We all know how the PP turned out in 2008 in hindsight but I'm wondering how was the experience holding it during the market turmoil at the time? I'm more interested in the psychological experience, since it still suffered a 15 - 20% drawdown despite being overall flat for the year. Did you consider bailing out and going 100% due to doubt?
Although the Year on Year return was slightly higher than for 2013, the volatility was decisively greater, at least from a simulation of the portfolio performance.
How was the PP experience in 2008?
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Re: How was the PP experience in 2008?
Excellent question and one that I have been wondering about as well. I just implemented the PP at the beginning of this year and it's easy to get the impression that it just goes up. On the other hand, it stunk being in just stocks and shorter term bonds in 2008. I know how THAT felt and it wasn't good at all. I am curious specifically what the emotions were in 2008 when the stock market imploded but before the long bond shot up at the end of the year. Wasn't it just a couple of months that the overall PP was way down?
Re: How was the PP experience in 2008?
I stopped looking at it after the first few weeks of the fall. I also stopped looking at the news so much. This is a good way to control hysteria when everyone else thinks the sky is falling. Then at the end of the year I rebalanced when the bonds rebounded so there were negligible losses.
It's never good to lose money, but it's important to not look at the portfolio assets in isolation and have knee jerk reactions. Also I'm a bit odd in that when you understand market history a lot of these kinds of drops just are expected and have less impact emotionally. It's not zero impact, but knowing market history allows it to be less of a blow. So after the crash when I rebalanced back into stocks I knew the odds were in my favor with the much lower stock prices and that it was likely a good move. You can never know of course, but you have to play the odds and the odds are after a crash that rebalancing is a good idea.
I was of course happy over the entire time that I ran a strongly diversified portfolio.
It's never good to lose money, but it's important to not look at the portfolio assets in isolation and have knee jerk reactions. Also I'm a bit odd in that when you understand market history a lot of these kinds of drops just are expected and have less impact emotionally. It's not zero impact, but knowing market history allows it to be less of a blow. So after the crash when I rebalanced back into stocks I knew the odds were in my favor with the much lower stock prices and that it was likely a good move. You can never know of course, but you have to play the odds and the odds are after a crash that rebalancing is a good idea.
I was of course happy over the entire time that I ran a strongly diversified portfolio.
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Peak2Trough
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Re: How was the PP experience in 2008?
Portfolio overall returned +1.5% in 2008 and there was a peak to trough drawdown of roughly 15% from 03/18/2008 to 11/13/208.
You can see for yourself here:
http://www.peaktotrough.com/hbpp.cgi
You can see for yourself here:
http://www.peaktotrough.com/hbpp.cgi
Re: How was the PP experience in 2008?
Very interesting to look at 2008 on a month-to-month basis. To blackomen's question, it looks like October was the only really painful month as stocks were plunging but gold and LTTs were also going down. Gold & LTTs were already on the way back up in November as was the PP overall. So really only a month or so of angst for the daily watchers maybe?