Golden Butterfly Portfolio Adaptation

• Discovering the Golden Butterfly
• The benefits of having the Golden Butterfly portfolio with respect to the COVID-19 pandemic or not.
• Variation of the Golden Butterfly following the same principles and how to adjust your portfolio.

The golden butterfly is a derivation from the all weather portfolio popularized by Ray Dalio. I first encountered the term Golden Butterfly from a podcast I listen to, List Money Matters. Prior to learning about this portfolio, my stocks were just scattered and didn’t really have a direction other than invest on the total stock market and hope for the best. My safe go-to were the REITs that I have been just consuming based on recommendation from authors in seeking alpha after reading a post by Jussi Askola on why ETF for REITs may not be the best place to stick your money into. But I find out even the most loyal fans of REITs still have different allocation to their entire portfolio, and this is where the Golden Butterfly has captured me.

As part of my journey of getting into a better financial state, I think it’s best to be diversified, but to also have a focus. During this pandemic, we can easily get swayed by emotions and think that our original investment plans are terrible seeing your stocks go into the red and lower each day. I couldn’t help and think that there’s someone out there who is wise and is able to navigate this turmoil without being scathed… much. But for normal people like me, who don’t have the skills to perform technical analysis, I wouldn’t be able to navigate this treacherous waters so what’s the next best thing? Let’s turn on the auto pilot! This is where the Golden Butterfly portfolio will shine. Based on the analysis over at portfoliocharts.com, it only falls 2% lower than what the total stock mark will make on average, but when it’s experiencing bad weather, it is a whopping 40% difference!

I like the dividend investing mindset, which allows our portfolio to grow by reinvesting dividends. I have applied this to my M1 portfolio, which makes the golden butterfly go through a metamorphosis. Instead of having the total stock market, I had a preference on ETFs that had a higher yield for earning dividends and instead of just gold, I had to bring in a set of REITs that I follow, which I can discuss on a future post, but for this example I stuck with VNQ ETF to keep it simple. I didn’t start out with the golden butterfly and I’m still in transition to achieving the right percentage for my golden butterfly. I’m doing this slowly and consistently. If you aim to modify your portfolio, do so by taking small steps on a regular basis because taking giant leaps could impact your loss especially during bear markets.