The Portfolio Built To Survive Every Crash | Jared Dillian

**SPEAKER_1** (0:00)
Nothing said on Forward Guidance is a recommendation to buy or sell any investments or products.
All right, what's going on, everybody? Welcome back to another episode of Forward Guidance. And excited to be joined today by Jared Dillian, editor of The Daily Dirtnap and regular guest of the show. Jared, always great to have you on the show. What's going on?

**Jared Dillian** (0:25)
Today's Black T-shirt Day, I'm happy to announce.

**SPEAKER_1** (0:31)
Yeah, in the heat of the summer, what's better than just wearing a black T-shirt apparently?
Yeah, exactly. Awesome. Well, look, yeah, always good to have you on the show. I think the last time you joined were with your man Tony Greer, and on my side was Quinn. But yeah, just a one-on-one today, which will be great. And yeah, I know that you have a new book coming out, your seventh book. And so yeah, feel free to tell us what's it about, when it's coming out, and why did you write it?

**Jared Dillian** (1:01)
Okay, so the book is called The Awesome Portfolio, and it comes out September 8th. You can pre-order it now. Best place to pre-order it is Amazon, typically.
I was back, this was like seven years ago, I was doing some tinkering with portfolios. And, you know, I started with stocks, and I started with stocks and bonds. I started with like a 60-40 portfolio. And then I started adding stuff to it. I was like, I had a gold to it, which brought down the volatility considerably. And I had a cash to it, which brought down the volatility considerably. And I kept tinkering with it. And I came up with this portfolio that was 20% stocks, bonds, gold, cash and real estate. And what I found was, this thing had the highest sharp ratio of any linear combination of asset classes I could come up with. Like just it has a huge sharp.
So since 1971, and the reason I picked 1971 is that's one, that's the first time you could hold gold basically. Since 1971, it has returned just about exactly 9% a year. Okay.
And the sharp, I want to say is like 0.6 or something like that. And it has half the volatility of an 80-20 portfolio. And this is the really remarkable thing. In terms of drawdowns, your worst drawdown ever with this portfolio was down 12%, and that was in 2022 The second worst was down 9%, which was the financial crisis. It was only down 9% in the financial crisis. The third, fourth and fifth biggest drawdowns were 1%, down 1%.
So you have this thing, which gives you about half the volatility of the stock market, has minimal drawdowns, returns 9% a year. Now, the stock market since 1971 has returned 11% a year.
So you're giving up 2% in terms of performance, but your volatility is just smushed, the drawdowns disappear, and you have this portfolio that you don't have to look at it ever. If you have this thing, you know the worst you can do is 12% a year, there's no reason to look at your phone, there's no reason to worry about it. Like if the conventional wisdom on investing is you just buy an index fund, and you dollar cost average and you hold it forever. Well, you know, the S&P 500 was down 57% from 2007 to 2009 Like if you had a million bucks and you ended up with $430,000, you are crapping your pants, like you're miserable, right? So in those situations, 90% of people are going to puke, like they're just going to liquidate the lows, and then they're going to stop compounding. Or let's say you're in the 10% that doesn't puke, you're literally going to be miserable for years until you get back to the high water mark, right? So what I'm offering with this portfolio is literally just happiness. Something you just give up a little bit in terms of performance. It's really not that much, and you have this thing that basically grows in a straight line for years and years and years, so...

**SPEAKER_1** (4:42)
Okay.
I guess my first simple question is to understand the incentive structures of why pretty much every RIA offers and recommends a 60-40 portfolio or an 80-20 if you're young or something like that, as opposed to something like this, if it has a better risk-adjusted return. Like, is it behavioral? Is it the fact that 20% of it isn't in cash and they don't collect fees on cash? Or what do you think is the reason why there's beautiful simplicity here? And I'm just curious why you think that that doesn't get embraced.

**Jared Dillian** (5:13)