Transitioning from a Boglehead 60/40 to Permanent Portfolio
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Transitioning from a Boglehead 60/40 to Permanent Portfolio
I have a Bogleheads portfolio for my Roth IRA which is 60% stocks (VTSAX) and 40% bonds (VBTLX).
Looking to transition to a Permanent Portfolio but it is looking like we're close to peak gold as it's currently at $1500 or so.
Something tells me it may not be a good idea to put too much into a gold ETF at this point.
Is it better to transition slowly? Just suck it up and do it in one lump sum? Or just leave this at 60-40 and start a new portfolio with all future contributions?
Looking to transition to a Permanent Portfolio but it is looking like we're close to peak gold as it's currently at $1500 or so.
Something tells me it may not be a good idea to put too much into a gold ETF at this point.
Is it better to transition slowly? Just suck it up and do it in one lump sum? Or just leave this at 60-40 and start a new portfolio with all future contributions?
- Kriegsspiel
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Everyone starts the PP when gold is near its highs I still haven't broken even on the first coins I bought, but overall my gold position is well into positive returns due to natural dollar-cost averaging. Or, of course, you could just transition over your entire hoard and believe in the PP philosophy. There's pros and cons to both, no shame.
You there, Ephialtes. May you live forever.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
I think every portfolio needs some gold as a diversifier for stocks and bonds. Has gold been on a tear? Of course. But what hasn't been on a tear in recent years, the current stock slide of the last couple weeks aside at least? I don't think there is anything wrong with any way of transitioning though. So doing some DCA is fine. You could even do a mix, like a big lump sum of like 10%, followed by DCA on the rest. Whatever helps you sleep at night. But, remember to keep an eye on the portfolio as a whole, not the individual assets. The portfolio as a whole is meant to be greater than the sum of its parts. Sometimes it gets easy to miss the forrest for one or two of the trees.
- Kriegsspiel
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Yes, I don't think I was clear on COA 1, as pmward was. I meant you may choose to buy equal amounts of all of the assets, but with only some of your current hoard. Not buy some t-bill now, then maybe in a few months buy some bonds...
You there, Ephialtes. May you live forever.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Everyone considering the PP seems to say a variation on this, "I want to do the PP but asset X is overvalued for reason Y." But the X and Y are different for everyone.
The PP philosophy is that no one can predict the future, so hold all four assets, even if some seem overvalued at the moment. It will always be the case that at least one asset will appear overvalued. It's how the portfolio works.
Whatever makes you feel the most comfortable. Again we can't predict the future. 60/40 is a higher risk/reward asset allocation than 4x25, so this question amounts to, should I reduce the risk/reward of my portfolio immediately or slowly. That's always hard to predict, but is especially so this week with a lot of volatility due to world events.
My $.02, when I decided I was committed to the PP, I transitioned everything over to PP at the same time.
- I Shrugged
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
But yes, something always seems way too high when you start. It’s the nature of the beast. I’m so comfortable with owning gold that I forget that most people have a hard time with the idea. And to them, it’s easy to feel it’s over priced.
Wait, that probably isn’t helpful....
But yes, something always seems way too high when you start. It’s the nature of the beast. I’m so comfortable with owning gold that I forget that most people have a hard time with the idea. And to them, it’s easy to feel it’s over priced.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Thanks for the ideas.
I am thinking that I will convert half of it (along with anything new contributed) to the PP and leave the other half 60/40 and then slowly DCA it.
How do you all handle your 401K? I will probably leave mine at 60/40 since there are such limited options (no LT treasuries, gold ETFs, etc).
I am thinking that I will convert half of it (along with anything new contributed) to the PP and leave the other half 60/40 and then slowly DCA it.
How do you all handle your 401K? I will probably leave mine at 60/40 since there are such limited options (no LT treasuries, gold ETFs, etc).
