Tangent Portfolio.com

What are the Tangent PortfoliosSM?

The Tangent Portfolios are portfolios of stocks and bonds designed for long-term investors. Since people hate losing money about twice as much as they enjoy making it, the Tangent Portfolios start by asking how much you would be prepared to lose in a worst-case scenario without bailing out of the market: 20%, 25%,or 33%? Once the maximum loss level is selected, the Tangent Portfolios attempt to deliver a high rate of return for that amount of risk.

Most investors tend to take on too much risk during good times (”buy high”), and then sell out during bad times (”sell low”), ruining their returns in the process. The Tangent Portfolios are designed to let you do well enough during both good times and bad to keep you in the markets throughout. This lets you reap the long-term benefits form investing in stocks and bonds with a simple, low-maintenance solution.

Maximum Loss

For all the rolling twelve-month periods going back from 2010 to 1926...

The Tangent 20 portfolio had a maximum one year inflation-adjusted loss of 20%

The Tangent 25 portfolio had a maximum one year inflation-adjusted loss of 25%

The Tangent 33 portfolio had a maximum one year inflation-adjusted loss of 33%

This period takes into account the Crash of ‘29, the Great Depression, World War II,the Cold War, Sputnik, assassinations, race riots, Vietnam, inflation, the Crash of ’87, 9/11, bubbles and collapse of bubbles, the Panic of ‘08, and so on. While we do not know the future (a meteor might put an end to the stock market forever), these estimates of loss form a rough historical benchmark of the bad times we might face.

Estimated Total Returns 1926-2008

The table below suggests how various portfolios performed after adjusting for inflation over every rolling 12-month period from 1926 to 2008 (before expenses or taxes). Notice how the Tangent 20 portfolio delivered almost twice the average returns of a portfolio of Treasury bills, with only slightly more risk of 1-year loss. At the other end of the spectrum, the Tangent 33 protfolio delivered most of the returns of the US stock market, with substantially less risk. Be aware that these are hypothetical historical reconstructions and not actual investment results. Additionally, there is no guarantee that this level of risk or returns will be maintained in the future. Read The Little Book of Bulletproof Investing by Stein & DeMuth for more explanation. Individual's investment gains or losses may vary depending on their risk tolerance, investment objectives, and/or other factors.

Portfolios

Average Year

Worst Year

US Stocks 7.9% -65%
Tangent 33 7.6% -33%
Tangent 25 6.0% -25%
Tangent 20 4.6% -20%
T-Bills 2.4% -16%