P 500
  • but with over 3X the yield and much lower volatility

Investment Strategy Yield LT Consensus Growth LT Consensus Total Return Potential Long-Term Risk-Adjusted Expected Return Long-Term Inflation And Risk-Adjusted Expected Returns Years To Double Your Inflation & Risk-Adjusted Wealth

10-Year Inflation And Risk-Adjusted Expected Return

ZEUS High-Yield Ultra Low Volatility Portfolio 5.0% 4.9% 9.9% 6.9% 4.7% 15.3 1.58
60/40 Retirement Portfolio 1.6% 5.1% 6.7% 4.7% 2.5% 29.1 1.28
S&P 500 1.6% 8.5% 10.1% 7.1% 4.9% 14.8 1.61

(Sources: DK Research Terminal, Morningstar, FactSet, YCharts)

Why not just put her money in a 60/40? Because for Rose’s goals, this ZEUS portfolio is better in every single way.

What kind of difference could that extra 2.3% per year in returns mean for Rose’s plans for a philanthropic foundation?

Inflation-Adjusted Consensus Total Return Forecast: $3,000,000 Starting Portfolio

Time Frame (Years) 4.5% CAGR Inflation-Adjusted 60/40 7.7% Inflation-Adjusted ZEUS HYULV Consensus Difference Between ZEUS HYULV Consensus and 60/40
5 $3,734,969.63 $4,343,066.60 $608,096.97
10 $4,649,999.37 $6,287,409.16 $1,637,409.79
15 $5,789,202.14 $9,102,212.24 $3,313,010.10
20 $7,207,498.05 $13,177,171.32 $5,969,673.27
25 $8,973,262.09 $19,076,444.21 $10,103,182.11
30 (Retirement Time Frame) $11,171,620.46 $27,616,755.89 $16,445,135.43
35 $13,908,554.36 $39,980,470.02 $26,071,915.66
40 $17,316,009.36 $57,879,281.32 $40,563,271.96
45 $21,558,256.34 $83,791,191.16 $62,232,934.82
50 $26,839,810.87 $121,303,574.54 $94,463,763.66
55 $33,415,292.80 $175,609,834.30 $142,194,541.50
60 (Investing lifetime) $41,601,701.22 $254,228,401.93 $212,626,700.72
100 (Institutional Time Frame) $240,125,149.26 $4,904,852,398.51 $4,664,727,249.26

(Source: DK Research Terminal, FactSet)

Analysts expect a 60/40 to deliver 4.5% long-term inflation-adjusted returns, which could turn Rose’s $3 million into $11 million over 30 years, $42 million over 60, and $240 million over her foundation’s time frame).

That’s great, but look at what analysts expect from ZEUS in today’s dollars.

  • $28 million after 30 years
  • $254 million after 60 years
  • $4.9 billion after 100 years

For someone planning on a charitable foundation, an extra $4.7 billion in inflation-adjusted dollars over 100 years is a great reason not to just go with the cookie-cutter 60/40 option.

Time Frame (Years)

Ratio ZEUS HYULV Consensus and 60/40 Vs. 60/40

5 1.16
10 1.35
15 1.57
20 1.83
25 2.13
30 2.47
35 2.87
40 3.34
45 3.89
50 4.52
55 5.26
60 6.11
100 20.43

(Source: DK Research Terminal, FactSet)

Potentially 2.5X more money than a 60/40 over a standard retirement time frame, 6X more over an investing lifetime, and 20X more over the institutional time horizon.

  • also, the inheritance time frame for many people
  • leave your portfolio to your children and grandchildren if you don’t want to start a foundation

This sounds amazing, but what evidence is there that this ZEUS High-Yield Ultra-Low Volatility portfolio can do what it’s designed for? Market-like returns with ultra-low volatility and much smaller crashes than a 60/40 in extreme market crashes?

Historical Returns Since June 2019 (Annual Rebalancing)

The future doesn’t repeat, but it often rhymes. – Mark Twain Past performance is no guarantee of future results.

Still, studies show that over time, blue-chips with relatively stable fundamentals offer predictable returns based on yield, growth, and valuation mean reversion.

valuation is almxost all thxat matters for long-term stock returns

Bank of America

DBMF started in May of 2019 and SCHD in October of 2011, so we’re limited to the last three years for the full portfolio.

However, through reasonable ETF substitution, we can push the backtest all the way to December 2007.

  • Exclude DBMF and use 28.33% EDV and 5% cash
  • substitute VYM for SCHD (similar volatility profile since 2011)

SCHD And VYM Returns Since November 2011

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(Source: Portfolio Visualizer Premium)

Note how VYM and SCHD had nearly identical annual volatility of 13% over the last 11 years and almost identical peak declines in the Pandemic crash.