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Why is that? I am finding that my TLT/VUSTX holdings are a good counter to the falling stocks as of late. Do you think the LT treasuries are peaking?I Shrugged wrote: ↑Tue Mar 10, 2020 2:57 pm Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
I personally include my 401k. I just hold LTT's and gold in my IRA and taxable. I also do have some bond holdings in my 401k, but I just use total bond market fund as a proxy for the barbell. I prefer the barbell, but you gotta do what you gotta do. Total bond market over the long haul performs very similarly to a 50/50 barbell, though in the short term it doesn't give as much oomph to damped drawdowns as it lacks the pure volatility of LTT's.turbo8214 wrote: ↑Wed Mar 11, 2020 12:31 am Thanks for the ideas.
I am thinking that I will convert half of it (along with anything new contributed) to the PP and leave the other half 60/40 and then slowly DCA it.
How do you all handle your 401K? I will probably leave mine at 60/40 since there are such limited options (no LT treasuries, gold ETFs, etc).
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
People have been thinking LTT's were peaking for 10 years now. Nobody has any clue. They could definitely still run further. They also could top and pull back. Who really knows?turbo8214 wrote: ↑Wed Mar 11, 2020 12:39 amWhy is that? I am finding that my TLT/VUSTX holdings are a good counter to the falling stocks as of late. Do you think the LT treasuries are peaking?I Shrugged wrote: ↑Tue Mar 10, 2020 2:57 pm Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
If you haven't already, check to see if your 401k offers a "brokerage window" that allows you to transfer funds to another account where you can invest in whatever you please. Some plans offer it, some don't, and some limit the % of total funds you can have there.turbo8214 wrote: ↑Wed Mar 11, 2020 12:31 am Thanks for the ideas.
I am thinking that I will convert half of it (along with anything new contributed) to the PP and leave the other half 60/40 and then slowly DCA it.
How do you all handle your 401K? I will probably leave mine at 60/40 since there are such limited options (no LT treasuries, gold ETFs, etc).
- I Shrugged
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
They are at the all time high, and it's always hard for me to buy in that situation. Understandably, I think. I'm not saying you shouldn't buy. As people have said, something is always high priced or low yielding when it's time to buy into the PP.turbo8214 wrote: ↑Wed Mar 11, 2020 12:39 amWhy is that? I am finding that my TLT/VUSTX holdings are a good counter to the falling stocks as of late. Do you think the LT treasuries are peaking?I Shrugged wrote: ↑Tue Mar 10, 2020 2:57 pm Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
My employer recently switched 401 companies and they have these different plans (2035 Target, 2045 Target, etc). I assumed they were a 60-40, 70-30 type thing. They automatically switched people to these plans unless they specified otherwise. I checked last week and was surprised to see the 2045 plan was something like 90% equities, although the wording was vague. I quickly switched to the 60-40 but now may just work it into the PP. No telling how long this damn bear market is going to last. It will drop to 0 in a few weeks if it keeps going at its current pace. That's an exaggeration of course, but it's gotten ugly really fast. Stocks didn't even go down this fast in 2008 if I remember correctly.pmward wrote: ↑Wed Mar 11, 2020 10:50 am I personally include my 401k. I just hold LTT's and gold in my IRA and taxable. I also do have some bond holdings in my 401k, but I just use total bond market fund as a proxy for the barbell. I prefer the barbell, but you gotta do what you gotta do. Total bond market over the long haul performs very similarly to a 50/50 barbell, though in the short term it doesn't give as much oomph to damped drawdowns as it lacks the pure volatility of LTT's.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
The LTT's have been matching balancing out VTSAX losses, but have taken a turn for the worse the past few days. This is one of those strange weeks where every category except cash is going down.pmward wrote: ↑Wed Mar 11, 2020 10:51 amPeople have been thinking LTT's were peaking for 10 years now. Nobody has any clue. They could definitely still run further. They also could top and pull back. Who really knows?turbo8214 wrote: ↑Wed Mar 11, 2020 12:39 amWhy is that? I am finding that my TLT/VUSTX holdings are a good counter to the falling stocks as of late. Do you think the LT treasuries are peaking?I Shrugged wrote: ↑Tue Mar 10, 2020 2:57 pm Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
It does not but thanks for the suggestion.flyingpylon wrote: ↑Wed Mar 11, 2020 11:20 amIf you haven't already, check to see if your 401k offers a "brokerage window" that allows you to transfer funds to another account where you can invest in whatever you please. Some plans offer it, some don't, and some limit the % of total funds you can have there.turbo8214 wrote: ↑Wed Mar 11, 2020 12:31 am Thanks for the ideas.
