The Correlated Risk Parity PP

General Discussion on the Permanent Portfolio Strategy

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Re: The Risk Parity PP

Post by Pointedstick » Sat Jul 11, 2015 6:15 pm

mathjak107 wrote: i have a different view. compounding on your money can be one of the most powerful forces .

the little bits we manage to save from our incomes is generally peanuts compared to what those bits and pieces can compound to over time.
This couldn't be more different from the view here, which is that your career provides your wealth and that you should save up as much of it as possible. If you're only saving "little bits" then you'd better count on time and compounding because that's all you've got!
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Re: The Risk Parity PP

Post by mathjak107 » Sat Jul 11, 2015 9:10 pm

well why do you think the savings rate is so low in this country ?

in fact wages have lagged for decades now  . wages have fallen well behind inflation .
they are actually worse than the numbers even show since what improved wage growth from what it is was the fact women are earning more than they used to by a lot. wage incereases for men are a lot worse when you separate male and female.

the only savings folks seem to be able to round up is what they force themselves to contribute.


they need the maximum amount of compounding to help them out.

as they say a penny saved is a penny earned but it will always stay a penny unless allowed to compound well.
Last edited by mathjak107 on Sat Jul 11, 2015 9:14 pm, edited 1 time in total.
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Re: The Risk Parity PP

Post by Xan » Sat Jul 11, 2015 9:13 pm

They need to fix the actual problem, which is not enough savings, rather than trying to throw a Hail Mary with their investments.
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Re: The Risk Parity PP

Post by Pointedstick » Sat Jul 11, 2015 9:51 pm

Xan wrote: They need to fix the actual problem, which is not enough savings, rather than trying to throw a Hail Mary with their investments.
Bingo.

And as for why people are such poor savers, there are a million reasons, and that's exactly the point: it's the easy thing to do, and people generally do the easiest thing. But it's really not that hard. For the most part you just have to avoid buying pointless shit. Right now my savings rate is 69% of my post-tax income, and what's left supports a 3-person family. We live a comfortable life and keep this up simply by avoiding the bafflingly awful expenses that most people seem to consider necessary.
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Re: The Risk Parity PP

Post by mathjak107 » Sun Jul 12, 2015 3:24 am

you need both a career , savings and your money working for you .


while you work for your money it is just as important to have your money work for you as hard as it can .

a good career and pay check is only 1/2 the story , without growth on that money all you have is that penny you saved and little more.

i have made more money investing  in  nyc real estate deals  the last 12 years than i likely  saved my entire life from working .  it took me 50 years of life  to hit my first million and that was with a good stock market .  it took me only 3 years to triple it through investing  after that point .

the deals i did got bigger , the investments more lucrative and the opportunity's i was privy to got better as my connections got better .

but even taking the real estate out of the picture  , a nothing special mix of funds  invested for decades still grew nice amounts of money .

100k to more than 2 million  in markets  is an awful lot of growth too.
 
while yes the early years in the late 80's were  good market years the fact is  as of 2000 all that older money hit a brick wall and grew very little the last 15 years . so over the long term  those gains will likely average out the same as  all the other 30 year average returns and not anything  special.

even an s&p 500 index fund would have given you about 500k less and that is with 15 years of money producing 1.86%  real returns .

those early years when markets were good may not t have a lot of money accumulated yet either , certainly no where near the amount that hit that wall in 2000 for many investors who counted on monthlly contributions  to feed the investment machine . .

that is what history shows , markets tend to average out over decades to about the same thing no matter how they start off or end up .  i would bet those who started in 2000 and saw such anemic growth early on will still end up some where near the return averages we have had over 30 year periods too when they get there . .

for decades folks have been going "this time is different "  but in the end things seem to end up not so different ,

the accumulation stage has a way of working out in the end for investors who were quite aggressive in their growth years using diversified funds ..

the decumulation  stage is very different though as you have time restrains now when spending down.

burn up to much capital early on and it does not matter what the long term averages are , that money is gone and can not recover .

so the early years  of spending down are the most crucial to get through .  you want the highest odds on your side and being to conservative can have the same effect as being to volatile .

you need a balance or you need insurance products to set a base income .

but in any case nothing is going to be 100% . just different levels of success or failure  odds

.
Last edited by mathjak107 on Sun Jul 12, 2015 8:57 am, edited 1 time in total.
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Re: The Risk Parity PP

Post by fishdrzig » Sun Jul 12, 2015 6:54 am

Mathjak107

You know, I have now read your many responses and the premise to this thread.  I cannot argue with logic, I am 50, so probably still have 10-15 years left to accumulate.  I have been in the PP for a couple of years and agree, I have just preserved what I have, not much gain.  My initial portfolio was the Swenson portfolio and I am going back to this one starting Monday. In 10 years or so, I think the PP will then be a better option for me.  Thank you for the persistence and counter arguments, it just may allow me to reach my retirement goals after all.
Just out of curiosity, what do YOU think of the Swenson portfolio?  VTI 30%, VWO 10%, VNQ 15%, VGLT 15%, VTIP 15%, VEA 15%  That is the original  I also add a VBR component and substitute Long term treasuries for VGIT (intermediate term treasuries) and split VNQ with VNQI
THANK YOU
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Re: The Risk Parity PP

Post by mathjak107 » Sun Jul 12, 2015 8:33 am

as i said my intervention is not to talk anyone out of the pp . it is just to make sure that  they look at whether they are using something that will meet  their goals and lifestyle and not just drink the kool aid and in some cases leave a million bucks in retirement money on the table  for no other reason than a  vision in their  head has them convinced that something worse than the great depression is coming .