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(Source: Portfolio Visualizer Premium)

In 2022 both are down a similar amount, 6% for VYM and 9% for SCHD.

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(Source: Portfolio Visualizer Premium)

In the 2022 bear market, VYM’s peak decline has been 8.6%, almost identical to SCHD’s 10%.

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(Source: Portfolio Visualizer Premium)

  • 60/40 decline 17%
  • S&P 500 20% (24% intraday)

What does all this mean? There is a 90% statistical probability that SCHD and VYM will suffer similar declines in future market downturns.

Basically, substitution gives us a reasonable estimate of how this portfolio would have performed over the last 15 years, a period that’s 94% statistically significant.

  • and includes the Great Recession
  • the 2nd worst market crash in U.S. history
  • and the Pandemic, the most severe economic downturn in history (-32% GDP growth in Q2 2020)
  • and inflation ranging from -2.5% to 9.1%
  • interest rates ranging from 0.5% to 4%

But first, let’s see how Rose’s ZEUS portfolio and its DBMF-free version did over the last 3 years.

  • includes the fastest economic contraction in history
  • the fastest economic recovery in history
  • the fastest bear market in history (-34% in a month)
  • a 100% 12-month stock market rally (the fastest in history)
  • inflation ranging from 1% to 9.1%
  • the fastest increase in interest rates in 41 years
  • the lowest interest rates in history

In other words, unless the future is more extreme than the last three years, this is a useful guide to what the future will likely hold for this ZEUS portfolio.

Total Returns Since June 2019 (Annual Rebalancing)

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(Source: Portfolio Visualizer Premium)

The annual volatility of both the DBMF-free (unhedged) portfolio and the DBMF-hedged portfolio was nearly identical at 10.3% over the last three years.

The peak decline was also almost identical at about -10%.

However, due to DBMF being a superior stagflation hedge (up 24% YTD), the DBMF hedged version achieved 3% higher annual returns and thus a far better negative-volatility-adjusted return (Sortino).

  • 50% better negative-volatility adjusted returns than the version without DBMF
  • 79% better than a 60/40

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(Source: Portfolio Visualizer Premium)

In 2022 the DBMF-free version of this portfolio is down 9% compared to the S&P’s -16% and 60/40’s -15%.

But the DBMF hedged version is down just 2%.

  • 1/8th as much as the market
  • and 1/7th as much as a 60/40

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(Source: Portfolio Visualizer Premium)

In the last year, Rose’s ZEUS portfolio is up 2% while the DBMF-free version is down 6%, half as much as the S&P of 60/40.

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(Source: Portfolio Visualizer Premium)

In the Pandemic (march prices), the S&P fell 20%, a 60/40 12%, Rose’s ZEUS portfolio 10%, and the DBMF-free version 8%.

What about income? That’s the primary goal of this portfolio, after all.

Steady And Dependable Income That Puts The 60/40 To Shame

DBMF pays 100% of its profits as an annual dividend, meaning a variable payout.

DBMF Historical Dividends

Year Total Return Annual Dividend (Yield)

% Of Returns Paid In Dividends

2019 9.27% 9.3% 100%
2020 1.72% 0.8% 47%
2021 11.40% 10.6% 93%
Average 80%

(Source: Portfolio Visualizer)

This implies two exciting possibilities.

  • DBMF’s expected potential future return is approximately 9% to 10%
  • 5% historical outperformance of the CTA hedge fund index
  • and hedge funds historically deliver 4.6% returns

In 2022 the annual dividend is likely to be about 20% to 30%.

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Portfolio Visualizer Premium

Despite dividends ranging from 0.8% to 10.6%, Rose’s ZEUS portfolio delivered steadily rising income throughout its short history.

  • 36% better yield than a 60/40 in 2021
  • 30% better yield than a DBMF-free version of the portfolio

So now let’s use substation to stress test Rose’s ZEUS High-Yield Ultra-Low Volatility Portfolio through the Great Recession

Stress Testing The Great Recession (Total Returns Through December 2007) – 94% Statistical Significance

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(Source: Portfolio Visualizer Premium)

Analysts expect about 10% long-term returns from Rose’s ZEUS portfolio, market matching return potential.

That’s what it’s done for the last 15 years, with 10% annual volatility, 38% less than the S&P 500. That volatility was slightly less than a 60/40.

  • despite 7% higher stock exposure

Rose’s ZEUS portfolio outperformed the 60/40 by over 2% per year, as expected in the future.

  • 60/40 delivered 6.8% CAGR vs. 6.7% expected in the future

And most importantly for Rose’s ultra-low volatility goals fell 18% in the Great Recession, almost half as much as a 60/40, and 1/3rd as much as the S&P 500.

  • 53% better negative-volatility-adjusted returns than a 60/40
  • 67% better than the S&P 500

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(Source: Portfolio Visualizer Premium)

A peak decline in 2022 of -10% and just 18% during the Great Recession. It took 21 months to recover to new record highs after the 2nd largest market crash in history.