I am thinking that I will convert half of it (along with anything new contributed) to the PP and leave the other half 60/40 and then slowly DCA it.
How do you all handle your 401K? I will probably leave mine at 60/40 since there are such limited options (no LT treasuries, gold ETFs, etc).
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Gold is as well, and stocks WERE, but I don't see volatility going away anytime soon.I Shrugged wrote: ↑Wed Mar 11, 2020 5:46 pmThey are at the all time high, and it's always hard for me to buy in that situation. Understandably, I think. I'm not saying you shouldn't buy. As people have said, something is always high priced or low yielding when it's time to buy into the PP.turbo8214 wrote: ↑Wed Mar 11, 2020 12:39 amWhy is that? I am finding that my TLT/VUSTX holdings are a good counter to the falling stocks as of late. Do you think the LT treasuries are peaking?I Shrugged wrote: ↑Tue Mar 10, 2020 2:57 pm Heck, I would have a lot more qualms about buying bonds than gold right now.
Wait, that probably isn’t helpful....
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Do they only offer these target date funds? That would be strange. Most employers offer individual funds as well for those that want to control their own allocation. It is pretty standard to default people to the target date funds. My employer does that on the default, but we also have Fidelity index funds for large cap, mid cap, small cap, International and total bond market. We also have a REIT fund, money market and some active large, mid and small cap growth and value funds and an active emerging markets fund. If you do not have a spread like this to choose from, you can choose the earliest target date fund and look up online what it's exact spread between stocks and bonds is so you can calculate it out for your PP.turbo8214 wrote: ↑Thu Mar 12, 2020 11:24 pm
My employer recently switched 401 companies and they have these different plans (2035 Target, 2045 Target, etc). I assumed they were a 60-40, 70-30 type thing. They automatically switched people to these plans unless they specified otherwise. I checked last week and was surprised to see the 2045 plan was something like 90% equities, although the wording was vague. I quickly switched to the 60-40 but now may just work it into the PP. No telling how long this damn bear market is going to last. It will drop to 0 in a few weeks if it keeps going at its current pace. That's an exaggeration of course, but it's gotten ugly really fast. Stocks didn't even go down this fast in 2008 if I remember correctly.
Side story, last week HR did an AMA on the 401k in our investments slack. Someone asked about a brokerage window. They said they would never do it because they see themselves as a fiduciary and have a responsibility to make sure that people are not doing stupid stuff like putting their entire retirement into penny stocks.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Turbo, sorry if I missed it, but why do you want to change your 60/40 to the PP? Just curious as you seem to have concerns about at least one of the assets.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
They actually do offer similar funds to the ones you mention. I am thinking about just combining the 401 and IRA into one Permanent Portfolio, stock and cash with be stored in the IRA, long term treasuries and gold ETF in the IRA.pmward wrote: ↑Fri Mar 13, 2020 8:44 am Do they only offer these target date funds? That would be strange. Most employers offer individual funds as well for those that want to control their own allocation. It is pretty standard to default people to the target date funds. My employer does that on the default, but we also have Fidelity index funds for large cap, mid cap, small cap, International and total bond market. We also have a REIT fund, money market and some active large, mid and small cap growth and value funds and an active emerging markets fund. If you do not have a spread like this to choose from, you can choose the earliest target date fund and look up online what it's exact spread between stocks and bonds is so you can calculate it out for your PP.
That's probably a good thing with much of the general public is financially illiterate. I think that's why my company's firm decided to just throw everyone into a target fund by default.pmward wrote: ↑Fri Mar 13, 2020 8:44 amSide story, last week HR did an AMA on the 401k in our investments slack. Someone asked about a brokerage window. They said they would never do it because they see themselves as a fiduciary and have a responsibility to make sure that people are not doing stupid stuff like putting their entire retirement into penny stocks.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Good question.
