Talmud Portfolio: backtest, returns and drawdowns
A third in stocks, a third in real estate and a third in bonds, after one of the oldest pieces of investment advice on record.
Data updated October 2026
Created by: Babylonian Talmud (Bava Metzia 42a)
Allocation
| Asset class | ETF used in the backtest | Weight |
|---|---|---|
| US stocks | ITOT | 33.3% |
| US real estate (REITs) | IYR | 33.3% |
| Intermediate US Treasuries | IEF | 33.3% |
- Stocks 66.7%
- Bonds 33.3%
From October 2011 to October 2026 the Talmud Portfolio returned 8.0% a year on average, with annual volatility of 10.8%. Its deepest fall was 24.8%, from December 2021 to October 2022, recovered in about 32 months.
Its best year was 2019 (+22.3%) and its worst 2022 (−20.0%).
Over the same period 100% US stocks returned 14.3% a year with a maximum fall of 35.0%.
Key figures
- Annual return (CAGR)
- +8.0%
- Annual volatility
- 10.8%
- Maximum drawdown
- −24.8%
- Recovery time
- 32 months
- Sharpe
- 0.62
- Sortino
- 0.86
- Worst year
- 2022: −20.0%
- Positive years
- 12/14
Growth of $10,000
Drawdowns
Returns by calendar year
| Year | Talmud Portfolio | 60/40 Portfolio | 100% Stocks |
|---|---|---|---|
| 2026(partial) | +4.4% | +6.9% | +12.7% |
| 2025 | +9.5% | +13.0% | +17.0% |
| 2024 | +9.2% | +14.8% | +23.8% |
| 2023 | +14.0% | +17.9% | +26.1% |
| 2022 | −20.1% | −16.9% | −19.5% |
| 2021 | +20.4% | +14.6% | +25.7% |
| 2020 | +8.5% | +15.4% | +20.7% |
| 2019 | +22.3% | +21.9% | +30.7% |
| 2018 | −2.9% | −3.1% | −5.3% |
| 2017 | +11.1% | +14.2% | +21.4% |
| 2016 | +6.7% | +8.3% | +12.1% |
| 2015 | +1.0% | +0.2% | −0.1% |
| 2014 | +16.0% | +9.7% | +12.2% |
| 2013 | +8.9% | +18.2% | +31.8% |
| 2012 | +12.2% | +10.4% | +14.7% |
| 2011(partial) | +5.3% | +3.1% | +4.1% |
History
- Created by
- Rabbi Isaac bar Aha
- Who
- Babylonian Talmud, tractate Bava Metzia 42a
- Year
- c. 1,500 years ago
- Source
- Babylonian Talmud, Bava Metzia 42a
- Funds in the backtest
- 3
One of the oldest pieces of asset-allocation advice on record comes from the Babylonian Talmud, compiled about 1,500 years ago: a person should always divide their money into three – a third in land, a third in merchandise and a third kept at hand. The saying is attributed to Rabbi Isaac bar Aha.
Modern readings translate land into real estate, merchandise into businesses, and so stocks, and money at hand into bonds or cash. The version tested here holds a third each in US stocks, US real estate investment trusts and intermediate Treasuries.
Strengths and weaknesses
Strengths
- Simple three-way split
- A full third in real estate, an income-producing real asset
- A third in safe bonds cushions falls
Weaknesses
- REITs are volatile and often fall with stocks in crises
- Two thirds in risky assets
- No international stocks
How it works
Divide wealth into three: land (real estate), business (stocks) and money at hand (bonds), so no single fortune depends on one asset.
Backtest with total-return ETF prices (dividends reinvested), rebalanced to target weights on the first trading day of each year. Where a Vanguard fund has a short price history in our data, an iShares fund on the same market is used (for example ITOT for VTI, IVV for VOO). No fees, taxes or currency effects; first and last years are partial. Past results do not predict future returns.
Questions
Who created the Talmud Portfolio?
Rabbi Isaac bar Aha (babylonian Talmud, tractate Bava Metzia 42a), c. 1,500 years ago. Source: Babylonian Talmud, Bava Metzia 42a.
What is the Talmud Portfolio?
A third in stocks, a third in real estate and a third in bonds, after one of the oldest pieces of investment advice on record. Allocation: 33.3% us stocks, 33.3% us real estate (reits), 33.3% intermediate us treasuries. Created by: Babylonian Talmud (Bava Metzia 42a).
What is the Talmud Portfolio return?
In the backtest from October 2011 to October 2026 it returned 8.0% a year on average, with a maximum drawdown of 24.8%. US dollars, before fees and taxes.
How often should it be rebalanced?
The backtest rebalances once a year back to the target weights. Rebalancing more often changes little and adds costs; some investors rebalance only when a weight drifts beyond a threshold.
What was the worst drawdown of the Talmud Portfolio?
24.8%, from December 2021 to October 2022; it took about 32 months to get back to the previous high.
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Source: MarketStack end-of-day prices. Historical and educational content: not a forecast and not investment advice. MEDGE Capital does not recommend buying or selling any instrument. Risk disclaimer.