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VT vs 60/40 (SPY/BND)

Rebalancing frequency study (gross returns) · R (quantmod + PerformanceAnalytics)

Overview

Question: Would a US 60/40 portfolio (SPY/BND) have been “better” than holding VT? I compare VT buy-and-hold against SPY/BND 60/40 under three policies: buy-and-hold (no rebalancing), monthly rebalancing, and yearly rebalancing.

Key takeaways (v1)

  • VT is a higher-risk equity-only benchmark; 60/40 is expected to reduce volatility and drawdowns.
  • Rebalancing frequency changes results slightly (gross of costs).
  • “Better” depends on objective: maximizing ending wealth vs reducing drawdowns vs improving risk-adjusted returns (Sharpe).

Notes: Sharpe is computed with Rf = 0. This version does not include transaction costs or taxes.

Results

Annualized return, volatility, Sharpe ratio (Rf=0), and worst drawdown table for B&H, monthly, yearly, and VT
Annualized metrics (gross; Rf=0; no transaction costs/taxes in v1). Download CSV.
Performance summary chart: cumulative performance and drawdowns for 60/40 variants vs VT
Performance summary (growth of 1, drawdowns, and return distribution).
Drawdown comparison chart for 60/40 variants vs VT
Drawdowns (depth and recovery) are often the most decision-relevant risk view.

Method

Assumptions and implementation (click)
  • Data: Yahoo Finance adjusted close for SPY, BND, VT.
  • Returns: daily simple returns using ROC(..., type="discrete").
  • Portfolios: Return.portfolio() on SPY/BND returns with weights (0.60, 0.40).
  • Rebalancing policies: buy-and-hold (drift), monthly rebalance, yearly rebalance.
  • Metrics: annualized return, annualized volatility, Sharpe (Rf=0), and worst drawdown.

Improvement planned for v2: excess-return series (portfolio − VT), turnover estimation, and a simple bps cost model.

Limitations