The Correlated Risk Parity PP

[Pointedstick]

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.

[iwealth]

if nothing else i certainly perked up this forum    lol .

If equities experience a sharp correction, make sure you stick around to collect the tears

[mathjak107]

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?

actually i didn't react at all to the 2000 one . the models never held much in dot coms or tech .as usual  there never is a reaction  TO CORRECTIONS OR DOWN TURNS , IT IS BUSINESS AS USUAL.

doing nothing or making subtle changes is all i would want to do .

2008  was a different story . just as part of my retirement plan i wanted to go from the growth portfolio to the income and capital preservation mode .

so as luck had it we made a lot of money in some apartment liquidations  in 2007 and i decided we were going to retire early..

we bought a 2nd home in the pocono's in pa and the plan was to retire there  in a few years. so while we were still up doing nicely my wife and i discussed making the change so we had more of what we wanted for retirement land in place .

well as luck had it i already made the change when 2008 turned nasty.

the irony is 5 years later we decided we did not want to retire there . it just lacked many of the things that were becoming more important to us as we aged.

no public transportation if we couldn't drive

harsh long winters when we couldn't ski

many of the reasons we entertained retiring there like hunting and fishing locally  we ended up not doing much .

limited specialists and medical facility's

all low paying jobs if i wanted to work so we killed the idea , sold the house 3 years ago this week  and instead decided to keep working a bit longer since we didn't move .

in 2009 i decided the income model was to conservative by itself and so i put 1/2 n the growth and income model  too where it stayed up until two weeks ago when i decided to use my own model.

the mtwo portfolio's had a good overall balance together but eventually it ended up with a lot of overlap since the models started using the same bond funds but in different percentages.

it was just toooooo much in bonds for my taste at this point when you took the two together so i created my own model.


so while i didn't predict 2008 i did luck out and miss much of it but i can tell you i never planned it that way . it was just the way the timing worked out of everything . .

[mathjak107]

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 .

Burn the witch! Burn the unbeliever! Let's shun him!

ha ha ha love it.

actually i am impressed that you all were so nice . for the most part the discussions were interesting and civil.

while i may not agree with some of the charts and the time frames  , tyler is amazing with his spread sheets and they sure are purdy looking too.

[mathjak107]

perhaps i am just more motivated than many folks to succeed .  i will tell you a little bit about myself so you will understand why i am driven to have my money do the best it can within my plan  and why i want to see others make sure they think about  what they are doing carefully and ask themselves do they want more growth potential ? .

i grew up in a nyc housing project. for those new yorkers here i grew up in woodside houses as my family had little money. my mom had a heart attack giving birth to my sister and it left her in pretty bad shape fo ever so she really couldn't work .  my dad was a clerk at the post office and the uncovered bills were high for my mom.

so i made myself a promise that i would never go back to the projects and no matter what it took i would do it.

so i became a pro drummer and started life off with a great career in music.

but in the 1970's disco was coming on the scene and worse DJ'S .

little by little they were popping up every where and i saw the handwriting on the wall , i will eventually be obsoleted.

so i thought and i thought about everything i could do to earn a living only except for drumming there was little.

so one day i see an ad for a new school opening . apex technical school and they were teaching air conditioning and refrigeration.

it occured to me back in the day  that people will build their own house , they will rebuild cars  but the one thing no one did was go in to the sealed system of an ac unit.

bingo ,  i will do that .  besides the guy on tv was wearing a white lab coat , how bad could this job be ?


well i borrowed 2k which was more money than i ever owned and i had no idea how i was going to pay it back.

well i graduated but couldn't get a job  since no one wanted to hire you with no experience.

so eventually i lied , got a job and worked as a commercial ac and refrig tech.

i hated it ...  it was hot ,dirty and heavy work.

but i noticed we had a service crew of techs who only did troubleshooting on complex control systems.

i asked if i could train with them and they let me .

in 2 years i was the top trouble shooter of the complex mall climate control systems.


at that point i was in my twenty's and working 3 jobs .  my day job , my own ac company at night and gigs as a drummer.  but the plan was what ever it took i had to have money to save .

eventually i got better offers and moved in to related areas designing control panels for  pumping stations and water treatment plants  . that spread to designing factory automation control panels  and today i am retiring after 40 long years . but i never stopped having my money work for me . the more i saved the more got invested and it grew and grew and so far i kept that promise i made to myself that i would never go back to the projects.

