PP thread at Bogleheads

[dualstow]

Anyone care to respond?

This is where it is important to have a strong grasp of what Harry Browne based the PP on.  He based it upon owning assets that will perform well under any imaginable economic conditions.  The economic conditions he described cover every economic environment.  All I am betting is that in the future we will have either prosperity or recession and either inflation or deflation.

For an all-conditions approach to investing, there seems to be very little talk about the Permanent Portfolio these days- some years ago, there were quite a few threads going on at the same time discussing it.  Any updates or thoughts?

http://www.bogleheads.org/forum/viewtop ... 0#p1924890

[foglifter]

Anyone care to respond?

This is where it is important to have a strong grasp of what Harry Browne based the PP on.  He based it upon owning assets that will perform well under any imaginable economic conditions.  The economic conditions he described cover every economic environment.  All I am betting is that in the future we will have either prosperity or recession and either inflation or deflation.

For an all-conditions approach to investing, there seems to be very little talk about the Permanent Portfolio these days- some years ago, there were quite a few threads going on at the same time discussing it.  Any updates or thoughts?

http://www.bogleheads.org/forum/viewtop ... 0#p1924890

I responded with a link to this forum. 

[dualstow]

I responded with a link to this forum. 

Probably the wisest thing to do. Even though we're sticking with the pp, it's not the most opportune time to sing its praises over there. I couldn't think of what to write except maybe, "Hey we're still here!"  and a link shows that nicely.

It really is amazing though, how the portfolio has weathered the huge drop in the price of gold.

[Libertarian666]

I added a comment about how as soon as gold resumes its ascent, we will start hearing about the PP more frequently.

Especially if the stock market takes a dive, of course, but I didn't mention that. 

[dualstow]

I added a comment about how as soon as gold resumes its ascent, we will start hearing about the PP more frequently.
Especially if the stock market takes a dive, of course, but I didn't mention that. 

hah. That kind of reminds me of the narrative mentioned in the Ritholtz-gold article I mentioned here. Not that the narrative is necessarily wrong, mind you. ;-) Time will tell. But, it certainly makes the pp more popular when things look like they're falling apart.

[Wonk]

I'd be curious to see a CAGR comparison of a 50-50 or 60-40 standard boglehead portfolio to the permanent portfolio from 1972 to present.  Anyone have those numbers available?

[Libertarian666]

I'd be curious to see a CAGR comparison of a 50-50 or 60-40 standard boglehead portfolio to the permanent portfolio from 1972 to present.  Anyone have those numbers available?

I think this will do what you want:
http://www.peaktotrough.com/hbpp.cgi

[sophie]

I think it's also in the permanent portfolio book published by a couple of guys we all know :-).  The returns are very close, but the ride is bumpier with the standard 50/50.

Once again though, it isn't about returns over 40 years.  To get that return you have to stick with your strategy over a long period of time without panicking.  Most of us would have a hard time sitting on our hands as a portfolio loses 30% of its value, or gains little more than your savings account for over 10 years.

Also, the posters asking about returns are completely forgetting that the portfolio is about a lot more than the return of its individual assets.  There's the benefits of rebalancing, and the very important role that cash plays in the drawdown period.  Magic!

[ns3]

I think PPer's and Bogleheads have much in common in regards to investing psychology but I think the major difference is that PPer's tend to account for the more drastic doomsday scenarios that Bogleheads tend to write off - thus the holding of physical gold. At least that's the way I see it and why I'm a PP'er rather than a Boglehead.

[Lonestar]

I'd be curious to see a CAGR comparison of a 50-50 or 60-40 standard boglehead portfolio to the permanent portfolio from 1972 to present.  Anyone have those numbers available?

I think this will do what you want:
http://www.peaktotrough.com/hbpp.cgi

that's a good link regarding the PP but what's an easy source for 50/50 or 60/40?  I found a link once where I could plug in various allocations over time periods but I've since lost it.

[Pointedstick]

that's a good link regarding the PP but what's an easy source for 50/50 or 60/40?  I found a link once where I could plug in various allocations over time periods but I've since lost it.

http://www.riskcog.com/

[Libertarian666]

I'd be curious to see a CAGR comparison of a 50-50 or 60-40 standard boglehead portfolio to the permanent portfolio from 1972 to present.  Anyone have those numbers available?

I think this will do what you want:
http://www.peaktotrough.com/hbpp.cgi

that's a good link regarding the PP but what's an easy source for 50/50 or 60/40?  I found a link once where I could plug in various allocations over time periods but I've since lost it.

