PSA: I now have a 3-year period with no gains

[Libertarian666]

I think investing in assets you like and minimizing assets you don't is more important than we've all thought, because the assets you hate are the ones that make you question your plan at the worst possible time, and the ones you love are the ones whose wild rides you're more easily able to tolerate.

Exactly. That's why I don't post "gold is falling, woe is me!" whenever there is a gold bear market. I have no problems continuing my investment strategy even in the face of tremendous volatility in its assets, because it helps me sleep at night not to be so tied to the fortunes of the US government as I would be with any "normal" allocation.

[I Shrugged]

In a zero interest rate environment, without much in the way of action, the PP is not going to produce much of a return.  I've said so before but nobody agreed.  Just a voice in the wilderness.... <sniffle>

[Cortopassi]

Stocks plunge, gold and treasuries are flat.
Stocks plunge again, gold and treasuries decline.
Stocks rally, gold and treasuries get demolished.

See the pattern? I know...its only a week, blah, blah, blah. Same crap, different day. Been that way since 2011.

Peak to trough, from 1/1/2011, CAGR of 4.37$, total 22.05%.  I would have taken that return without even thinking over the past 4+ years!

I think a bunch of us are seriously down on gold especially, and with stocks hammered as well, the normal, expected drop in gold ( ) just compounded the losses.

Everything I read, leads me to believe that gold is never perfectly inversely proportional to stocks.  There is a delay.  I can at this point seem to feel something is near:

--The crazy volatility swings
--China problems, including selling a boatload of US treasuries recently
--Continual hammering of gold when it is expected to shine
--Ukraine, ISIS, Greece, EU, etc

Something in the past few months feels like we are nearing some tipping point and there won't be many things left standing.  My assumption/hope is that gold in some fashion shines then, and that it isn't so bad that it doesn't matter.

[Libertarian666]

Stocks plunge, gold and treasuries are flat.
Stocks plunge again, gold and treasuries decline.
Stocks rally, gold and treasuries get demolished.

See the pattern? I know...its only a week, blah, blah, blah. Same crap, different day. Been that way since 2011.

Peak to trough, from 1/1/2011, CAGR of 4.37$, total 22.05%.  I would have taken that return without even thinking over the past 4+ years!

I think a bunch of us are seriously down on gold especially, and with stocks hammered as well, the normal, expected drop in gold ( ) just compounded the losses.

Everything I read, leads me to believe that gold is never perfectly inversely proportional to stocks.  There is a delay.  I can at this point seem to feel something is near:

--The crazy volatility swings
--China problems, including selling a boatload of US treasuries recently
--Continual hammering of gold when it is expected to shine
--Ukraine, ISIS, Greece, EU, etc

Something in the past few months feels like we are nearing some tipping point and there won't be many things left standing.  My assumption/hope is that gold in some fashion shines then, and that it isn't so bad that it doesn't matter.

I think both of those assumptions will turn out to be true.

[dragoncar]

Peak to trough, from 1/1/2011, CAGR of 4.37$, total 22.05%.  I would have taken that return without even thinking over the past 4+ years!

Funny, I just tried plugging in the last 3 years.  Here's what I got:

Fatal error: Maximum execution time of 30 seconds exceeded in /usr/local/ebs/web/sites/peaktotrough.com/hbpp.cgi on line 1027

Fatal error indeed.

[koekebakker]

Starting a portfolio and than changing course after three disappointing years is not a very good investment plan.
Any portfolio can have a bad couple of years and when you change now you will buy high/sell low.
Your IPS should protect you from recency bias.

Is it really that strange that the PP has been flat for a couple of years? It had a decade of exceptional returns!
Before that it under-performed a stock/bond portfolio for something like 20 years? 3 years is nothing.
Anyone starting in 2011/2012 did so after the out-performance of the PP. As usual, expected returns were lower going forward.

It's kinda strange to me that right now people are doubting the PP while to me it seems more attractive than it did 3 years ago.

[dragoncar]

Any portfolio can have a bad couple of years and when you change now you will buy high/sell low.
Your IPS should protect you from recency bias.

How do you figure?  I would likely be rebalancing into equities the next time they are down and then just letting them become overweight, or if they become overweight from now on just let them stay overweight.  I might also add new contributions to equities (actually I'm kind of doing this as my wife is just starting to invest and she's going for a hands-off target retirement fund -- it's not my money but it does change our combined AA).  I don't plan to dump anything low.

[mathjak107]

Stocks plunge, gold and treasuries are flat.
Stocks plunge again, gold and treasuries decline.
Stocks rally, gold and treasuries get demolished.