What about a 60/40 and the S&P 500?

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(Source: Portfolio Visualizer Premium)

The market took 51 months to recover from the Great recession, 2X as long as ZEUS.

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(Source: Portfolio Visualizer Premium)

The 60/40 portfolio took 35 months to recover from the Great Recession, 14 months longer than Rose’s ZEUS portfolio.

OK, that’s the past, but what about the future?

Stress Testing The Future: How You Sleep Well At Night With 90+% Confidence Of Success

Historical backtesting is great, but we need to know what kind of returns and volatility are likely in the future.

  • In the last 15 years, we’ve suffered 2 of the worst economic catastrophes since the Great Depression
  • 3 major bear markets
  • including the 2nd worst market crash in US history
  • inflation ranging from -2.5% to 9.1%
  • interest rates ranging from 0.3% to 4.0%

In other words, the last 15 years were so extreme that it creates a good statistical data source for stress testing for the next 75 years.

  • barring recessions and bear markets worse than the Great Recession or Pandemic, this analysis is likely to be highly accurate

75-Year Monte Carlo Simulation: Stress Testing Your Optimized Portfolio

  • 5,000 simulations
  • post-tax earnings (highest tax bracket) for conservatism
  • 5% withdrawals- (though you can test various withdrawal rates) -for charity
  • you can also stress test what happens if we get a lost decade at the start of the 75-year period
  • starting value $3 million

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(Source: Portfolio Visualizer Premium)

Even with 5% annual withdrawals and adjusting for inflation, this portfolio will likely grow slowly

Excluding annual withdrawals, it’s 90% likely to never fall more than 21% in the next 75 years.

  • The most likely future bear market declines by 16%

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(Source: Portfolio Visualizer Premium)

The statistical probability of this portfolio suffering a bear market over the next 75 years is 0.28%. Including 5% annual withdrawals, it’s 12.7%.

The probability of this portfolio falling 30% in the next 75 years is statistically zero and 4.24%, including 5% annual withdrawals.

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(Source: Portfolio Visualizer Premium)

Rose defines a 5% inflation-adjusted return as “success” because that covers her planned 5% annual charitable contributions.

The probability of success with her ZEUS portfolio over the next 50 years is 99.12%.

What about Rose’s goal of donating money to charity?

$13.2 Million In Inflation-Adjusted Income Over The Next 75 Years

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(Source: Portfolio Visualizer Premium)

This portfolio will likely generate $13.2 million in inflation-adjusted income over the next 75 years AND still wind up $800,000 larger than it started.

  • $14 million in inflation-adjusted total returns

Ok, but what if the future is far worse than the last 15 years?

75-Year Monte Carlo Simulation: Great Depression 2.0 Worst-Case Scenario

This isn’t just a stress test; it’s a doomsday scenario tester for any portfolio.

  • not just a lost decade for stocks
  • literally the worst years of returns over 75 years… packed together, back to back, in the first 10 years

This is equivalent to another Great Depression or five historically average recessions, one after the other.

  • Goldman Sachs puts the probability of another Great Depression (most likely triggered by nuclear war with Russia) at approximately 2.5%
  • our worst-case scenario uses the 10th percentile worst-case results
  • a 1 in 400 chance or 0.25% probability scenario stress test

S&P 500 Great Depression 2.0 Worst-Case Scenario

S&P 500 Great Depxression 2.0 Worst-Case Scenario

(Source: Portfolio Visualizer Premium)

Nasdaq Great Depression 2.0 Worst-Case Scenario

Nasdaq Great Dxepression 2.0 Worst-Case Scenario

(Source: Portfolio Visualizer Premium)

In the worst-case scenario, of another Great Depression, there is a 10% chance that the S&P 500 falls as much as 81%.

The Nasdaq could crash as much as 97%.

60/40 Great Depression 2.0 Worst-Case Scenario

60/40 Great Depresxsion 2.0 Worst-Case Scenario

(Source: Portfolio Visualizer Premium)

A 60/40, worst-case, during a worst-case Great Depression scenario has a 10% probability of falling 53%.

  • compared to an 81% decline in the S&P 500
  • and 97% decline in the Nasdaq

What about Rose’s ZEUS High-Yield Ultra-Low Volatility Portfolio?

ZEUS HYULV Great Depression 2.0 Worst-Case Scenario

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(Source: Portfolio Visualizer Premium)

In the base case, Great Depression 2.0 Scenario, a 60/40 falls 43%, and this ZEUS portfolio falls 39%.

In the worst-case Great Depression 2.0 scenario, a 60/40 falls 53% and this ZEUS portfolio falls 49%.

The probability of any blue-chip portfolio failing (going to zero) even with 4% annual withdrawals is statistically zero.

