I'm Done!

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buddtholomew
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I'm Done!

Post by buddtholomew » Wed Mar 14, 2012 12:58 pm

I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by stone » Wed Mar 14, 2012 1:19 pm

buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
Where do you predict stocks will rise to and why?

I was presuming that it was on the cards for stocks to indulge in another plunge fairly soon.
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Re: I'm Done!

Post by murphy_p_t » Wed Mar 14, 2012 1:35 pm

buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
how long have you been w/ the PP?
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Re: I'm Done!

Post by buddtholomew » Wed Mar 14, 2012 1:37 pm

stone wrote:
buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
Where do you predict stocks will rise to and why?

I was presuming that it was on the cards for stocks to indulge in another plunge fairly soon.
I do not attempt to forecast the price of stocks in the future. I am more concerned with preservation of capital and have grown weary of watching the PP decline over the last few weeks.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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buddtholomew
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Re: I'm Done!

Post by buddtholomew » Wed Mar 14, 2012 1:38 pm

murphy_p_t wrote:
buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
how long have you been w/ the PP?
Almost a year. Waiting to complete 12+ months before realizing gains and moving on.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by MediumTex » Wed Mar 14, 2012 1:48 pm

buddtholomew wrote:
murphy_p_t wrote:
buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
how long have you been w/ the PP?
Almost a year. Waiting to complete 12+ months before realizing gains and moving on.
So you've had about a 10-12% gain over the 12 month period?

Is that more or less than you hoped for when you adopted the strategy?

I took a look at Vanguard Wellington (close to a 60/40 split) and its return over the last year has been around 8%, but with a lot more volatility.

I understand that you don't like volatility, but it seems to me that where you are going you are going to see WAY more volatility than you have experienced with the PP.

I'm just trying to understand what your strategy is.
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Re: I'm Done!

Post by KevinW » Wed Mar 14, 2012 1:50 pm

MediumTex wrote: I took a look at Vanguard Wellington (close to a 60/40 split) and its return over the last year has been around 8%, but with a lot more volatility.
As an aside, I use Vanguard Balanced Index Fund Admiral (VBIAX) for these kinds of quick comparisons. Now that the LifeStrategy funds have strict asset allocations, they will make for good benchmarks too.
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Re: I'm Done!

Post by buddtholomew » Wed Mar 14, 2012 1:57 pm

MediumTex wrote:
buddtholomew wrote:
murphy_p_t wrote: how long have you been w/ the PP?
Almost a year. Waiting to complete 12+ months before realizing gains and moving on.
So you've had about a 10-12% gain over the 12 month period?

Is that more or less than you hoped for when you adopted the strategy?

I took a look at Vanguard Wellington (close to a 60/40 split) and its return over the last year has been around 8%, but with a lot more volatility.

I understand that you don't like volatility, but it seems to me that where you are going you are going to see WAY more volatility than you have experienced with the PP.

I'm just trying to understand what your strategy is.
The 10-12% unrealized gain is actually more than I expected and I would like to realize these profits before they vanish. I do not have a strategy in-mind, as I was convinced that the PP was the right portfolio for me. However; declines of > 1% on a daily basis is definitely not what I had in mind.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: I'm Done!

Post by BugMan » Wed Mar 14, 2012 2:03 pm

Have you considered using PRPFX instead of the 4x25? I know it's not perfect (active manger, fees, etc.) but it does serve the purpose of "hiding" volatility within the contents. Thoughts?


buddtholomew wrote:
MediumTex wrote:
buddtholomew wrote: Almost a year. Waiting to complete 12+ months before realizing gains and moving on.
So you've had about a 10-12% gain over the 12 month period?

Is that more or less than you hoped for when you adopted the strategy?

I took a look at Vanguard Wellington (close to a 60/40 split) and its return over the last year has been around 8%, but with a lot more volatility.

I understand that you don't like volatility, but it seems to me that where you are going you are going to see WAY more volatility than you have experienced with the PP.

I'm just trying to understand what your strategy is.
The 10-12% unrealized gain is actually more than I expected and I would like to realize these profits before they vanish. I do not have a strategy in-mind, as I was convinced that the PP was the right portfolio for me. However; declines of > 1% on a daily basis is definitely not what I had in mind.
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Re: I'm Done!

Post by stone » Wed Mar 14, 2012 2:09 pm

Buddtholowmew, my UK PP seems to do nothing for weeks then have a spasm of a 4% loss that then quickly corrects to make up that 4% loss giving a 1% overall gain. Those 1% gains seem to build up to give about 1% per month as gains. I guess that has been what you have been seeing too? I'm less and less expecting to see a long series of 4% losses with no correction. In fact if we do get 8% yield LTT and $200 gold by the summer, I'm sure I'll just rebalance into them with gung-ho confidence.