See the pattern? I know...its only a week, blah, blah, blah. Same crap, different day. Been that way since 2011.

Peak to trough, from 1/1/2011, CAGR of 4.37$, total 22.05%.  I would have taken that return without even thinking over the past 4+ years!

I think a bunch of us are seriously down on gold especially, and with stocks hammered as well, the normal, expected drop in gold ( ) just compounded the losses.

Everything I read, leads me to believe that gold is never perfectly inversely proportional to stocks.  There is a delay.  I can at this point seem to feel something is near:

--The crazy volatility swings
--China problems, including selling a boatload of US treasuries recently
--Continual hammering of gold when it is expected to shine
--Ukraine, ISIS, Greece, EU, etc

Something in the past few months feels like we are nearing some tipping point and there won't be many things left standing.  My assumption/hope is that gold in some fashion shines then, and that it isn't so bad that it doesn't matter.

through the decades whenever i bought gold and actually owned it although i admit i never ever made money on it at any time i always had the vision that some how the time was right for gold .

but nope never happens for me and each time i sold it that vision of that time being right fades with it .

we tend to always have a picture that  shows that we did the right thing and the turning point is very close .

but when we don't own it that thought is not on the radar .

[edsanville]

My current line of thinking is to move into a more Desert-like allocation (overweight stocks and underweight gold) during the next stock crash.

Wow, even Pointedstick is thinking of throwing in the towel on the PP?  I think the bottom is finally in.

I started my PP in May 2012, and I'm up about 6.93%.  Not great, but I'm not complaining because I'm worry-free, and I don't "hate" or "love" any of the assets.  I don't really care enough about them to feel one way or the other, to be honest.

[dualstow]

My current line of thinking is to move into a more Desert-like allocation (overweight stocks and underweight gold) during the next stock crash.

Wow, even Pointedstick is thinking of throwing in the towel on the PP?  I think the bottom is finally in.

That is disheartening, isn't it. I think I'm comfortable with the pp as long as I can keep my stock-heavy vp. Conversely, I feel better about the vp because of the pp core.

[mathjak107]

no different than when i ran the fidelity insight income model which is 26% stock and the 70/30 growth and income model at the same time . it really was a  45-50% equitymodel at the end of the day

in the end it really was a blend of both and no longer really was either one although i tracked them individually .

[iwealth]

no different than when i ran the fidelity insight income model which is 26% stock and the 70/30 growth and income model at the same time . it really was a  45-50% equitymodel at the end of the day

in the end it really was a blend of both and no longer really was either one although i tracked them individually .

IMO everyone would be so much better off if they looked at their portfolios this way. 

Here's my PP money. Here's my VP money. And I hold a small Desert Portfolio with a dose of Boglehead. So many names when at the end of the day all that matters is your overall asset allocation.

[mathjak107]

a lot of times what we do is nothing more than a case of the emperors  new clothes .  it makes us feel better but it really is no different from what it actually is when looked at as one .

[dualstow]

a lot of times what we do is nothing more than a case of the emperors  new clothes .  it makes us feel better but it really is no different from what it actually is when looked at as one .

As I've often said, I pay close attention to how the (pp+vp) allocations boil down as a whole, but it is important for me to *run* the pp separately to see how it works. Otherwise, I don't have a pp, just a big mishmash. Psychologically speaking, I just don't have the stomach to hold all stocks even though that seems to have the highest potential upside.

Having the pp allows me to get through stock downturns without capitulating. At the end of the Emperor's New Clothes fable, the Emperor spent a lot of money and was left naked and laughed at. Hopefully, I'll end up with millions of dollars and at least one comfortable pair of Dockers. We'll see how it goes.

[Pointedstick]

My current line of thinking is to move into a more Desert-like allocation (overweight stocks and underweight gold) during the next stock crash.

Wow, even Pointedstick is thinking of throwing in the towel on the PP?  I think the bottom is finally in.

Probably! My timing is always terrible so I haven't done anything. But I have been feeling a bit cranky.

I started in August 2012 and my CAGR is about 1.6% (nominal, not real). The basic problem is that this is not enough for an ERE portfolio, and as the years tick on with such low returns, the viability of financial independence itself will falter. I know I can withdraw from cash to preserve the volatile assets' chance to recover, but eventually, those assets have to produce some serious gains, and they have to be above average to make up the difference.

