PP Mistakes

[Jack Jones]

What were your biggest Permanent Portfolio mistakes?

I'll go first. I got into this portfolio earlier in my accumulation phase and considered all of my wealth as, "can't afford to lose." This was sub-optimal from a long term returns perspective.

If I could do it over, to start with, I would have put 100% in equities in retirement accounts, and (slowly) accumulated gold with any spare non-retirement money. The stash of gold accumulated would dictate the size of my PP at any given time. As the gold accumulated, I'd move more and more of my retirement portfolio (VP) into the PP.

[Maddy]

But then again, who could possibly have predicted that they'd manage to kick the can down the road this long?

It could just as easily have happened that equities crashed, bonds surged, and gold went "to da moon," as many predicted it would. The thing about gold, however, is that there's a limited quantity of it, and had you put off buying, you might have found yourself unable to do so. With the benefit of hindsight, things undoubtedly look much clearer.

When I start doing post mortems of my investment decisions, it helps me to contemplate the difference between a poor decision and one where I simply got it wrong.

[boglerdude]

Not knowing about index funds till 40. Grandpa said stocks were too risky. All cash 2005-2015. "Luckily" they gave me two mortgages in 2005...despite no income. Started PP in 2016 and bought a slug of 30years at 2.33% just before trump won and rates spiked.

[seajay]

Grandpa said stocks were too risky.

Different paradigm. Gold used to be money, gold, silver, copper coins worth their weight. Gold being finite and inflation was low, broadly 0% across centuries. Gold (money) deposited into savings accounts earned interest, more gold, that was comparable to a real rate of return and was quite a decent amount. Why 'speculate' with stocks under such a era.

Then along came fiat (1930's). The state nationalized gold and locked it up in Fort Knox. People had to use paper money instead, that could easily be printed/spent, devaluing all other notes in circulation in the process. Mostly induced inflation, and where combined inflation and taxation can result in 0% real for those that do lend to someone who has a printing press and as such doesn't really need to borrow. Of the PP assets I dislike bonds and cash the most. 67/33 SCV/gold is more preferable IMO. Martingale style. If 67 stock value halves to 33, chances are that 33 gold value might double to 66 due to the same circumstances that drove stocks to halve. Rebalance 33/67 SCV/gold back to 67/33 and you double up on the number of SCV shares being held after prices had halved (Martingale/Double-Down style). More volatile, over the shorter term, but that only affects those that lump all-in/all-out at single points in time, most don't, instead they average in/out over a extended period of time, maybe 60 years or more.

PV of 67/33 SCV/gold vs PP vs S&P500 vs 10 year Treasury's

The PP is fine as a alternative to T-Bills ... as Harry Browne originally intended it to be. More for those looking at preservation of wealth. Otherwise a risk is that of regret, lower wealth accumulation/growth. The 1970's onward period has been more a exception than a rule, great gains in gold, followed by great bond rewards and stock gains as very high interest rates have progressively declined. Could repeat, such as large stock losses, great gold gains, a return to very high interest rates that subsequently slope slowly back down again, historically however and the 1970's were more the exception than a rule.

Any mistakes isn't really the PP to blame, rather a mistake in the inappropriate adoption. Is more for those with wealth rather than those accumulating/saving.

[Hal]

What were your biggest Permanent Portfolio mistakes?

Hmm.... Thinking that Gold in an Australian PP would perform in the same manner as Gold in a US PP.

1. Recommend holding US assets as well for non-US PP holders.

2. If I knew of the PP concept when I was young, then hold Shares/Gold and gradually increase the percentage of cash/bonds so it reached the 4x25% allocation when I hit retirement age. (Assuming I was saving the funds for retirement.)

Have had no regrets following the PP philosophy

[Dieter]

Overall, if I hadn't applied PP aspects to my retirement portfolio starting in 2012 (never been full PP), if I'd stayed the course, I'd have had higher returns.

If I'd gone the other way and 100% into S&P 500, I'd have done even better

Of course, I wouldn't have slept as well, might not have stayed the course, and probably spend more time trying to figure things out

(Overall, my retirement investment targets are 50% stocks, 15% gold, 25% across bonds/"cash")

Specific to the PP, I think SCV has underperformed Large Cap during my investment time, so, all stocks in Large Cap likely would have helped my return for my time period, but, no way to have known that beforehand.

I also had a bit of Silver early on, and some money in PERM and PRPFX.

[Smith1776]

Broadly speaking, I have made two big Permanent Portfolio mistakes in my life.

1) Not adopting the portfolio sooner. I spent years fudging around with unbalanced portfolios that didn't let me sleep at night. One might reasonably say that this isn't a "mistake" per se, as for many of those years I literally hadn't even heard of the PP. Still, even after hearing about it I wish I had adopted the strategy (or at least) something similar sooner.

2) Messing around too much with variations of the PP. I am a tinkerer who loves to do optimization and squeeze every last bit of risk-adjusted return I can from an allocation. There are ways that one can make a portfolio more efficient from a risk-return as well as tax perspective, but in the end I would have had higher returns if I had just stuck with an "imperfect" PP from day one and just held it till today.