I guess it is the overall portfolio volatility that bugs you rather than the individual components' volatility?
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Re: I'm Done!

Post by MediumTex » Wed Mar 14, 2012 2:09 pm

buddtholomew wrote: The 10-12% unrealized gain is actually more than I expected and I would like to realize these profits before they vanish. I do not have a strategy in-mind, as I was convinced that the PP was the right portfolio for me. However; declines of > 1% on a daily basis is definitely not what I had in mind.
The PP has been up 3 out of the last 5 days.

YTD it's up about 1%.

It's having a bad day today, but I wouldn't choose a bad day to sell everything.  If I was going to move to a different strategy I would probably do it when the PP is hitting a peak.
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Re: I'm Done!

Post by Gosso » Wed Mar 14, 2012 2:13 pm

buddtholomew wrote: The 10-12% unrealized gain is actually more than I expected and I would like to realize these profits before they vanish. I do not have a strategy in-mind, as I was convinced that the PP was the right portfolio for me. However; declines of > 1% on a daily basis is definitely not what I had in mind.
As I type this the Canadian PP is down 1.08% for the day, while a Canadian 60/40 is down 0.87% for the day.  Over the past year the Canadian PP has gained 7.8%, while the 60/40 is down 1.1%.

I don't think it is possible to completely eliminate daily/weekly/monthly fluctuations from the total portfolio, while still maintaining a decent annual real return of 3-6%.

I suppose you could go all short term bonds, but that is a guaranteed real loss on your assets.

It's tough, and I can sense your frustration, but all I can do is tell you to simply accept that there will be some daily/weekly fluctuations in the total value of the PP.  If you cannot accept this then go with all short term bonds...although I won't even get into the risks your taking with this option.

I wish you luck in whatever decision you make.

PS - Before you posted this I was thinking of making a new thread saying that now would be a great time to jump into the PP.
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Re: I'm Done!

Post by stone » Wed Mar 14, 2012 2:27 pm

Is the PP's bad day today all about the US bank stress tests being passed by some big banks- So a big cause for celebratory sell offs of defensive holdings ???
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Re: I'm Done!

Post by craigr » Wed Mar 14, 2012 2:32 pm

buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis. Gold and Treasuries are taking another beating today. The portfolio served its purpose when markets were in decline, but now it is time to transition to a more conventional 60/40 allocation.
A few things:

1) Don't look at your portfolio so often. Don't mean to sound flip, but this can solve a ton of problems.

2) It's strange that you'd consider going heavily into stocks now. Why are you doing it at new market highs and not last fall when they fell a bunch? Or even back in 2009 when they were at a once-in-a-generation low point?

3) Have you thought about keeping the PermPort core and just owning more stock in your variable portfolio slice? That way you still have the core portfolio assets but own more stocks? Say 20% each into cash, gold and bonds and 40% in stocks?

There is no portfolio that can guarantee stable day to day price movements. There is no portfolio that can guarantee you positive returns each year. All you can do is widely diversify and ride out market bumps. Using some psychological tricks like not watching your portfolio closely also helps a lot. Until I saw this post I hadn't looked at my portfolio assets in some time. I see they are down today together. But otherwise I just don't look at the thing that much.
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Re: I'm Done!

Post by Gosso » Wed Mar 14, 2012 2:38 pm

To be honest, I check my portfolio (the pseudo portfolio on Google finance) at least 10 times a day.  But when I look at it I have almost no emotional attachment to the daily up and down movements.  When there is a day like today I simply adjust the chart to the one-year view, and I instantly feel better.

Maybe I'm just weird...I don't know.
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Re: I'm Done!

Post by Lone Wolf » Wed Mar 14, 2012 2:53 pm

buddtholomew wrote: I am tired of watching my portfolio total decline on a daily basis.
I would definitely not recommend watching your portfolio on a daily basis.

As an experiment, I might suggest going without any portfolio watching for the next 30 days.  When you'd normally spend time worrying about your portfolio, instead do something productive and enjoyable.  At "portfolio checking time", read a few pages of a book you're working on.  Begin a video series on an interesting subject.  Whatever interests you.

I check in no more than once per month and I find this to be not only completely adequate but much more enjoyable that daily checking.  The daily checking that I did early on improved my results not one iota -- so I stopped it.  That time gets put to more productive uses.

No matter what you wind up doing, best of luck to you and your investments, budd!
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Re: I'm Done!

Post by shoestring » Wed Mar 14, 2012 3:14 pm

Will you give the 60/40 a whole 2 years I wonder? :-\
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Re: I'm Done!

Post by MediumTex » Wed Mar 14, 2012 3:25 pm

I love these threads.

I think they are immensely useful.

It's like a wretling match between fear and rationality, and I don't mean any disrespect to Team Fear by saying that.  We all toggle between fear, greed and rationality all the time.
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Re: I'm Done!

