FLAGATOR wrote:
Hello everyone!
I am new here.
I just recently went all in by investing in the PP on 4/22/15.
As of today I am -7.27 on long term treasuries
-0.48 on short term treasuries
-1.05 stocks
-1.27 gold
I have lost 2.52 % of my investment in just a bit over a month.
I feel like there is really no place to hide and all the components are going down simultaneously.
I did not expect this at all. I am not sure what kind of environment we have in the economy because the data provided by govt are very suspicious. I do not know what to do from here on, but I am certainly racking up losses pretty steeply.
Any comments would be appreciated.
Hi FLAGATOR, I feel your pain. Tyler's charts posted elsewhere on this Forum show that the entry year does make a difference sometimes in how the PP performs for a few years post-entry, and if those three years are so painful to the new investor that they bail, then that's not a good thing.
I have advocated being more adaptive as far as getting into the portfolio. This is what I am doing at present. I guess you could say I'm still transitioning in since October 2014.
For better or worse, I follow the opinions of a market watcher who thinks gold will go below $1000 within the next year, then it will stabilize and head higher. Doomer Harry S. Dent thinks gold could go down to $250 by 2020. People who sell gold will always tell you that gold is going to go up starting tomorrow, so you better buy some today! I'm right now at 10.7% gold, my target allocation is 14%, if it goes below $1000 I'm going to my full target, if it drops to $250-$500 then I'm "all in" with a 25% Classic PP allocation.
After getting hammered with everyone else with long bonds since February 1, I hopped out to shorter bond durations. I swapped long Treasuries for SCHZ, the Schwab total bond ETF. It's much less volatile than TLO or TLT. Yes, it has corporate bonds and some high yield, no I don't think all of the issuers are going to default really soon, and it's diversified. My aim is to wait for TLO to go down another 14%-15%, to $58, then re-enter.
Cash? I have the full cash allocation. Ally Bank, 0.99%. Some I-Bonds at 1%. A bit of paper in the safe.
Stocks? Because I am light on gold, my bonds and stocks were both at 32% instead of 25%. I like to keep the ratio 1:1. 25% of my stocks are non-US. Stocks will go down, but I'll see if they grind higher. I don't plan on selling stocks no matter how bad they get in a correction, I kept all my stocks even in 2008-2009, and rebalanced after the blood was flowing in the streets.
So in summary, I am treating gold and long bonds as special cases, because gold has a very volatile recent history (1975-2011) of extreme ups and downs in real terms, and you don't want to overpay for it. Long bonds have just come off the top of a QE policy driven bull market which has no where left to go but down (with volatility), so why stand in the way of the truck while it races towards you? You know it's coming, you hear the engine; stand aside, just for a while. Maybe as short as a few months. But I acknowledge that is not without risks either... long bonds prices could go back up and stay up for years! No one can predict. I'm just sick of the volatility. I'm choosing to take a sedative for a while.
But truly, once I'm "in" the PP, at at least a 14% gold allocation, and my long bonds are restored, I intend to put it to sleep and go on the regular rebalance plan. It's just a matter of easing in, so one don't feel cheated by fate.
My specific advice to you, take it with a grain of salt:
I agree with others who say not to sell your positions, except if you can harvest tax losses to your advantage. If you feel adventurous, trade some of your long bonds for shorter maturities (the very shortest maturity being cash) and wait for long bonds to go on sale... which may not happen for a long time, or it might happen soon.