New PPer needs guidance.

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Matthew19
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New PPer needs guidance.

Post by Matthew19 » Wed Jun 03, 2015 11:53 pm

Hi everyone. I'm 32 years old with a wife and two kids. We have 750k in liquid assets. The PP is fascinating to me, I've read Craig's book as well as ' the best laid  Investments'. Up until now iv been a Peter schiff fan who bought lots of gold miners. Big mistake. Harry's book lopened my eyes!

I'm self employed and own an LLC filing as an S-corp. I've been avoiding IRA contributions for the past few years. It seems like a solo 401k through my LLC would be the best way to catch up, but I'm not sure. What's the consensus on the best way to own bonds? Will treasurydirect accept a solo401k account? Would I do better just buying TLT?

Thanks for any help pointing me in the right direction!
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Re: New PPer needs guidance.

Post by MediumTex » Thu Jun 04, 2015 12:44 am

Matthew19 wrote: Hi everyone. I'm 32 years old with a wife and two kids. We have 750k in liquid assets. The PP is fascinating to me, I've read Craig's book as well as ' the best laid  Investments'. Up until now iv been a Peter schiff fan who bought lots of gold miners. Big mistake. Harry's book opened my eyes!

I'm self employed and own an LLC filing as an S-corp. I've been avoiding IRA contributions for the past few years. It seems like a solo 401k through my LLC would be the best way to catch up, but I'm not sure. What's the consensus on the best way to own bonds? Will treasurydirect accept a solo401k account? Would I do better just buying TLT?

Thanks for any help pointing me in the right direction!
Congratulations on having so much saved at your age.  Nice work!

There is a lot of information out there about single participant 401(k) plans.  Just pick a service provider you like and get it set up.

As far as buying bonds (and gold) in your new 40(k) account, I would tell the plan service provider that you want to have the equivalent of a "brokerage window" in your plan so that you can buy individual securities for your account.  That will allow you to at least buy funds like TLT, EDV, GTU, IAU for your 40(k) account.  I wouldn't try to buy individual bonds in a 401(k) account.  It can probably be done, but TLT should work fine for now.

Good luck with your PP experience.  I hope it ends up being a good fit for you.
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ochotona
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Re: New PPer needs guidance.

Post by ochotona » Thu Jun 04, 2015 5:24 am

At the risk of PP heresy, I say wait for Treasuries to go down more and bounce before starting a buy program. I have set a bunch of limit buy orders at prices ranging from 25% to 40% off of the recent peak. Will it get that low? No clue, but trip wires are set. Doing same for gold... trying to buy more below $1000. With the Dollar so strong now, buy a slice of foreign stocks as part of your stock plan.
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Re: New PPer needs guidance.

Post by iwealth » Thu Jun 04, 2015 7:26 am

ochotona wrote: At the risk of PP heresy, I say wait for Treasuries to go down more and bounce before starting a buy program. I have set a bunch of limit buy orders at prices ranging from 25% to 40% off of the recent peak. Will it get that low? No clue, but trip wires are set. Doing same for gold... trying to buy more below $1000. With the Dollar so strong now, buy a slice of foreign stocks as part of your stock plan.
It's not the heresy that's the problem as much as the inappropriateness of advising market timing to a first time poster who wants to use the PP partially because of a failed prior attempt at market timing. Just my opinion of course.

Statistically speaking it's best to just go all-in and ride out short term volatility because at his ripe old age of 32, short term volatility just doesn't matter. If one was to employ any form of market timing when entering the PP, the only one that makes sense is dollar cost averaging into every asset equally until 100% cash becomes 25% cash.
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Re: New PPer needs guidance.

Post by ochotona » Thu Jun 04, 2015 7:55 am

32 is a good age. My opinion is, "don't try to catch a falling knife" with respect to bonds or any other asset. Be a little patient, wait for the dust to settle.
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Re: New PPer needs guidance.

Post by barrett » Thu Jun 04, 2015 8:05 am

ochotona wrote: 32 is a good age. My opinion is, "don't try to catch a falling knife" with respect to bonds or any other asset. Be a little patient, wait for the dust to settle.
I don't disagree with this but I don't know how to identify which knife is falling, by how much and how soon. Are stocks not a falling knife candidate as well?

Yes, great job with the savings, Matthew. I think you'll see a bias from several PPers toward cash right now which may or may not be a good choice going forward. Just remember that the PP is a real return portfolio. If we figure that inflation is basically zero right now, over the next little while (I am being deliberately vague on the timeframe) we should expect to see returns of about 4-5%. An annual 4.5% return still doubles your money every 16 years. Again, that is in real terms, not nominal.
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ochotona
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Re: New PPer needs guidance.

Post by ochotona » Thu Jun 04, 2015 8:37 am

Falling knife - look at TLT during Feb / Mar / Apr / May / June 2015
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Re: New PPer needs guidance.

Post by dutchtraffic » Thu Jun 04, 2015 9:25 am

Would wait a bit or go slow.

My EU PP has not ever been positive since i started, despite me putting more and more cash in it when it dropped, got 100K in now but am going to pause now for a bit untill something positive happens. Down a bit more than 5% atm, which was worse but i bought more as it dropped.

It's somewhat expected ofc. as everything is totally in bubble territory, so just wait a bit or go in slowly.
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Re: New PPer needs guidance.

Post by iwealth » Thu Jun 04, 2015 9:33 am

ochotona wrote: Falling knife - look at TLT during Feb / Mar / Apr / May / June 2015
ochotona wrote: At the risk of PP heresy, I say wait for Treasuries to go down more and bounce before starting a buy program. I have set a bunch of limit buy orders at prices ranging from 25% to 40% off of the recent peak. Will it get that low? No clue, but trip wires are set.
So which is it...do you wait for a bounce before getting back in or do you set limit buy orders? By definition, don't limit buy orders catch falling knives? Also, how about that TLT bounce in March from about $123 to $133? Is that enough of a bounce? How does one know?

Market timing can work, but not with loosely defined rules like "don't catch falling knifes" or "wait for a bounce." As far as buying at 25% or 40% declines, that's great, not much different from rebalancing bands. So a good, well-defined rule would be "rebalance when an individual asset declines 25% and again at 40%."
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Re: New PPer needs guidance.

Post by dualstow » Thu Jun 04, 2015 9:53 am

One thing I've always liked about the pp is that I feel free to make regular contributions without worrying about market timing at all.
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Re: New PPer needs guidance.

Post by ochotona » Thu Jun 04, 2015 10:00 am

The issue really for me is not as one who is in the portfolio and on the rebalancing plan which is automatic buy low, sell high... the issue is for the new investor, or you have a pile of new cash, will you hate yourself if you just buy the non-cash assets and they take a tumble? I don't think I'm overstating it when I say, as others have, that the non-cash assets all face simultaneous risks, which is probably a bit rare.
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Re: New PPer needs guidance.

Post by mukramesh » Thu Jun 04, 2015 11:34 am

MediumTex wrote:
Matthew19 wrote: Would I do better just buying TLT?
I wouldn't try to buy individual bonds in a 401(k) account.  It can probably be done, but TLT should work fine for now.
I buy individual bonds directly in my Fidelity 401(k) through their brokerage window (BrokerageLink) commission free. It's actually quite easy and I recommend it as a way to avoid the expense ratio of TLT.
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