The market has lost roughly 25% in a very short amount of time. That means I'm down roughly 15%. As Harry Brown stated, nobody has any idea what the future holds. It could bounce back and exceed previous highs. It could also fall another 50% with all of the craziness going on. These are uncertain times, unprecedented, and nobody can predict the future.
The market has never been so volatile. These latest moves up and down are some of the biggest gains and losses in the history of the market, similar to 2008. I'd be more comfortable in stocks being a smaller fraction of my portfolio. To put it bluntly, I don't want to give a sh** if the market goes up for down.
I cannot touch my retirement accounts for almost another 20 years so perhaps I'm overreacting. Then again, I would almost certainly want to be all in on the PP as retirement approaches so I am asking myself "why not do it now rather than later"?
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
In his book The (Mis)Behavior of Markets, the famous mathematician Benoit Mandelbrot showed why he thought stocks are far, far riskier than most people think, and as a result he said that most people should have much less exposure to them.
That statement by Mandelbrot is actually one reason why I didn’t think the low 25% allocation to stocks in the PP was too conservative when I first learned about it back in 2010.
- mathjak107
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Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
in the mean time 100% equities in retirement , over the 119 30 year cycles we have had has actually had as high a success rate for the most part as 50/50 .... the reason being the higher up years cushion spending in the down years ....
long term equities may be volatile but diversified funds have not been risky ...
never confuse volatility with risk ..... people create risk by taking long term money and using it for short term spending .... even at 65 we have 20 to 30 years before we need the long term money to eat ...
higher equity levels is more a mental thing than a real financial issue
100% stock
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-931,017 to $8,509,297, with an average at the end of $2,718,768. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 8 cycles failed, for a success rate of 93.3%
50% equities
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952 to $4,145,063, with an average at the end of $1,146,780. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.0%.
long term equities may be volatile but diversified funds have not been risky ...
never confuse volatility with risk ..... people create risk by taking long term money and using it for short term spending .... even at 65 we have 20 to 30 years before we need the long term money to eat ...
higher equity levels is more a mental thing than a real financial issue
100% stock
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-931,017 to $8,509,297, with an average at the end of $2,718,768. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 8 cycles failed, for a success rate of 93.3%
50% equities
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952 to $4,145,063, with an average at the end of $1,146,780. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.0%.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
I feel called out. Not that I'm true PP (59% stock, ~12% gold as target) and I did wait for my ~ 70/30 BH to recover after 2009 to start buying gold (IIRC).
But yeah.
My retirement funds would be better higher if I hadn't gone more conservative / bought gold, but I've slept better.
(Tilt to SCV didn't help either).
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Thanks for the book suggestion, I will check it out.Tortoise wrote: ↑Sat Mar 14, 2020 12:58 pm In his book The (Mis)Behavior of Markets, the famous mathematician Benoit Mandelbrot showed why he thought stocks are far, far riskier than most people think, and as a result he said that most people should have much less exposure to them.
That statement by Mandelbrot is actually one reason why I didn’t think the low 25% allocation to stocks in the PP was too conservative when I first learned about it back in 2010.
I did some search on the PP on Bogleheads and many people posted that they thought it was way too conservative....but there are many threads there with people panicking. I see no such panic here.
I just read Fail Safe Investing again and it makes so much sense, especially in times like this.
Re: Transitioning from a Boglehead 60/40 to Permanent Portfolio
Interesting.mathjak107 wrote: ↑Sat Mar 14, 2020 1:14 pm in the mean time 100% equities in retirement , over the 119 30 year cycles we have had has actually had as high a success rate for the most part as 50/50 .... the reason being the higher up years cushion spending in the down years ....
long term equities may be volatile but diversified funds have not been risky ...
never confuse volatility with risk ..... people create risk by taking long term money and using it for short term spending .... even at 65 we have 20 to 30 years before we need the long term money to eat ...
higher equity levels is more a mental thing than a real financial issue
100% stock
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-931,017 to $8,509,297, with an average at the end of $2,718,768. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 8 cycles failed, for a success rate of 93.3%
50% equities
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $-223,952 to $4,145,063, with an average at the end of $1,146,780. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.0%.
The higher ones goes in stock, the greater the returns, but timing plays a big impact in how things play out.