3) Not doing a better job defending the portfolio. When I first heard of the PP I had learned a substantial amount about finance and economics from business school, but I didn't have the level of knowledge I have today (which is still imperfect). It thus made defending the PP and my choice to use somewhat of a challenge against some of the more senior members of various forums online as well as in person.

[vnatale]

Broadly speaking, I have made two big Permanent Portfolio mistakes in my life.

1) Not adopting the portfolio sooner. I spent years fudging around with unbalanced portfolios that didn't let me sleep at night. One might reasonably say that this isn't a "mistake" per se, as for many of those years I literally hadn't even heard of the PP. Still, even after hearing about it I wish I had adopted the strategy (or at least) something similar sooner.

2) Messing around too much with variations of the PP. I am a tinkerer who loves to do optimization and squeeze every last bit of risk-adjusted return I can from an allocation. There are ways that one can make a portfolio more efficient from a risk-return as well as tax perspective, but in the end I would have had higher returns if I had just stuck with an "imperfect" PP from day one and just held it till today.

3) Not doing a better job defending the portfolio. When I first heard of the PP I had learned a substantial amount about finance and economics from business school, but I didn't have the level of knowledge I have today (which is still imperfect). It thus made defending the PP and my choice to use somewhat of a challenge against some of the more senior members of various forums online as well as in person.

As usual all quite well stated by one of our younger members (if not THE youngest).

[Smith1776]

As usual all quite well stated by one of our younger members (if not THE youngest).

Hard to even believe I'm the youngest in any group! I'm already starting to develop knee pain LOL!

[Pointedstick]

What were your biggest Permanent Portfolio mistakes?

I'll go first. I got into this portfolio earlier in my accumulation phase and considered all of my wealth as, "can't afford to lose." This was sub-optimal from a long term returns perspective.

If I could do it over, to start with, I would have put 100% in equities in retirement accounts, and (slowly) accumulated gold with any spare non-retirement money. The stash of gold accumulated would dictate the size of my PP at any given time. As the gold accumulated, I'd move more and more of my retirement portfolio (VP) into the PP.

I made the same mistake and arrived at the same conclusion. 6 years ago I went into 100% equities and I have no regrets except not doing it earlier, because I had decades of my career in front of me.

Not that it would necessarily have been a mistake for everyone in my situation, but it was a mistake for me because I had the stomach for swings in the stock market. Haven't felt a bit of market stress since then, whereas I was stressed out a lot about the PP: did I implement it right, could I micro-optimize it more, was I dumb for adopting it and lagging equities' returns, etc.

I suspect I'll feel very differently about it once I near retirement age though. Different portfolios for different stages of life.

[mathjak107]

the swings at times with the pp have been higher at times when 3 of the 4 assets are moving together , has been greater then most conventional portfolio moves .

i can’t say stomach for swings is any less with the pp.

in fact pp users tend to be more conservative and have lower pucker factor to start with .

so i think they are feeling these swings just the same

[flyingpylon]

Hindsight is 20/20. Foresight, not so much.

[dualstow]

I wish I had gone all in - not all into the pp with my available capital but all in at once with what I allocated to the pp. Instead I dripped into gold and long bonds (and even cash). I could have bought gold at a much lower price.

[Tortoise]

I have no regrets going all in on the PP in late 2010 and sticking with it since then. It has had a modest CAGR of 5.0% over that 13-year period, with a max negative return of -11.9% in 2022. It has allowed me to mostly shrug off market turmoil and sleep soundly as I focus on working and accumulating wealth.

I could look at the stock market's CAGR of 12.8% over the past 13 years and lament that I would have been far better off going all in on stocks instead of the PP.

But what if I step back to get a bit more perspective? What if I look at the preceding 13-year period (late 1997 to late 2010)? Over that time window, the stock market had a meager CAGR of 2.7% (vs. 7.3% for the PP) and also had a stomach-churning negative return of -36.2% in 2008.

The picture starts to look a bit different then, doesn't it?

[vnatale]

I have no regrets going all in on the PP in late 2010 and sticking with it since then. It has had a modest CAGR of 5.0% over that 13-year period, with a max negative return of -11.9% in 2022. It has allowed me to mostly shrug off market turmoil and sleep soundly as I focus on working and accumulating wealth.

I could look at the stock market's CAGR of 12.8% over the past 13 years and lament that I would have been far better off going all in on stocks instead of the PP.

But what if I step back to get a bit more perspective? What if I look at the preceding 13-year period (late 1997 to late 2010)? Over that time window, the stock market had a meager CAGR of 2.7% (vs. 7.3% for the PP) and also had a stomach-churning negative return of -36.2% in 2008.

The picture starts to look a bit different then, doesn't it?

It definitely does!

[Hal]

But what if I step back to get a bit more perspective? What if I look at the preceding 13-year period (late 1997 to late 2010)? Over that time window, the stock market had a meager CAGR of 2.7% (vs. 7.3% for the PP) and also had a stomach-churning negative return of -36.2% in 2008.

The picture starts to look a bit different then, doesn't it?