The probability of this ZEUS portfolio going to zero with 5% annual withdrawals is statistically zero.

Bottom line: This ZEUS portfolio is as close to a bear-market-proof portfolio as realistically exists, and only the actual apocalypse could cause it to fail entirely.

Bottom Line: These 11 Blue-Chips Can Build A Dream High-Yield Ultra-Low Volatility Retirement Portfolio

I’m NOT saying this is the perfect portfolio for you or anyone else. This is Rose’s optimal high-yield ultra-low volatility retirement portfolio based on her specific:

  • temperament
  • goals
  • risk profile
  • time horizon
  • and comfort with each individual stock

If you aren’t comfortable with managed futures? Then leave out DBMF.

If you don’t like tobacco or pipelines? Then substitute other high-yield blue-chips, like ALIZY, LGGNY, or NVS.

If you are a growth-oriented investor, replace the ETF allocation with VIG or QQQM.

If you want maximum returns, replace the stock allocation with Ultra SWAN names like AMZN, LOW, MA, and ADSK.

But the process of designing the ultimate sleep-well-at-night bunker retirement portfolio is the same for everyone.

  1. What’s your temperament?
  2. What are your long-term goals
  3. What’s your optimal asset allocation
  4. What hedging assets (if any) are best for you?
  5. What ETFs (if any) are best for you?
  6. What individual blue-chip companies are best for you?
  7. How has your portfolio performed in the past?
  8. How is it likely to perform in the future?
  9. How is it likely to perform in a 1 in 400 chance Great Depression Worst Case scenario?
  10. What is the probability of achieving your target return in the coming decades?

These are literally the only 10 questions you need to know to sleep well at night in all future economic and market conditions.

Does the Fed raise 75 or 50 in September? How high does the Fed with interest rates? Do we get a recession in 2023? How much could stocks fall next year? How long will it take for new record highs?

None of these matter, not decades from now, if you own world-beater blue-chip assets bought at reasonable to attractively valued prices within a diversified and prudently risk-managed portfolio.

How long did this process take with Rose? About 6 hours. But that’s a small time investment in exchange for a $3 million dream high-yield ultra-low volatility bunker blue-chip portfolio that:

  • yields a very safe 5.0% (over 3X more than a 60/40)
  • is expected to deliver 10% long-term returns (just as it has historically) matching the S&P 500
  • averages 10% annual volatility over time (40% less than the S&P 500)
  • fell 18% in the Great Recession (1/3rd as much as the S&P 500
  • fell 10% in the Pandemic (1/2 the S&P 500 and 20% less than 60/40)
  • is down 9% in the 2022 bear market (half the 60/40 and less than half the S&P 500
  • is down 2% in 2022 Vs. the S&P 500’s 16% and 60/4’s 14%
  • has a 0.28% probability of experiencing a bear market in the next 75 years
  • 99.12% probability of achieving Rose’s target returns over the next 50 years
  • has a zero statistical chance of failure…even in the worst-case Great Depression 2.0 scenario (a 1 in 400 chance event)

How did we build such a marvel? Did we pay a hedge fund 5% annual fees? No, the expense ratio is 0.29%.

What kind of complex assets can deliver such extraordinary results? Just 11 blue-chip stocks that anyone can buy.

  1. SCHD: 8.33% (the gold standard high-yield ETF)
  2. IYK: 8.33% (gold standard consumer staples ETF)
  3. VHT: 8.33% (gold standard healthcare ETF)
  4. VPU: 8.33% (gold standard utilities ETF)
  5. EDV: 14.17% (gold standard long US treasury ETF)
  6. DBMF: 14.17% (5-star gold standard Vanguard of Hedge funds)
  7. VGSH: 5% (gold standard cash ETF)
  1. TD: 8.33% (Ultra SWAN world-beater bank)
  2. ENB: 8.33% (Ultra SWAN world-beater dividend aristocrat midstream giant)
  3. BTI: 8.33% (Ultra SWAN world-beater global aristocrat tobacco giant)
  4. MO: 8.33% (Ultra SWAN dividend king, best performing stock in history)

Together these 11 blue-chip stocks represent:

  • cash
  • bonds
  • managed futures
  • 174 of the world’s best dividend blue-chips

This is how you practice safe high-yield investing in a bear market.

This is how you can safely ignore everything the Fed is doing or will do in the future.

This is how you can turn off CNBC, unplug from the markets, and sleep well at night in all market and economic conditions.

Most importantly, this disciplined and methodical approach to safety and quality first, and sound valuation and prudent risk management always, is what can help you retire in safety and splendor.

Whether you have $3 million to invest or $3,000, the basics of good long-term investing are timeless and apply to everyone.

And they can help you not only make your own luck on Wall Street but also retire rich and stay rich in retirement.

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