This week we are talking with “Tyler,” founder of the website Portfolio Charts and creator of the “Golden Butterfly” and “Pinwheel” investment portfolios.  Tyler shares his unique insights on portfolios, investing, asset allocation, and the psychology of money on his website, PortfolioCharts.com. 

1. What was the big idea behind creating the Portfolio Charts website?

I once had an engineering professor in college who taught us to model the heat distribution in a metal plate and create a color-coded heat map using Excel. I’ve always been a visual thinker, and that exercise was a turning point in my education where I could finally see past the esoteric formulas and understand what was going on. As I often like to say, a picture is worth a thousand calculations.

Fast forward many years, and someone on an investing forum I frequent made an open request for a chart showing the color-coded returns distribution of a portfolio over every timeframe on record. I was naturally able to do that quickly using my old tricks, and the result was the original version of the Heat Map chart. No big deal.

I never imagined that it would be such a huge hit! And I was soon deluged with requests for charts of different portfolios. Like me finally understanding heat transfer, apparently lots of people respond well to clear visual presentation of financial concepts. That was the moment I realized I had a skill that could help bridge the gap between cold data and real insights for everyday people, so I started a website to help them create unique visualizations for any portfolio they want.

Portfolio Charts has grown a lot over the years, and beyond the many new tools I even developed a love of analysis and writing. But the basic mission is still the same – to present good data in a format that anyone can understand so that they can make educated financial choices.

2. Financial blogging is such a crowded space. How do you stand out?

I think the biggest difference between me and a lot of other financial writers is my data-driven neutrality. For better or worse, many are incentivized by the need for revenue to carefully curate a certain lifestyle or portfolio to sell while working hard to build their own personal credibility. But I take a bit of a different approach and spend my energy building tools that allow good data to speak for itself.

As a result, the blog is only one of three Portfolio Charts content pillars. The other primary pages include the Portfolios page where people can compare many professional portfolio recommendations with no salesmen involved. And the Charts page shares a variety of powerful and completely free tools that allow investors to instantly model virtually any asset allocation they can imagine over every investing timeframe simultaneously in a dozen different countries.

So compared to most financial bloggers, I have a uniquely deep expertise in historical data and am mainly here to help you understand it rather than push a specific investing solution. And compared to other free financial calculators, I have a lot more asset types to choose from and have put in much more effort to help you truly understand the results. Basically, I work hard to present complex concepts in intuitive images and down-to-earth terms that both experts and everyday people can appreciate.

3. My experience with Portfolio Charts — and I have spent hours on the site — is that it replaces the guesswork of portfolio design with simple math. Is it your intent to provide a data-driven tool for investors?

Absolutely! Good decisions require good data. And I’m happy to do my part supplying the latter so that people can make educated choices.

To accomplish that goal, one thing many people may not realize is how much time I spend behind the scenes on data research. Instead of simply talking about generic “stocks” and “bonds” or discussing one company or asset at a time, I’ve spent countless hours studying data sources and index methodologies for hundreds of different asset options. That’s how I’m able to do some unique things like share a single chart illustrating more than 40,000 unique portfolios at a time or expanding traditional US-focused withdrawal rate research to entire new markets. None of that is possible without the right data.

By the way – while the output may appear simple, I think it’s fair to say that the math behind it can sometimes be rather complex. Running those numbers for you and presenting them in the most intuitive way possible is part of the magic that makes Portfolio Charts special.

4. You’ve reached semi-famous status with the “Golden Butterfly” portfolio. What led to that portfolio design?

Fame has never been important to me, which is one reason why I choose to write under a pen name rather than plaster my face and bio on everything. So being called semi-famous purely for a good portfolio idea that stands on its own merits is the highest honor!

