Gyroscopic Investing

sophie wrote: ↑Mon Mar 23, 2020 3:43 pm I'm very close to crossing bands both on the low side (small caps) and high side (bonds). Still not quite ready to pull the trigger though. Just naturally hesitant about any big financial moves.

You're all GB right?

Yes.

I'm still hesitating. I figured that the entire stock allocation, total market + small caps, was still above threshold even though small caps had dropped below the band. No other asset has crossed a band. So - a mandatory rebalance yet.

sophie wrote: ↑Mon Mar 23, 2020 9:24 pm Yes.

I'm still hesitating. I figured that the entire stock allocation, total market + small caps, was still above threshold even though small caps had dropped below the band. No other asset has crossed a band. So - a mandatory rebalance yet.

Hi SOPHIE!!!

I am adding stocks to rebalance.

New fresh money to my EU-PP

Please advice.

Sorry frugal, but I could not possibly advise you....when I barely know what to do myself. I haven't rebalanced yet. Bonds & small caps still within 1% of crossing a band though, so....maybe soon.

It's kind of you to share your thinking about this Sophie! You've long been one of the most insightful posters on the forum so reading that you're not certain either is helpful.

As I mentioned earlier in this thread my thought for the moment anyway is to treat my GB allocation, which I still believe in long-term, as though it were a traditional PP for rebalancing purposes, going with 4 x 25% "targets" and the 15%/35% rebalancing bands.

It's been interesting to me to see a friend's "Larry" Portfolio (with 10% each SCV, EM and TSM and 70% ITT's) experiencing about half the drawdowns of the GB in the market carnage thus far but I still believe the PP and GB are inherently the most robustly defensive options I have available to me. I remind myself that in a world where Ray Dalio's down 20% I'm doing OK.

Kevin K. wrote: ↑Sat Mar 28, 2020 12:11 pm ...
It's been interesting to me to see a friend's "Larry" Portfolio (with 10% each SCV, EM and TSM and 70% ITT's) experiencing about half the drawdowns of the GB in the market carnage thus far
...

Got me curious....

Based on VG funds, 2020 YTD (March 27):

TSM : -22%
SCV: -35%
EM: -25%

MM: +.33% (Federal MM)
ITT: +7%
LTT: +22%
TBM: 3% (
for comparison)

IAU: +6.15 (ok, not a VG mutual fund )

Soo:
*The 40% GB LTT + Cash better than 40% of Larry ITT :
11% vs 7% return
(Or does Larry have higher duration than VGs ITT?)

* Gold and ITT close, but 20% with a slight edge to Larry

* Stock
10% TSM and 10% SCV each a wash
10% GB TSM slightly less bad than Larry EM
10% GB SCV horrible vs Larry ITT (42% swing to Larry)

Summary: higher allocation to risky stocks (SCV) hurts during a (this) crash. A 5.8% drop vs 3.3%? (Vs 12% drop for traditional 60/40.)
(Assuming I'm doing this correctly).

Assuming everyone was at default allocation to start the year and using the same funds. Your mileage may vary. At

Of course, with markets moving 5-10%/day, different answer likely every day....

Thanks Dieter!

I was going off of Tyler's one month chart:

https://portfoliocharts.com/2020/03/23/ ... ful-month/

But you're right, with such wild swings it's a moving target.

SCV has indeed been getting killed and that being the case along with (to a lesser degree) the 40% to stocks vs. 25% and consequent slight but still impactful reduction in gold, LTT and STT holdings accounts for the classic PP's better performance. As a very savvy finance writer (Bob Clyatt, author of "Live More, Work Less") once put it, the PP is a bunker and is doing what it's supposed to do.

I should also have pointed out that there are an infinite number of iterations of the "Larry" portfolio but the one on the Portfolio Charts site is a version recommended by Swedroe himself that contains 7.5% International Small Cap Value, 7.5% Emerging Markets and 15% U.S. SCV along with the 70% ITT's. My choice of stocks (10% each TSM, EM and U.S. SCV) is a bit more conservative and is inspired by Desert's most recent suggestion of a modified or PP-informed Larry Portfolio with that stock allocation, 10% gold and the rest ITT's.