On that calculator, just set the allocations to 50% S&P and 50% Treasurys, or the corresponding numbers. You don't have to put in any gold or cash allocations.

[kev_in_tw]

I'd be curious to see a CAGR comparison of a 50-50 or 60-40 standard boglehead portfolio to the permanent portfolio from 1972 to present.  Anyone have those numbers available?

I think this will do what you want:
http://www.peaktotrough.com/hbpp.cgi

Honestly there's not much in it, is there?

From 01-01-1972 to 01-01-2014

HBPP 25:25:25:25 gives me a CAGR of 8.84% and STD dev of 6.69%

Years 42.03
CAGR 8.84%
Starting Capital 10,000
Ending Capital 351,847
Total Return 3418.47%
Max Drawdown 20.02% (1980-01-21 - 1980-03-27)
DD > 10% Count 8
Annualized Std. Dev 6.69%
Sharpe Ratio 0.50

A 50:50 Boglehead gives me a CAGR of 9.22% and a STD dev of 8.64%

Years 42.03
CAGR 9.22%
Starting Capital 10,000
Ending Capital 407,951
Total Return 3979.51%
Max Drawdown 29.51% (1973-01-03 - 1974-10-03)
DD > 10% Count 19
Annualized Std. Dev 8.64%
Sharpe Ratio 0.43

So you get more return with 50:50. On the other hand you get more and bigger drawdowns. If you knew a year was going to be a good one for stocks of course a stock heavy portfolio would be a better option, but you don't, and if you're wrong you can get some heavy drawdowns.

IMO it makes me think the PP is doing what it is intended to do.

[HB Reader]

Once again though, it isn't about returns over 40 years.  To get that return you have to stick with your strategy over a long period of time without panicking.  Most of us would have a hard time sitting on our hands as a portfolio loses 30% of its value, or gains little more than your savings account for over 10 years.

Also, the posters asking about returns are completely forgetting that the portfolio is about a lot more than the return of its individual assets.  There's the benefits of rebalancing, and the very important role that cash plays in the drawdown period.  Magic!

I sense some womanly wisdom here.  I think female participation definitely improves this forum.  Let's see more.  Of course, I'm assuming Sophie is a female.       

[sophie]

Tongue firmly in cheek HB??

I was just restating stuff from CraigR and MT's book.  They should get due credit.  However - I totally agree with them that sitting on your hands is probably a lot more important an investing concept than CAGR.  Because of this forum (primarily), I went and compared my investment track record with the S&P 500 index.  I went from congratulating myself on my great returns since 2008, to being thoroughly disgusted with my losing strategy.  At least I didn't mess with my retirement accounts, thank goodness - I was so shell-shocked by the 2009 crash that I was afraid to look at them.  Probably the best investment decision I'd made before buying into the PP.

Oh yes and in fact I have a noticeable absence of Y chromosomes.  It's good for keeping me out of some of the more spicy threads in "Other Discussions."

[HB Reader]

Tongue firmly in cheek HB??

I was just restating stuff from CraigR and MT's book.  They should get due credit.  However - I totally agree with them that sitting on your hands is probably a lot more important an investing concept than CAGR.  Because of this forum (primarily), I went and compared my investment track record with the S&P 500 index.  I went from congratulating myself on my great returns since 2008, to being thoroughly disgusted with my losing strategy.  At least I didn't mess with my retirement accounts, thank goodness - I was so shell-shocked by the 2009 crash that I was afraid to look at them.  Probably the best investment decision I'd made before buying into the PP.

Oh yes and in fact I have a noticeable absence of Y chromosomes.  It's good for keeping me out of some of the more spicy threads in "Other Discussions."

LOL.  No deliberate tongue in cheek here.

It is just that I have noticed (and I'm hardly the first) that women tend to be a little more patient and willing to admit they may not know everything. 

Bravado certainly has its place.  But we are talking about managing our safe money here, not charging across Europe like General Patton trying to end a war.

I'll play General Patton in my VP.  Bitcoins, anyone? 
   
[/quote]

[MediumTex]

Tongue firmly in cheek HB??

I don't think so.  I think that the female perspective on things is much appreciated here.

As far as the PP goes, IMHO a true PP'er is someone who simply can't cope with large drawdowns and who really wants a strategy that will allow him to more or less keep up with inflation with a positive real return, while avoiding those terrifying drawdowns that trigger the reptilian part of our brains and make us stupid.

In 2013, I think that many felt that the PP had a terrible year, and it was down about 2-3%, right?  That's not too bad for a terrible year.

