We've had some fun in the last few posts looking at Total Portfolio Approach (TPA) which is where we get constructing a portfolio around growth and stability as opposed to equities and fixed income. We expanded that a little bit to try to consider some sort of risk weighting along the lines of risk parity and we also talked a little bit about antifragility.
Let's continue to expand the conversation a little bit to bring in quadrant style investing too. The most basic version of quadrant style allocates equally between stocks for growth, long term bonds for deflation, gold for inflation and cash for recession. The idea is that no matter what is going on the world at least one of those four will be doing well.
We've played around with this sort of thing quite a few times before but for this one we'll continue to include growth and stability while adding antifragility (benefits from chaos and disorder) and asymmetry.
Portfolio 1 is the simplest expression of what we're talking about. ACWX is growth, SHRIX is stability, client/personal holding BTAL is antifragility and SRUUF which is uranium is asymmetry. I own a few shares of SRUUF. 25% in BTAL is way more than I think makes sense but it wasn't too much of an obstacle for that portfolio. SRUUF compounded at 22% over the length of the backtest but it's not like I cherry picked NVDA with no context which compounded at 64%. We could have just as easily used Bitcoin which does have context here and had a more volatile ride to a slight higher return than SRUUF.
Portfolio 2 is a step closer to reality. ACWX/client personal holding BLNDX make up growth. Using ACWX cherry picks nothing, it's a slight pivot to the possibility that after a long while of lagging, foreign might outperform for a while but play around with whatever broad based equity exposure you want. BLNDX is growthy but less so than plain vanilla equities. The stability bucket just two exposures we use all the time for blogging purposes the point is to avoid duration. Gold is antifragile except when it isn't but there is a tendency for it to do well in the face of chaos and disorder. ITA is a defense contractor ETF. We talk all the time about defense contractors so I think it is valid to include it in this exercise as opposed to quantum computing which we never talk about.
There is of course nothing that says any sort of quadrant styled portfolio needs to be just four or eight holdings. The 25% growth bucket could accommodate many more holdings, how many different equity holdings do you have? That number could fit into a smaller percentage of the portfolio. I'm not sure I could come up with too many more for the antifragility sleeve, maybe a couple of more but there's nothing that says each quadrant must be 25%. One thing about this idea is that 25% in "growth" is nowhere near a normal allocation to equities unless you include asymmetry in growth which certainly makes some sense. Maybe 40% growth and 10% asymmetry for example.
The point is not to run out and do this but if you look at what you own, if you go narrower than one broad index equity fund and one AGG bond equivalent then you probably have these attributes in your portfolio already so this amounts to reframing how you think of what you own and maybe being more able to assess and manage around other regime changes.
It's not far fetched that a diversified portfolio owns a little gold which as we said does often exhibit antifragile attributes. If you have a bunch of different equity holdings that go narrower like into sectors, industries and individual stocks, it again is not that far fetched that you have a few moon shots in there equating to asymmetry. If you've read this blog for a while, hopefully whatever your fixed income bucket is more like a stability bucket without too much duration.
Speaking of avoiding duration, check out this note from PIMCO.
Active fixed income strategies delivered their best results in years in 2025, and the outlook for 2026 is just as compelling. The post-pandemic bond market repricing set up an extended period of attractive starting yields. Divergent economic conditions offer abundant avenues for active managers to generate alpha, or outperformance versus the broader market. Investors have a rare opportunity to increase quality and liquidity without giving up equity-like return potential – at a time when equity valuations have reached extremes.
They could be 100% correct but equity-like return potential? If that's your trade, great but whatever that is, what it isn't is stability. Duration is not stability and it is no longer a reliable offset to equity market volatility. This whole thing about duration that we've been exploring for what seems like forever had been a slow moving regime change that turned into a fast moving regime change in 2022.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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