[mathjak107]

i am very well aware of it . but the flip side is i hate to see folks make bad choices on the other side too and get so conservative that they ruin their chances of having their money grow enough to fund their retirement .  if all you hear is a one sided view you are losing 50% of the information and you do not want to make decisions that effect your entire life on that basis.

one thing i learned is most successful people have a ready -fire -aim strategy.

if they let all the what if's get in the way of what they do they would never do the things they do that make them successful.

like i always say , sleeping with the enemy can give you a good understanding of both sides and when you know enough to argue for or against then you know enough to look at your own situation and evaluate what you want ..

[Pointedstick]

i am very well aware of it . but the flip side is i hate to see folks make bad choices on the other side too and get so conservative that they ruin their chances of having their money grow enough to fund their retirement .

Again, the point is that with a savings rate high enough, how conservative or aggressive your investments are doesn't actually matter very much. High savings coupled with a conservative investment portfolio like the PP might guarantee you have enough in 10-11 years, while a more aggressive one might make the timeframe more like 5-14 years, depending on its performance. Clearly you would prefer 5-14 because of the potential for it being only 5. Most of us here would prefer 10-11 because of the near-certainty of 10-11.

[mathjak107]

well speaking for myself , i would say the pp would have really changed my retirement  lifestyle.

the difference between my mix of fidelity funds and the pp was over a million dollars difference over the same time frame and that was per 100k invested .

other time frames will have different results but the important thing to know is the trade off between a comfortable ride and what you potentially  could have  is likely going to be a big difference.

i won't even say you had a safer ride since in just about every 20-30  year time frames where the pp could be compared it was subject to the same events as all the other investment portfolio's and likely came out near the bottom  in exchange for that comfortable ride.

we can speculate about the future all you want as no one knows  what is next , but we can speak about the past and the cost of low volatility has generally been a very costly one money wise.

emotionally , well that counts to so that is where the pp is good .. i wish i could book a cruise with my salvaged emotions    ha ha ha  but by the same token the pp investor likely had more restful nights at times .


my whole point with the above is just to have folks give a good thinking to whether they really want that potential trade off , if they do that is fine .  perfectly understandable and depending on age may even be a great idea.

[Pointedstick]

well speaking for myself , i would say the pp would have really changed my retirement  lifestyle.

the difference between my mix of fidelity funds and the pp was over a million dollars difference over the same time frame.

No, it would have changed your accumulation lifestyle. Knowing that the PP had a lower CAGR with less volatility, you would have had to sacrifice a bit more to save more money to wind up with the same sum in retirement.

other time frames will have different results but the important thing to know is the trade off between a comfortable ride and what you potentially  could have  is likely going to be a big difference.

I don't think there is a person here who would contest this, especially compared to an actively managed portfolio that succeeds in beating the performance of the stock market.

i won't even say you had a safer ride since in just about every 20-30  year time frames where the pp could be compared it was subject to the same events as all the other investment portfolio's and likely came out near the bottom  in exchange for that comfortable ride.

The same events, but not the same performance. Those other portfolios might have been down 30% in a bad year, only to be up a ton in the next year. The PP experienced the same events, but had very low drawdowns and correspondingly lower recoveries. That's the whole point. Clearly this has no value to you because you are not fazed by big drawdowns. Not everyone can say the same thing. A lot of people panic-sell or time the market badly. The PP can help them. Just because those aren't things that are useful to you, that doesn't mean they're useless for everyone. Investor psychology matters.

my whole point with the above is just to have folks give a good thinking to whether they really want that potential trade of , if they do that is fine .

Is there any evidence that the people here don't understand this trade-off?

[iwealth]

if all you hear is a one sided view you are losing 50% of the information and you do not want to make decisions that effect your entire life on that basis.

This isn't the only investing forum on the internet, but this IS the "Permanent Portfolio Discussion Forum" (see top of page) which is why you are experiencing this one-sided view. The aim here isn't to convert people from stock-heavy to PP - I'm sure this place was originally intended to be a community for those who've either already made the decision to invest in the PP or who have questions about the PP.

While everyone here is extremely nice and welcoming, I hope that all future posts from new or old members about the PP aren't met with criticisms of the PP being a sub-optimal investment vehicle.

Stimulating conversation about all the alternatives is great, but maybe it should be limited to one or two big topical threads.

[mathjak107]

is there any evidence that folks mis-judged the cost of the low volatility ?

for sure , both in the posted threads about their unhappiness in their returns from the pp  that i have read here  as well as the d/m's i received .

[iwealth]

is there any evidence that folks mis-judged the cost of the low volatility ?

for sure , both in the posted threads about their unhappiness in their returns from the pp  that i have read here  as well as the d/m's i received .

Nobody's been hiding data. It's been presented here at length in written posts and beautiful charts. The PP hasn't done anything shocking or out of the ordinary in the past couple years despite losing heavily to the equities market in 2013. Take out 2013, and I'd guess you don't have a single unhappy person around here.

Do you think that if people prescribe to your portfolio ideas that they aren't going to be shell-shocked and complaining come a large equities correction?

[mathjak107]

it isn't a question of hiding data . it is merely a lack of interest many had in reading the data , understanding the data or  even understanding what data is meaningful and not .

that would be true on both sides. many folks have no interest in looking at data that goes against  what ever they do .  however once they are presented with an opposing view  then the wheels start turning and they start their own research .  which is what they should do .

i had a few d/m's from folks who did just that and realized on their own that they rather go for more upside potential and don't really want to pay so much for more down side potential.

they thanked me for just triggering that spark that made them look deeper in to what they wanted for themselves.

after all isn't that where the value of these forums lye ?

[Xan]

What is a d/m?  And why all the spaces between letters and punctuation?

[mathjak107]

d/m direct messages .  i guess you call them personal messages .

i type with one finger left handed  because i have diabetic neuropathy in my finger tips and toes  so i use spell checker a lot which tends to insert extra spaces sometimes .

[Tyler]

that would be true on both sides. many folks have no interest in looking at data that goes against  what ever they do .  however once they are presented with an opposing view  then the wheels start turning and they start their own research .  which is what they should do .

Speaking of opposing points of view, please note that some transcend portfolio choice.  Shilling my post in another thread for the second time (thanks, TennPaGa) because I think the topic merits more discussion:

"The choice is yours.  Follow the traditional path of saving bits and pieces and growing it via investments as much as you can over a lifetime, or do what I did and retire in 14 even with the worst market timing in the last 40 years simply by working hard and spending less.  At the very least, find a middle ground that makes you happy rather than looking to income and markets for salvation.  Don't be a wage slave!"

(link)

[mathjak107]

It is  fabulous when you can retire without markets. In fact i envy those who can retire on a nice pension and do not have to worry about withdrawal rates and markets..

But the sad truth is not only will most folks not retire early they will be lucky to retire at all before 70

[Xan]

d/m direct messages .  i guess you call them personal messages .

i type with one finger left handed  because i have diabetic neuropathy in my finger tips and toes  so i use spell checker a lot which tends to insert extra spaces sometimes .

Wow!  Sorry you're having to deal with that.  I'm amazed you can type as much as you are with one finger!

[mathjak107]

, been a few years now so it is amazing how your body works around it.

the funny thing is my sugar is fine without meds , just exercise and diet.

i run 4 miles non stop every other day and bike about 50-60 miles a week and have no issues or pain . but the tips of my fingers and toes feel overly sensitive when touched . like when you have a sunburn  and the sheet hits it .

one finger on my left hand is less sensitive so i learned to type with it . but of course cap keys and shift are out . it is just to slow .

[Xan]

Wow.  Which finger?  Shut me down if I'm prying.

[mathjak107]

i use pointer  lol

[mathjak107]

nah ,    I would never do that . opposing sides keep the forum active

[Tyler]

It is  fabulous when you can retire without markets. In fact i envy those who can retire on a nice pension and do not have to worry about withdrawal rates and markets..

But the sad truth is not only will most folks not retire early they will be lucky to retire at all before 70

I agree -- that's sad.  But for the vast majority of the people on this forum (good jobs, way more savings than average, smart with money) it absolutely does not have to be that way.  There are other ways to approach retirement accumulation than the traditional one, and this forum really is not representative of "most folks".  It's important to know the audience. 

[Greg]

It is  fabulous when you can retire without markets. In fact i envy those who can retire on a nice pension and do not have to worry about withdrawal rates and markets..

But the sad truth is not only will most folks not retire early they will be lucky to retire at all before 70

I agree -- that's sad.  But for the vast majority of the people on this forum (good jobs, way more savings than average, smart with money) it absolutely does not have to be that way.  There are other ways to approach retirement accumulation than the traditional one, and this forum really is not representative of "most folks".  It's important to know the audience.

It would be interesting to learn more about demographics of this group to determine what actual "type" of people become PP'ers. I myself am 27 and currently have around 60% of my paycheck going towards savings, and awaiting salary increases and cutting more expenses to raise that value. Whether it is a particular Myers-Briggs test, or something else that we all seem to have a high concentration on that naturally gravitates us here.

[Pointedstick]

For the most part we're INTJs in tech or other professional fields who are 5-15 years away from retirement. 28 with 69% of income going to savings here.