To me, the usefulness of an investment strategy should be judged on a typical investor's ability to hang on during its worst years, as opposed to its average annual returns over many years, considering that a typical "dumb money" investor isn't going to be able to realize those long term returns because he is usually going to be selling low and buying high at the worst possible times. 

I wonder how many stock investors were selling in late 2008 and early 2009 and then bought back into the market 2-3 years later.  Actions like that destroy those nice long term returns the stock market is supposed to provide.

[barrett]

I wonder how many stock investors were selling in late 2008 and early 2009 and then bought back into the market 2-3 years later.  Actions like that destroy those nice long term returns the stock market is supposed to provide.

To MedianTex' point about people's tendency to buy high and sell low, a statistic I would love to know is what rate of return the median investor gets on stock investments. We always hear about the "historic rate of return of around 9% or 10%" that the stock market provides, but I suspect the actual returns that individual investors get are much lower. I for one seem to have a particular talent of being able to break even in a market that is generally up. I've posed this question to a few people and it is generally dismissed as "the wrong question" or something similar. Not sure what the right question is, but if we are not trying to make money with our investments, there's not really much point, right? I have been forced to adopt the PP strategy to save me from my mediocre market timing.

[Pointedstick]

To MedianTex' point about people's tendency to buy high and sell low, a statistic I would love to know is what rate of return the median investor gets on stock investments. We always hear about the "historic rate of return of around 9% or 10%" that the stock market provides, but I suspect the actual returns that individual investors get are much lower. I for one seem to have a particular talent of being able to break even in a market that is generally up. I've posed this question to a few people and it is generally dismissed as "the wrong question" or something similar. Not sure what the right question is, but if we are not trying to make money with our investments, there's not really much point, right? I have been forced to adopt the PP strategy to save me from my mediocre market timing.

You and me both. I suspect that this is a LOT more common than often admitted.

My problem was always that I was so excited by rallies that I would sell lackluster, underperforming assets (most of which I didn't even really understand that well at the time) to fund purchases of stocks that were climbing, and then when they fell, those shares' high cost basis easily put them into loss or break-even territory, pulling down the average. Basically I was dollar-cost-averaging when it was least advantageous to do so.

[dragoncar]

To MedianTex' point about people's tendency to buy high and sell low, a statistic I would love to know is what rate of return the median investor gets on stock investments.

I move we start calling him MedianTex

[WildAboutHarry]

[quote=dragoncar]I move we start calling him MedianTex[/quote]
Second!

All in favor?

[barrett]

I move we start calling him MedianTex

Sweet Lordy, I should never post anything at night when I am tired. I kept thinking that because I was writing about the concept of a "median investor" that I had to be extra careful not to call MT MedianTex (Or MedianYex as I just typed on my first try now). No, MT gives many fresh points of view, so if anything he would be HyperTex but that has the connotation of a maniacal knee-jerk poster with no insight. That being said, I do have several potential nicknames of posters that sometimes run through my head. Wild about When Harry Met Sally?

[Reub]

Aye!

[sophie]

To MedianTex' point about people's tendency to buy high and sell low, a statistic I would love to know is what rate of return the median investor gets on stock investments. We always hear about the "historic rate of return of around 9% or 10%" that the stock market provides, but I suspect the actual returns that individual investors get are much lower. I for one seem to have a particular talent of being able to break even in a market that is generally up. I've posed this question to a few people and it is generally dismissed as "the wrong question" or something similar. Not sure what the right question is, but if we are not trying to make money with our investments, there's not really much point, right? I have been forced to adopt the PP strategy to save me from my mediocre market timing.

You and me both. I suspect that this is a LOT more common than often admitted.

My problem was always that I was so excited by rallies that I would sell lackluster, underperforming assets (most of which I didn't even really understand that well at the time) to fund purchases of stocks that were climbing, and then when they fell, those shares' high cost basis easily put them into loss or break-even territory, pulling down the average. Basically I was dollar-cost-averaging when it was least advantageous to do so.

I'm pretty sure a lot of people do this.  The thing is, unless you directly compare your results to those of a passive investing strategy, you may even think you're doing well especially if the market is going up.  Also we tend to remember successes much more readily than failures, and to have time horizons that are too short to give accurate assessments of market trends.

All of which means that unless you're willing to devote way too much time to this endeavor, market timing is something most of us should avoid.

[MediumTex]

I love you guys.

I feel really blessed to have a group of people who care about me enough to riff on my nickname.