After spending years like most new investors chasing my own tail, my first real asset allocation that I personally understood and invested my own money in was the Permanent Portfolio. In fact, the desire to accurately model things like safe withdrawal rates for the Permanent Portfolio (when the most cited online calculators only offer proper options for one of the four assets) was a major motivator for me to learn about data sources and build my own tools. Once I had more data at my disposal, I wondered if there was one additional asset that might best complement the large cap stocks, long term treasuries, short term treasuries, and gold that I already owned. After some experimentation, I settled on small cap value and the Golden Butterfly was born.

Interestingly, I also arrived at the same concept completely independently from a secondary route. As part of my work with early versions of a tool called the Portfolio Finder, I looked not just at one portfolio at a time but at every possible combination of assets and mapped them all on a chart that measured the risk and returns to find the most efficient portfolio. To my surprise, the Golden Butterfly was right on the efficient frontier of every option!

So no matter whether you approach portfolio construction from raw empirical observation or by building on Harry Browne’s core a priori economic framework, the Golden Butterfly rises to the top either way. Its most distinguishing characteristic is its remarkable consistency in all economic environments, and I’ve found it particularly appeals to investors looking for a way to dependably grow and protect their money with minimum effort.

Readers can find more about the Golden Butterfly by reading The Theory Behind The Golden Butterfly and Catching A Golden Butterfly.

5. One of the funnier financial planning YouTube videos I have seen is one in which Rob Berger is addressing the question of whether to add gold to an investment portfolio. He’s quite a skeptic, but as he runs actual numbers, he can’t explain the surprise performance. Despite the good performance, I think he is still a skeptic. How do you address gold skeptics? It it simply just about historical performance and the math?

I always find it interesting to watch how people react to the idea of gold in a portfolio. For whatever reason it tends to elicit way more emotion on both sides of the argument than any other asset. People tend to either love it or hate it, which is one reason I think data-driven evaluation tools are so important.

I certainly can’t speak for everyone, but from my perspective the most common stumbling blocks for investors regarding gold follow a few noticeable patterns:

1. Trying to fit gold into an asset valuation or expected returns framework that just doesn’t apply.

2. Evaluating gold in isolation rather than considering its role in a larger portfolio. I like to compare it to a chef deciding what to include in a cake simply by tasting spoonfuls of sugar, flour, baking powder, and raw eggs and only including what tastes good on their own while never trying the final product. Would you eat at the restaurant of someone who cooks that way?

3. Being tripped up by how government policy has directly controlled the historical gold price over time, either by citing the low long-term returns without knowing what changed or by dismissing one-off events as unrepeatable without looking deeper. To be fair, gold data does require proper context to accurately study and understand.

To work past preconceived biases, my approach to addressing gold skeptics is to start with the measurable data. For those interested in learning more, I recommend these articles:

• Metal, Money, and the Measurable Value of Gold – How gold works.

• Three Secret Ingredients of the Most Efficient Portfolios – This illustrates how gold can simultaneously be very unappealing in isolation but a critical component in the most desirable portfolios.

• Unexpected Returns: Shannon’s Demon and the Rebalancing Bonus – This offers some mathematical insight into how gold contributes to portfolio returns while reducing volatility.

But even with all that background, I also understand that every investor is different. Some people just don’t like gold as an investment, and that’s OK. There are lots of good portfolios that contain no gold at all, and my goal is just to help properly educate people on their options so that they can make an informed choice without all the noise.

6. What are your top performing blog posts in the INSIGHTS section of the site? Any surprises on the type of posts that get the most readers?

Good question! Looking up the numbers and adjusting a bit for longevity bias, these five articles stand out:

• Three Secret Ingredients of the Most Efficient Portfolios – This is perhaps my peak article to date using raw computational horsepower to address the core question most people care about – what is the most efficient use of my limited investing resources?

• High Profits at Low Rates: The Benefits of Bond Convexity – This is probably my most cited article that many people treat as an evergreen reference on bond mechanics. I’m pretty proud of how I was able to explain a complicated topic in terms that are useful to both beginners and subject matter experts. 