that thinking has left many behind over decades under invested and while they may have had a comfortable ride the end result is they paid a big price for that comfort ,

if they can afford it , great . heck if living in nyc wasn't so costly and this is where our kids and grand children are i could move ,  sell everything , go to TIPS ,short term bonds and an immediate annuity and call it a day but 2% inflation withdrawals would be all that is bullet-proof.

not enough to meet our goals so i have to trade that comfort for more volatility to have a high success rate of meeting the income levels we would like .



it looks like that portfolio it is very similar to my own which stands at 55/30/15  as of friday.  equity's /bonds /cash .


the version as it stands now :


fidelity growth and income fund FDGRX - had this and blue chip growth for many many years.

fidelity blue chip growth FBGRX

vanguard total market index vti

vanguard extend market index VXF

vanguard veu all world index etf

vanguard vig dividend achievers etf

that is the equity side.

the bond side uses

vanguard admiral total bond fund (now only 10% of the portfolio , reduced from 30% )

fidelity floating rate high yield

vanguard bsv short term bond

vanguard vtip short term inflation proof bond etf

my logic is i will give equity's every possibility to squeak out gains with out being weighted down heavy or  wiped away when interest rates rise by holding a lot of very interest rate sensitive bond funds.

there is always time to nudge things if another recession looks possible .. the max of 60/40 is still pretty conservative compared to an all out growth model ,
Last edited by mathjak107 on Sun Jul 12, 2015 8:43 am, edited 1 time in total.
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Re: The Risk Parity PP

Post by mathjak107 » Sun Jul 12, 2015 8:54 am

fishdrzig wrote: Mathjak107

You know, I have now read your many responses and the premise to this thread.  I cannot argue with logic, I am 50, so probably still have 10-15 years left to accumulate.  I have been in the PP for a couple of years and agree, I have just preserved what I have, not much gain.  My initial portfolio was the Swenson portfolio and I am going back to this one starting Monday. In 10 years or so, I think the PP will then be a better option for me.  Thank you for the persistence and counter arguments, it just may allow me to reach my retirement goals after all.
Just out of curiosity, what do YOU think of the Swenson portfolio?  VTI 30%, VWO 10%, VNQ 15%, VGLT 15%, VTIP 15%, VEA 15%  That is the original  I also add a VBR component and substitute Long term treasuries for VGIT (intermediate term treasuries) and split VNQ with VNQI
THANK YOU
if nothing else i certainly perked up this forum    lol .
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Re: The Risk Parity PP

Post by Greg » Sun Jul 12, 2015 9:00 am

mathjak107 wrote:
fishdrzig wrote: Mathjak107

You know, I have now read your many responses and the premise to this thread.  I cannot argue with logic, I am 50, so probably still have 10-15 years left to accumulate.  I have been in the PP for a couple of years and agree, I have just preserved what I have, not much gain.  My initial portfolio was the Swenson portfolio and I am going back to this one starting Monday. In 10 years or so, I think the PP will then be a better option for me.  Thank you for the persistence and counter arguments, it just may allow me to reach my retirement goals after all.
Just out of curiosity, what do YOU think of the Swenson portfolio?  VTI 30%, VWO 10%, VNQ 15%, VGLT 15%, VTIP 15%, VEA 15%  That is the original  I also add a VBR component and substitute Long term treasuries for VGIT (intermediate term treasuries) and split VNQ with VNQI
THANK YOU
if nothing else i certainly perked up this forum    lol .
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Re: The Risk Parity PP

Post by Pointedstick » Sun Jul 12, 2015 9:05 am

mathjak107 wrote: there is always time to nudge things if another recession looks possible .. the max of 60/40 is still pretty conservative compared to an all out growth model ,
Did you successfully predict the recessions in 2001 and 2008 and react correctly beforehand?
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Re: The Risk Parity PP

Post by iwealth » Sun Jul 12, 2015 9:23 am

Pointedstick wrote: And as for why people are such poor savers, there are a million reasons, and that's exactly the point: it's the easy thing to do, and people generally do the easiest thing. But it's really not that hard. For the most part you just have to avoid buying pointless shit. Right now my savings rate is 69% of my post-tax income, and what's left supports a 3-person family. We live a comfortable life and keep this up simply by avoiding the bafflingly awful expenses that most people seem to consider necessary.
The exact % savings rate is sort of irrelevant isn't it? Saving 69% of $1,000,000/yr isn't all that hard. Saving 69% of $50,000 is a different story. The actual dollar amount you use to support that 3-person family is the critical data point. Not that I want you to divulge, but I'm sure you understand what I'm getting at.
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Re: The Risk Parity PP

Post by Pointedstick » Sun Jul 12, 2015 9:36 am

iwealth wrote: The exact % savings rate is sort of irrelevant isn't it? Saving 69% of $1,000,000/yr isn't all that hard. Saving 69% of $50,000 is a different story. The actual dollar amount you use to support that 3-person family is the critical data point. Not that I want you to divulge, but I'm sure you understand what I'm getting at.
To a certain extent that's true, but lifestyle inflation is a real thing, and by the time you're making a million bucks a year, you're likely running with a crowd that will pressure you to own a mansion whose running costs are $50k a year, vacation home, a boat, multiple luxury vehicles, expensive art, titanium golf clubs, etc. Also, the number of people earning a million dollars a year is pretty small. For the average  income range of, say, $30-100k, I think it's pretty good. :)
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
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