Roger Gibson Talmud Portfolio: Allocations, Performance, and Returns Analysis
The Gibson Talmud Portfolio by Roger Gibson aims to diversify investments across US stocks, REITs and bonds.
The Gibson Talmud Portfolio strategy can be implemented with only 3 ETFs, of which 33.34% are US stocks, 33.33% are US REITs and 33.33% are mid-term treasury bonds. You do not need to pick individual stocks and bonds.
Accordingly to our backtests over the past 16 years, the Gibson Talmud Portfolio has the following performance metrics:
• Compound annual return (CAR): 6.62%;
• Standard deviation: 16.76%;
• Maximum drawdown (MDD): –45.02%;
• Sharpe ratio (with a risk-free rate of 3%): 0.22;
• CAR/MDD ratio: 0.15.
Who Is Roger Gibson
Roger is best known as the author of the investment classic, Asset Allocation: Balancing Financial Risk (McGraw-Hill). First published in 1989 and released in its fifth edition in 2013. It remains a bestselling book on asset allocation. The book has been published in German, Japanese, Korean, Chinese, Indian, and Russian editions.
Roger Gibson has been a frequent speaker at national and international conferences for investment professionals for 30 years. He is a steering group member and a past chairman of the Committee for the Fiduciary Standard, a group of leading financial advisors working to uphold stricter standards for all those providing investment advice.
Roger holds the professional designation of Chartered Financial Analyst (CFA) and earned his MBA from Carnegie Mellon University.
What Is The Gibson Talmud Portfolio
The Gibson Talmud Portfolio is a portfolio that is simple in structure and consists of the following asset classes:
- Stocks that make up 66.67% of the portfolio and include US large-cap stock and real estate investment trust (REIT) stocks;
- Bonds that make up the remaining 33.33% of the portfolio and include only medium-term treasury bonds.
The asset allocation of The Gibson Talmud Portfolio is as follows:
| Asset Class | Weight In The Portfolio |
| Total U.S. Stock Market | 33.34% |
| U.S. REITs | 33.33% |
| Intermediate-Term Treasury Bonds | 33.33% |
Stocks In The Gibson Talmud Portfolio
Stocks are used as high-return securities that increase portfolio returns, but stocks are more volatile than bonds.
The Gibson Talmud Portfolio includes the following types of stocks:
- Total U.S. Stock Market – US large-cap growth and value stocks that virtually replicate the benchmark S&P 500 stock index;
- Real estate investment trust (REIT) stocks – these stocks historically have a low correlation with the S&P 500 stock index.
For stocks, we have picked these ETFs, which are well diversified, have high liquidity and a long performance history:
| Asset Class | ETF Name | ETF Ticker |
| Total U.S. Stock Market | Vanguard Total Stock Market Index Fund | VTI |
| U.S. REITs | Vanguard Real Estate Index Fund | VNQ |
Bonds In The Gibson Talmud Portfolio
Bonds are used to minimize portfolio volatility and drawdowns. The Gibson Talmud Portfolio includes only intermediate-term treasury bonds.
Treasuries are used instead of corporate bonds because corporate bonds are more risky and volatile than treasuries.
The portfolio uses medium-term treasury bonds, but you can use longer-term bonds, which traditionally show higher returns than short-term ones while maintaining low risk and volatility.
For treasury bonds, we have picked well-diversified ETFs that have high liquidity and long performance history. Instead of medium-term bond ETFs, we use long-term bond ETFs due to the lack of performance history of the first ETF (alternatively you could use IEI):
| Asset Class | ETF Name | ETF Ticker |
| Long-Term Treasury Bonds | Vanguard Long-Term Bond Fund | BLV |
Backtesting Of The Gibson Talmud Portfolio
We backtested The Gibson Talmud Portfolio using a “buy and hold” strategy, rebalancing at the beginning of each year.
For backtesting, we used the ETFs we picked with the appropriate weights.