Couldn't resist
https://external-content.duckduckgo.com ... ipo=images

<snip>
Portfolio efficiency

No other portfolio in our database granted a higher return over 30 Years and a less severe drawdown at the same time.

30 Years Stats (%)
% Allocation
Portfolio Author Return▾ Dev.Std Drawdown Stocks Bonds Comm
Simplified Permanent Portfolio +6.67 6.79 -16.43 25 50 25

https://www.lazyportfolioetf.com

[vnatale]

But what if I step back to get a bit more perspective? What if I look at the preceding 13-year period (late 1997 to late 2010)? Over that time window, the stock market had a meager CAGR of 2.7% (vs. 7.3% for the PP) and also had a stomach-churning negative return of -36.2% in 2008.

The picture starts to look a bit different then, doesn't it?

Couldn't resist
https://external-content.duckduckgo.com ... ipo=images

<snip>
Portfolio efficiency

No other portfolio in our database granted a higher return over 30 Years and a less severe drawdown at the same time.

30 Years Stats (%)
% Allocation
Portfolio Author Return▾ Dev.Std Drawdown Stocks Bonds Comm
Simplified Permanent Portfolio +6.67 6.79 -16.43 25 50 25

https://www.lazyportfolioetf.com

Thanks for this. A comprehensive list. Thought it took scanning the list a few times to finally find the Simplified Permanent Portfolio.

The list is what order? Definitely NOT alphabetical?

??????

[flyingpylon]

Thanks for this. A comprehensive list. Thought it took scanning the list a few times to finally find the Simplified Permanent Portfolio.

The list is what order? Definitely NOT alphabetical?

??????

30-year avg return, descending order. Click on the column headers to change the sort order.

[vnatale]

Thanks for this. A comprehensive list. Thought it took scanning the list a few times to finally find the Simplified Permanent Portfolio.

The list is what order? Definitely NOT alphabetical?

??????

30-year avg return, descending order. Click on the column headers to change the sort order.

Thanks. Because the headings did not stay fixed as you scrolled down ... in their absence it was difficult to tell what were each of the numbers in each row represented.

[Mike59]

I regret buying long bonds near the top in the last 2-3 years, hoping that an agnostic dollar cost averaging approach would serve me well in the long run.

I have become somewhat less purist and time some of my purchases , preferring to accumulate cash to 35% allocation then spread it around , typically to the asset class most beat up. Going ahead I only add new funds to gold/bonds/stocks when they are below their 400 day SMA, as I'm mid-career the ship is large enough that playing around with new purchases doesn't affect my allocations too much (typically they stay in the 23-27% range) , maybe it's all placebo

[seajay]

I regret buying long bonds near the top in the last 2-3 years, hoping that an agnostic dollar cost averaging approach would serve me well in the long run.

I have become somewhat less purist and time some of my purchases , preferring to accumulate cash to 35% allocation then spread it around , typically to the asset class most beat up. Going ahead I only add new funds to gold/bonds/stocks when they are below their 400 day SMA, as I'm mid-career the ship is large enough that playing around with new purchases doesn't affect my allocations too much (typically they stay in the 23-27% range) , maybe it's all placebo

Harry's second preferred choice was T-Bills. As a alternative thirds each stocks, gold, hard cash .. works reasonably OK as well. Two thirds of assets in-hand, no counter-party risk, one third in stocks with T+2 liquidity time.

[jalanlong]

I have no regrets going all in on the PP in late 2010 and sticking with it since then. It has had a modest CAGR of 5.0% over that 13-year period, with a max negative return of -11.9% in 2022. It has allowed me to mostly shrug off market turmoil and sleep soundly as I focus on working and accumulating wealth.

I could look at the stock market's CAGR of 12.8% over the past 13 years and lament that I would have been far better off going all in on stocks instead of the PP.

But what if I step back to get a bit more perspective? What if I look at the preceding 13-year period (late 1997 to late 2010)? Over that time window, the stock market had a meager CAGR of 2.7% (vs. 7.3% for the PP) and also had a stomach-churning negative return of -36.2% in 2008.

The picture starts to look a bit different then, doesn't it?

If you go back to 1980, a $10k investment in stocks would be worth over $1 million now. PP would be $200k and ST Treasuries $99k.

[vnatale]

If you go back to 1980, a $10k investment in stocks would be worth over $1 million now. PP would be $200k and ST Treasuries $99k.

So what you are telling me that after finally graduating college in 1978 (with masters at age 27) and had saved my first $1,000 in 1979 and was agonizing what to do with it ... I should have put it and left it in stocks to let it turn into over $100,000 now?

[seajay]

If you go back to 1980, a $10k investment in stocks would be worth over $1 million now. PP would be $200k and ST Treasuries $99k.

So what you are telling me that after finally graduating college in 1978 (with masters at age 27) and had saved my first $1,000 in 1979 and was agonizing what to do with it ... I should have put it and left it in stocks to let it turn into over $100,000 now?

If you'd invested in McDonald's shares instead of buying/eating their burgers, share price alone has risen around 600x since 1979 and you'd have collected a load of dividends along the way that could have been spent on buying burgers

[dualstow]

If i had all the money I’ve spent on burgers…I’d spend it on burgers.