• The Top-4 Portfolios to Recession-Proof Your Investments – While I wrote this in 2019 well before COVID lockdowns wrecked the economy, this is understandably still quite popular today. Practical defensive investing advice never gets old.

• How to Survive and Make Money in the Matrix – This is honestly one of my all-time personal favorites, and I’m excited to see that others agree. It addresses common investing fears by using my favorite movie as an allegory for modern portfolio theory. And I‘ve received quite a few emails from people who cite this as the point that they finally “get it.”

• Understanding Cash Will Make You a Better and Happier Investor – I think this one surprised me the most, as I wouldn’t normally expect a post on the simplest investing asset to get so much attention. But I think it’s a good example of how there’s real market demand for educational material that addresses the unintuitive side of investing and challenges common knowledge.

7. How can readers subscribe to your blog?

You can always stay up to date on new articles by joining the email list or following me on Twitter or Instagram. 

8. With no banner ads, how do you generate money from the Portfolio Charts website? 

Slowly. 😊

One more thing that makes Portfolio Charts somewhat unique in the finance space is that it really is a personal hobby project by one individual investor. Because I’ve been blessed with a successful engineering career, paying the bills has never been my primary incentive for creating a website. I do this because I enjoy it and believe it’s important to share far and wide.

With the ability to make choices that don’t have to prioritize profitability out of necessity, I have a lot more design latitude than you often see on today’s ultra-monetized internet. For example, I’ve never really liked banner ads because I find them far too distracting. And I also avoid the usual affiliate marketing popular in the genre because I feel it erodes trust. 

That said, I do make money in a few specific ways. I sell spreadsheets and gear designed for DIY investors, receive Amazon commissions on the portfolio books I share, and accept direct donations via Ko-fi. Even the smallest amount is a big help.

9. You recently introduced a PRODUCTS page to the website. How have sales gone so far?

They’re going well! As with any new feature, there will always be a normal adjustment period as I learn what resonates with people and what doesn’t. But the response has been exciting, and I foresee many new items in the future.

The most popular product so far has been the freestanding My Portfolio spreadsheet bundle that allows proactive investors to generate the full set of charts using any data they provide. Knowing that, I’m already thinking about new tools to make that process even easier.

10. Does Portfolio Charts have any new innovations on the horizon? 

As opposed to having some grand master plan that is years in the making, I’m always experimenting with new ideas. Without giving too much away, I have a few new chart concepts in the hopper and have been thinking about new downloadable tools to solve various money management challenges. And I’m always open to suggestions! 

11. What’s your “One Thing” that most drives your professional success?

I’ve admittedly had a unique career arc from a young mechanical engineer to a creative product designer and to the financial analyst, toolmaker, and writer I am today. But I guess the one thing that has most defined my success in each endeavor is my ability to creatively solve problems.

No matter whether I’m designing a new mechanism, user experience, or financial charting tool, the ability to identify and challenge every assumption, break the problem down into core components, process hundreds of possibilities, and ultimately settle on a totally new concept that has never been done before is a skill not every person has. I think differently, with a lot of parallel ideas and natural intuition that is impossible to rationally explain to linear thinkers. But it just works, and I find the creation process just as rewarding as the result.

12. What are you reading right now?

I understand that it’s normal for a lot of people to project a persona that involves constant book reading as a social signal of intelligence. But if I’m being really honest, I’m actually not a prolific recreational reader. As a highly creative tinkerer, you’re much more likely to find me creating something new or playing a game requiring problem solving rather than purely consuming things like books or TV.

But in the spirit of the question, one of my favorite books is “Shop Class as Soulcraft” by Matthew B. Crawford. Any knowledge worker who has ever felt a nagging sense of a lack of real purpose should read it, as Crawford articulately states what many of us intuitively feel even when we can’t put it into words. And he also offers an inspiring window into other concrete possibilities.

To learn more about Portfolio Charts, please visit the website here.

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