Growing up in South Africa, I saw Africa’s “Big Five” animals on safari – the lion, leopard, elephant, rhino, and buffalo – all surviving in their natural habitat. So, inspired by those formidable creatures, I’ve built an aggressive, diversified Big Five Portfolio, able to thrive in different economic environments. Turns out, it would have beaten the US stock market over the past decade. Here's how it works – and how you can replicate it using low-cost ETFs.

What’s in this Big Five Portfolio, then?

It's pretty straightforward. The portfolio has 20% in each of these five assets: the Nasdaq (the lion), bitcoin (the leopard), gold (the elephant), long-dated Treasury bonds (the rhino), and inflation-linked Treasury bonds (the buffalo). At the start of each year, you rebalance the portfolio back to its original percentages by selling some of the winners to buy more of the losers. This keeps overall volatility in check because you don't end up with the more volatile hunters – tech stocks or bitcoin – dominating the portfolio at any point.

Here’s each asset class and how it fits into the Big Five Portfolio:

The Nasdaq is the lion because its tech stocks are at the top of the food chain. The index tracks some of the biggest companies in the world and tends to capture long-term economic growth and the innovation of new technologies. And with AI now front and center, that could be an even bigger story down the line. These shares can drive the portfolio's gains when the economy is in the clear and the market mood is “risk-on”.

Bitcoin is the leopard because it can sneak up on you and strike when least expected – with incredible strength relative to its size. While some see it as speculative, many (including myself) view it as a long-term hedge against currency debasement. That can be from extreme economic stimulus – like quantitative easing, where governments buy bonds and other securities to expand the money supply (known in the market as “money printing”). There’ll only ever be 21 million bitcoins – and the scarcity that limit brings is an important feature for the crypto.

Gold is the elephant because it never forgets. The yellow metal has preserved wealth from inflation for thousands of years. It’s big, and when it runs, you’ll want to get out of its way – because it could mean there’s some economic danger afoot. This perceived safe-haven typically does best when inflation is moderate to high and interest rates are low or falling.

Long-dated Treasury bonds are the rhino because they can charge when the economic environment changes drastically. These securities (essentially loans to the US government) take 20 years or more to mature. That makes them “long duration”, meaning they’re more sensitive to interest rate changes than short-dated notes are. So when interest rates drop, long-dated Treasuries typically see more price appreciation than their shorter-term counterparts (it works in reverse when rates go up). And since they’re government bonds (meaning: not corporate), they can often see a flight to safety during an economic downturn.

Inflation-linked Treasury bonds (TIPS) are the buffalo because they’re steady and built to endure tough environments – like periods of heated inflation and slow economic growth. These bonds (also loans to the US government) adjust their principal and interest payouts for inflation, so your income holds its value. This is the most defensive part of the portfolio, and it’s there to dial back some of the risk. It rounds out the Big Five to help it perform better in a high inflation, high interest rate economy.

How has the Big Five Portfolio performed in the past?

I mentioned up-front that this is an aggressive, high-growth portfolio – and my back-tested results back that up. At first, I ran a back-test for the past ten years, but the results were a bit skewed because bitcoin was a much smaller asset a decade ago, shooting up more than 13 times in value in 2017 alone. But in case you’re wondering, the Big Five Portfolio clocked a 29.88% compound annual growth rate (CAGR) from September 1st, 2014, to August 31st, 2024 – more than double the 12.83% CAGR of the Vanguard 500 Index, which tracks the 500 biggest companies in the US stock market. And remember, that’s with yearly rebalancing for the Big Five.

For a more recent (and less ridiculous) look, I back-tested the portfolio from January 1st, 2018, to swerve that massive 2017 bitcoin rally. A $10,000 investment in the Big Five Portfolio (blue) would be worth $29,410 (17.56% CAGR) as of the end of August this year, compared to $23,467 (13.75% CAGR) for the Vanguard 500 Index (red).

As the chart above suggests, the Big Five Portfolio was a bit more volatile than simply owning US stocks. Its yearly standard deviation (how much the portfolio fluctuates from its average growth rate each year) was 21.42% compared to the Vanguard 500’s 17.43%. And its worst-case loss from top to bottom (i.e. the maximum drawdown) was minus 33.72%, versus the Vanguard 500’s minus 23.95%. Keep in mind these numbers are based on month-to-month value changes – so intra-month, those drawdowns can be a bit bigger.

The table below has all the key stats for each portfolio in one place. You’ll notice the Sharpe ratio (which measures the return over standard deviation) is slightly higher for the Big Five (0.76 versus 0.7). In other words, the added gains were worth the added risk when comparing the two side by side. The Sortino ratio (which measures return over downside standard deviation) was a lot higher for the Big Five (1.49 versus 1.07). And that suggests more of that Big Five Portfolio’s volatility was to the upside – and that’s no bad thing.

So how can you replicate the Big Five Portfolio?

Here’s my thinking. Bitcoin is maturing as an asset class with its growing market size and easier institutional access through ETFs, so its volatility (and CAGR) are both likely to trend lower with time. That might make the Big Five more defensive in the long run. After all, it’s diversified across five asset classes that could each thrive in slightly different economic habitats.

For the back-tests, I used these ETFs in Portfolio Visualizer:

• Nasdaq: Invesco QQQ Trust (ticker: QQQ; expense ratio: 0.2%)
• Gold: SPDR Gold Shares (GLD; 0.40%)
• Long-dated Treasury bonds: iShares 20+ Year Treasury Bond ETF (TLT; 0.15%)
• Inflation-linked Treasury bonds: iShares TIPS Bond ETF (TIP; 0.19%)

I used bitcoin’s actual price for bitcoin. But since they have ETFs now, you could go for something like the iShares Bitcoin Trust ETF (IBIT; 0.12%). And, you know the drill: past performance is no guarantee of future results.