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added 40 characters in body

edited Dec 6, 2021 at 21:57

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Edit: After discussing with the author on their assumptions.

I hope we can settle the claim once and for all.

S&P 500 = Adjusted Close with Yahoo Finance
10-year Treasury = Yield to Maturity from macrotrends.net, which I confirmed it to be extremely similar to treasury.gov
Start Date = 2000-01-03
End Date = 2021-12-01
Lump Sum $100,000 with no additional funds
Reinvested dividend
"Continous Rebalancing" = Assume Daily Rebalancing
No Bid/Ask Spread (theoretically TLH has 0.05% spread, which does add up daily.
No Capital Gains or Divividend Tax
Price of Bonds Fund = 100/((1+YTM/100)^10)
A very smart Bonds Fund manager is able to maintain constant maturity (theoretically a 10-year Bonds becomes 9.997-year Bonds after 1 day. )

Result: End-Value of 60/40 is worse than 100% S&P 500.

Raw Data, Formula, and Excel files here: https://www.mediafire.com/file/p34fe2y7td4dchx/6040_vs_SPY.xlsx/file

If you look at the definition of "60/40 stock/bond portfolio" at 24:14 of the video, it says:

60/40 is 60% S&P 500 and 40% 10-year Treasury

This is the part where it is misleading. Treasury Bonds had a magnified great run in the past 20 years. The longer the duration of the Treasury, the higher return and lower volatility it brings.

This 60/40 is different from the Modern Portfolio Theory, where the "Market Portfolio" is 60% Total Stock Market and 40% Total Bonds Market (including Treasury, Corporate, Municipal, Junk, etc).

So instead of 40% BND ETF that Bogleheads recommended, the 10-year Treasury is simulated by IEF ETF and TLH ETF on a 7:3 Ratio.

They could have made it more misleading by using 20-25 years Treasury (i.e. TLT and EDV ETF).

Back to your question #1 and #2. In the following charts: