Black Monday

[mukramesh]

I don't see why average returns would be useful for projecting forward.

I lost many hours of my life reading about this last night that I'll never get back.  It's boring and confusing.  Let me see if I can summarize so you don't suffer the same fate.

Thanks for the response, Tyler! Though, I still don't see the point of ever using 'average' returns instead of CAGR because it seems like in practically every case you would be overstating your expected return. But... your PortfolioCharts website is awesome and definitely gives a useful way of visualizing and understanding various portfolios. 

[Cortopassi]

nope but it was a whole lot less volatile and did have less losses although the pp lost ground from that point the last 2 days . but it still did not lose as much .

of course when the recovery happens in equity's  i  will guess and say i do expect  it will happen before my hypothetical  pp shows a profit again since it is hard to come back from that 44k loss with the assets fighting each other . retracements in equitys tend to happen fairly quicker .

My main reason for the PP was to minimize chances to jump ship during periods like the one shown below.  I had to use SPY to go back that far.  To your point of retracing faster, it took SPY approx 7 years each of those up down cycles to recover what it lost from the previous high.  And since it was actually two up down cycles, it reall took from Aug 2000 peak to about Feb 2013 to get back to that point, without factoring in inflation.  That is quite a long rollercoaster to nowhere.  I am not sure I would call that quick.

And just in general I got sick (and am sick) of how the news universe revolves around the stock market, as if that's the best gauge of the economy.  The breathless anticipation of the next Fed meeting.  Yada yada.  If an 1/8 or 1/4 point increase from 0 will derail this recovery, well, it isn't a recovery.  Days like the past few lead me to put my tin foil hat on, believing it is all smoke and mirrors and can fall apart at the drop of a hat.  At least the PP has pulled me away from that, although I do admit the past week has got me looking at Zerohedge again, dammit!

[mathjak107]

7 years for spy is fine ,  another 40 years for an interest rate cycle or decades for gold if it runs it's typical long self is not fine . in all cases rebalancing would shorten things up a bit .

i think we can cherry pick big drops in all assets that took longer than typical time frames to recover . but the facts are more typically certain assets take way longer normally to run their cycles .

as peter lynch said when asked about his prediction on where rates were headed  he would rather bet on the market cycle repeating any day  than tying to figure out if and when  interest rate cycles were repeating . that is true of commodity's too. they just tend to take a very long time to have their day in the sun.

sure you can have temporary runs to safety from black swan events but usually when the smoke clears if it isn't that assets time it goes back down again .
.

[Cortopassi]

Smaller drawdowns are the most compelling feature for me of the PP diversification.

You can say rebalance will shorten things up, but that's if you successfully made it through those terrifying drops in 2001/2008.  I made it through the first one because I was oblivious (maybe I should have stayed that way!)  I did not make it through 2008/2009.

[mathjak107]

well it is only natural to run for the exit when there is a fire . while we all know  staying the course is the best deal always even seasoned investors question that when the crap hits the fan .

that is because we hate losing money more than we like making it as a default ..

while i like the low volatility in the pp i am not convinced it is the right thing for me to do at this stage as  my investment philosophy changes with the big picture . i think with stocks likely being the only horse to hitch to i do not want opposing asset classes hurting what ever weak gains they may produce . but that is my thinking as related to me .

i do hold lots of bond funds but nothing rate sensitive , basically i hold them for no other reason then they are not stock and if i am lucky i may see some interest and positive returns  after nav is considered .

i think the pp dug itself in to a hole by having so many parts go south at the same time that unless we have some calamity it can take quite a while to pull out of under normal conditions .

the other parts at this point in time with rates so low  depend on not normal times but either long cycles or an EXTENDED  black swan event since those assets correct back so quickly when the fear dies .

today  the long treasury bond is fear driven at this level , and we still do not have a clue what drives gold , but so far nothing we have seen in years .