This is the portfolio’s equity curve:
The portfolio’s underwater curve (drawdowns):
The portfolio’s monthly and annual returns:
| Year | Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Yr% |
| 2007 | 3.6% | -1.5% | -0.3% | 1.7% | 0.6% | -4.0% | -3.5% | 3.4% | 2.5% | 2.0% | -3.6% | -2.0% | -1.6% |
| 2008 | -1.8% | -2.1% | 1.9% | 3.7% | -0.3% | -6.0% | 0.7% | 1.7% | -4.3% | -19.1% | -5.9% | 10.6% | -21.4% |
| 2009 | -10.9% | -10.8% | 4.6% | 11.3% | 3.2% | 0.2% | 7.0% | 6.8% | 4.6% | -2.8% | 4.6% | 2.7% | 19.3% |
| 2010 | -2.4% | 3.0% | 5.4% | 4.1% | -4.0% | -2.3% | 5.8% | 0.0% | 3.8% | 2.1% | -1.1% | 3.3% | 18.6% |
| 2011 | 1.4% | 3.3% | -0.5% | 3.8% | 1.1% | -2.5% | 1.2% | -2.2% | -3.8% | 7.7% | -1.7% | 3.2% | 11.0% |
| 2012 | 4.0% | 0.8% | 1.9% | 1.8% | -2.1% | 3.0% | 2.4% | 0.6% | -0.1% | -0.8% | 0.2% | 1.2% | 13.7% |
| 2013 | 2.1% | 1.4% | 2.1% | 4.1% | -3.1% | -2.4% | 2.2% | -3.9% | 2.8% | 3.8% | -1.2% | 0.9% | 8.8% |
| 2014 | 1.9% | 3.6% | 0.6% | 2.0% | 2.2% | 1.3% | -0.6% | 3.7% | -3.6% | 4.9% | 2.1% | 1.4% | 21.0% |
| 2015 | 3.6% | -0.9% | 0.4% | -2.6% | -0.4% | -3.2% | 3.5% | -4.5% | 0.3% | 4.8% | -0.3% | -0.5% | -0.4% |
| 2016 | -2.3% | 0.6% | 6.7% | -0.2% | 1.3% | 4.1% | 3.7% | -1.3% | -0.9% | -3.7% | -1.2% | 2.6% | 9.3% |
| 2017 | 0.7% | 3.0% | -1.0% | 1.0% | 0.7% | 1.3% | 1.2% | 0.7% | 0.5% | 0.4% | 2.2% | 1.0% | 12.3% |
| 2018 | -0.4% | -4.8% | 1.0% | -0.3% | 2.6% | 1.4% | 1.5% | 2.2% | -1.2% | -4.6% | 2.4% | -4.6% | -5.1% |
| 2019 | 7.5% | 1.2% | 3.5% | 1.1% | -0.9% | 3.7% | 1.2% | 3.2% | 0.6% | 1.0% | 0.9% | 0.9% | 26.2% |
| 2020 | 2.1% | -3.7% | -11.3% | 7.9% | 2.4% | 2.1% | 4.9% | 0.9% | -2.0% | -2.2% | 8.3% | 2.3% | 10.6% |
| 2021 | -1.0% | 0.9% | 2.1% | 5.1% | 0.6% | 2.9% | 3.1% | 1.7% | -4.4% | 5.5% | -1.0% | 4.6% | 21.4% |
| 2022 | -6.2% | -2.9% | 1.7% | -7.5% | -1.7% | -6.3% | 7.5% | -5.0% | -10.0% | 2.7% | 6.5% | -4.5% | -24.2% |
| 2023 | 8.2% | -4.5% | 1.7% | -0.1% | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | 5.0% |
Portfolio performance statistics compared to benchmark S&P 500 Total Return index:
| Statistical Metric | Portfolio | S&P 500 TR |
| Annual Return % | 6.62% | 8.91% |
| Exposure % | 99.45% | 100.00% |
| Risk Adjusted Return % | 6.66% | 8.91% |
| Max. drawdown | -45.02% | -55.19% |
| CAR/MaxDD | 0.15 | 0.16 |
| Standard Deviation | 16.76% | 22.67% |
| Sharpe Ratio (3% risk-free) | 0.22 | 0.26 |
Conclusion about Gibson Talmud Portfolio
The Gibson Talmud Portfolio lost out to the S&P 500 TR in terms of returns, but outperformed in terms of risk.
The drawdown and standard deviation of the portfolio are slightly lower than that of the S&P 500 TR index because a significant portion of the portfolio (33%) is treasury bond ETF.
In general, this portfolio may be of interest to conservative passive investors who are primarily concerned about preserving capital and only then about increasing it. If you want higher returns with slightly more drawdowns, consider buying 100% of the SPDR S&P 500 ETF.
FAQ:
What is the Gibson Talmud Portfolio, and how does it aim to diversify investments?
The Gibson Talmud Portfolio is an investment strategy created by Roger Gibson, designed to diversify investments across US stocks, Real Estate Investment Trusts (REITs), and bonds. The portfolio is structured with 33.34% in US stocks, 33.33% in US REITs, and 33.33% in mid-term treasury bonds, providing a well-balanced and simplified approach to asset allocation.
How can the Gibson Talmud Portfolio be implemented, and what ETFs are involved?
The Gibson Talmud Portfolio can be implemented with only 3 ETFs, representing 33.34% US stocks (Vanguard Total Stock Market Index Fund – VTI), 33.33% US REITs (Vanguard Real Estate Index Fund – VNQ), and 33.33% mid-term treasury bonds (Vanguard Long-Term Bond Fund – BLV). This allows investors to gain exposure to different asset classes without the need to pick individual stocks and bonds.
How are stocks selected for the Gibson Talmud Portfolio, and what types are included?
The portfolio includes Total U.S. Stock Market ETF (VTI) for exposure to US large-cap growth and value stocks, virtually replicating the S&P 500 index. Additionally, Real Estate Investment Trust (REIT) stocks (VNQ) are included due to their historically low correlation with the S&P 500, providing further diversification.