Post by Roy » Wed Mar 14, 2012 4:07 pm

Guys who have been following the PP threads from the old days expect that even years of comparative underperformance will occur, most commonly in bull phases, let alone over a few days.  I think the last few years, which have been a laugher for the PP, have convinced some that comparative underperfomance wasn't ever going to happen.  There is a difference between imagining something and living through it.

But if this bothers you ("you" meaning anyone), honest reassessment needs be done.  There is a fair place for all sorts of risk levels—because it suits individual psychology.  For my parents, the illusion of non-movement offered peace of mind.  My parents, who lived through the depression, never ventured beyond T-Bills, and would have mattress-stuffed if my Dad had his way. I used to scream bloody hell at them, perhaps rightfully so.  But if they had been in even 5-year bonds, they would have lost sleep and sold when their statements declined;  they would have been miserable—awaiting Depression II.  I used to think they were ridiculous.  It was easy to think that, then.  I'm not so sure now.  Because I now respect fear in a way I did not then.

"Bad" days like this, showing volatility-in-motion, offer great explanatory power of why the PP works.  Just sayin'.

Normally, I'd also say folks should not portfolio-peek.  However, if one wants to continue reading this fine board (or any investing board) it is almost impossible to avoid knowing what's going on in the markets.  So, choices have to be made, depending upon what sort of investor you are.  Some think they'll visit just every so often.  That may work.  Unless you're the type that visits on the wrong day.

Once the PP concept is really understood (or any other buy-and-hold/rebalance concept), there is no reason, save enjoyment, to visit forums.  You can turn it all off—like Howard Beale says in NETWORK.  If it's too hard to stop reading the boards, and if you are the sort to get bothered by days like this (let alone a year or two of comparative underperfomance), then you have to make some other changes so you can enjoy the boards and not wig-out.  You've got to know who you really are.  Often one has to live through a pummeling to find out—and pummeling toleration is relative to each individual.
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Re: I'm Done!

Post by PP67 » Wed Mar 14, 2012 4:34 pm

We may be entering a period when I get to use one of my favorite movie quotes:

"You better dig deep for a bigger set of balls because before this is over you're going to need them."

                                                                              - Lucy McClane - Live Free or Die Hard
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Re: I'm Done!

Post by buddtholomew » Wed Mar 14, 2012 4:43 pm

Today's response to GLD and TLT underperformance was completely irrational and I apologize for starting this thread in frustration. Fear of loss plays an instrumental role in my psyche and I begin to second guess my decisions under these circumstances. 5-digit daily declines have prompted me to sell in the past, but luckily I have not acted on these drawdowns.

Thank you all for your thoughts and recommendations. It is a pleasure to share your company and I welcome the positive reinforcement to stay the course. I've fought this battle before and I will continue to press on. For those that are interested, the PP comprises approximately 45% of my investments with the balance allocated 60/40 US, INT, Bonds and Cash.

Best-
Budd
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Re: I'm Done!

Post by Roy » Wed Mar 14, 2012 5:01 pm

buddtholomew wrote: Today's response to GLD and TLT underperformance was completely irrational and I apologize for starting this thread in frustration.
Budd,

I find nothing wrong with any of this.
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Re: I'm Done!

Post by steve » Wed Mar 14, 2012 5:02 pm

A day like today could be looked at as an opportunity for anyone looking to start a PP.
If I didn't already have 100% of my portfolio in the PP I would have welcomed a day like this to start one.
When I take a look at my portfolio from my last rebalace point the end of Jan 2010 I see that I am up 16.6% and 1.38% year to date. Sure I was up about 20% from last rebalance point and 5% year to date maybe a week or two ago but I do not know how I could have done better without a crystal ball. For my personallity the PP is the only way to go.
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Re: I'm Done!

Post by TripleB » Wed Mar 14, 2012 5:07 pm

buddtholomew wrote: However; declines of > 1% on a daily basis is definitely not what I had in mind.
A 60/40 portfolio will have declines of >1% on a daily basis as well as the PP.
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Re: I'm Done!

Post by Alanw » Wed Mar 14, 2012 5:25 pm

Roy wrote:
buddtholomew wrote: Today's response to GLD and TLT underperformance was completely irrational and I apologize for starting this thread in frustration.
Budd,

I find nothing wrong with any of this.
Being concerned with your portfolio on a day like today is only natural.  But really, what are we supposed to do?  Move in and out of the various allocations as we see fit.  Wouldn't this all just be market timing that we are trying to avoid?  Small draw downs are not a real concern.  If/when we are faced with a larger draw down (10 - 15%), will we be able to stay the course.  At this point, I'm not even sure that I can.  But what are the alternatives?  Cash in the mattress, 60/40, 80/20.  I don't have the answer.  I just hope as  PPer's that we will not have to face this situation.  Most of us having gone through 2008 will have a good reference point to use as a guide.
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