Something I've suspected for a long time is that the PP is fighting the Fed. In an ultra-low rate environment, people are pushed into the stock market for yield, which becomes self-fulfilling due to their purchasing. Since a lot of these people don't really like stocks, once rates rise, many will probably exit the stock market, leading to a period of subpar stock returns or even a crash. At this point, the PP will probably shine, and protect us very well from the crash, and that will be grand. But when will this happen? Until it does, I think the PP will suffer, since gold looks stinky and the 50% fixed income part won't produce much in the way of coupon payments due to the super low rates.

[mathjak107]

seems like you are coming around to what i thought .

[Pointedstick]

seems like you are coming around to what i thought .

Yes, I think so. It's been a background worry of mine for several years, and it seems like things are playing out that way, sadly.

[Cortopassi]

To me, this points to a good near bottom marker for the PP!

Does anyone really think we can continue like this for another 10 years of near zero rates?  Of stock market corrections taking only a couple days and then a couple days to come right back?  Of the Fed still having bullets to prevent/delay/kick the can on the next economic or financial crisis?

While I will take the gains on the 25% stock portion of the PP and the interest on the 25% bond portion, I only see one portion getting us through some unknowable event in the near to medium term future and that is gold.

I wish anyone looking to increase their equity portions good luck, truly.  I would not be able to weather the guaranteed downturns which will come whether you think so or not!

Have we already forgotten this chart from less than a week ago?

[Pointedstick]

To be clear, I have no plans to add stocks right now. You don't buy when something's going up, clearly in a bubble, and experiencing crazy daily volatility. For the moment I'm sticking with the PP, just grousing a bit.

[buddtholomew]

Thanks for being honest PS. I came to the same realization a little earlier (2013) and increased equity exposure in both the PP and retirement accounts.

I had the misconception that the PP would shine when equities declined, but this is certainly not the case. The lower allocation to equities only limits the losses. The greatest bull market in history has been barely strong enough to result in portfolio gains. This also includes a rise in treasuries. As someone alluded to above, the PP distinguishes itself from other portfolios only when gold rises drastically.

HB diversified away from gold to protect gains. Getting into gold at the top has been disastrous.

[dragoncar]

To be clear, I have no plans to add stocks right now. You don't buy when something's going up, clearly in a bubble, and experiencing crazy daily volatility. For the moment I'm sticking with the PP, just grousing a bit.

Budd, we finally converted one!  Yeah grousers unite!

I don't think any of us grousers are liquidating PPs at the moment.  Maybe the bottom really is in and the PP maintains positive return over 3 years and everyone is "happy"

[goodasgold]

My advice is: hang in there, guys. "This too shall pass."

I happily reaped the rewards during my working years, when I had an orthodox Boglehead portfolio. I am retired now and look upon the PP as the best defensive portfolio in existence. May I remind all of you that there have been earlier periods when the PP returned mediocre or even negative returns for several consecutive years?

Yes, I grouse about the gold not going anywhere and even declining (especially when the Chinese market retreated sharply, which seemed like an ideal time for gold to take a Great Leap Forward.) But basically, I am happy with the gold, which will serve the purpose of a "get out of jail free" card if and when a REAL crisis shakes the world economy.

And as much as I used to grumble about cash, as it just sat around doing nothing while other sectors boomed, I have made my peace with it, especially in the form of I-Bonds.

In summary, I ain't goin' nowhere, and I respectfully advise other PPers to do the same.

Peace,

Goodasgold

[Cortopassi]

The greatest bull market in history has been barely strong enough to result in portfolio gains.

From 3-2009 to now,

PP returned total of 63%, 7.8% CAGR
60/40 mix 143%, 14.7% CAGR
100% stock, 211%, 19% CAGR

I would have been more than happy with 7.8% knowing all my eggs were spread around more evenly.  Barely strong enough is exaggerated.

[buddtholomew]

The greatest bull market in history has been barely strong enough to result in portfolio gains.

From 3-2009 to now,

PP returned total of 63%, 7.8% CAGR
60/40 mix 143%, 14.7% CAGR
100% stock, 211%, 19% CAGR

I would have been more than happy with 7.8% knowing all my eggs were spread around more evenly.  Barely strong enough is exaggerated.

Look at the performance compared to a 60/40 allocation. Pretty pathetic. Half the gains, half!!!!!

[Pointedstick]

Look at the performance compared to a 60/40 allocation. Pretty pathetic. Half the gains, half!!!!!

It just goes to show you how much a 60/40 portfolio tracks the stock market. If what you're looking for is basically stock-like performance but with slightly lower drawdowns when the shit hits the fan, I think it's a fine portfolio. Endless charts have confirmed this; it's basically a slightly smoother stock portfolio, and will accordingly have most of the same gains and losses, and at the same times.