2014 returned like 12% on the PP. Where are you getting this 3-year period of negative returns?dragoncar wrote:
That's kinda what spurred my post to begin with. From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look." We are nearing that point.
PSA: I now have a 3-year period with no gains
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Re: PSA: I now have a 3-year period with no gains
"All men's miseries derive from not being able to sit in a quiet room alone."
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Re: PSA: I now have a 3-year period with no gains
9.8% officially in 2014 I think. It's 4.8% total over the last 36 months. Not negative and possibly not even real return negative if you believe the CPI (see thread I'm about to start), but still discouraging in the face of the tremendous stock market gains.
May I remind everyone though, that judging the stock market performance from the 2009 nadir is quite misleading unless you happened to buy in at exactly that point. Most of the bull market was about recovering from the 2008-9 crash. If you bought in at the peak in 2007, you would have been in the red until 2013 - that's NEGATIVE RETURNS FOR 6 YEARS. If you're thinking that a standard Boglehead 60/40 or similar wouldn't be that bad, think again. The pictoral performance chart on my Vanguard account says that nominal investment returns with a target date fund were negative between September of 2008 and October of 2011. Less bad, but still 4 years in the red.
If you believe the PP's fundamentals are no longer sound, that would be a reason to pull out. Not sure if a 3 year period with lackluster returns should be the criteria though. By that logic you would most definitely have jumped out of the stock market sometime around 2010-2011, and then you'd have missed the big rally that's gone on since then.
May I remind everyone though, that judging the stock market performance from the 2009 nadir is quite misleading unless you happened to buy in at exactly that point. Most of the bull market was about recovering from the 2008-9 crash. If you bought in at the peak in 2007, you would have been in the red until 2013 - that's NEGATIVE RETURNS FOR 6 YEARS. If you're thinking that a standard Boglehead 60/40 or similar wouldn't be that bad, think again. The pictoral performance chart on my Vanguard account says that nominal investment returns with a target date fund were negative between September of 2008 and October of 2011. Less bad, but still 4 years in the red.
If you believe the PP's fundamentals are no longer sound, that would be a reason to pull out. Not sure if a 3 year period with lackluster returns should be the criteria though. By that logic you would most definitely have jumped out of the stock market sometime around 2010-2011, and then you'd have missed the big rally that's gone on since then.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
Re: PSA: I now have a 3-year period with no gains
It's been tough even for the biggest and brightest...
http://www.zerohedge.com/news/2015-09-0 ... quarter-le
Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman
The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.
http://www.zerohedge.com/news/2015-09-0 ... quarter-le
Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman
The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.
Re: PSA: I now have a 3-year period with no gains
That makes me so happy to be using the PP. It looks like YTD it's doing better than just about everything else.PP67 wrote: It's been tough even for the biggest and brightest...
http://www.zerohedge.com/news/2015-09-0 ... quarter-le
Bridgewater's 'All-Weather' Fund Goes Negative For 2015 After Risk-Parity's Worst Quarter Since Lehman
The $80 billion Bridgewater All Weather Fund, a risk-parity model managed by hedge fund titan Ray Dalio, was down 4.2% in August, according to Reuters citing two people familiar with the fund's performance. This leaves the fund down 3.76% for 2015 as the frameworks for these funds are forced mechanically to reposition as correlations and volatilities across asset classes break down. Just as we saw in the summer of 2013's Taper Tantrum, the last 2 weeks have seen 4 to 5 sigma swings in daily returns and 'generic' risk-parity funds have suffered the biggest 3-month losses since the financial crisis.
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A: “Not unless round is funny.”
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Re: PSA: I now have a 3-year period with no gains
bridgewater's is a special situation , not really representative of a regular fund ..
the problem is they use risk parity to bet against markets and they bet to heavy against the markets early on so going in to in august they never developed the cushion more conventional funds had .
they lost 4.2 percent in August , posting a negative 3.76 return . that means they had to be barely up prior to august while conventional funds were doing well .
i know my fidelity blue chip growth and , contra were all up more than 8% -10% prior so while they lost ground they are all positive .
fidelity blue chip growth is up 2.36% contra up 1.50 .
the problem is they use risk parity to bet against markets and they bet to heavy against the markets early on so going in to in august they never developed the cushion more conventional funds had .
they lost 4.2 percent in August , posting a negative 3.76 return . that means they had to be barely up prior to august while conventional funds were doing well .
i know my fidelity blue chip growth and , contra were all up more than 8% -10% prior so while they lost ground they are all positive .
fidelity blue chip growth is up 2.36% contra up 1.50 .
Last edited by mathjak107 on Thu Sep 03, 2015 6:02 pm, edited 1 time in total.
Re: PSA: I now have a 3-year period with no gains
Risk parity. Meh:
http://gyroscopicinvesting.com/forum/pe ... /#msg61780
http://gyroscopicinvesting.com/forum/pe ... /#msg61780
My bet is on the simple HBPP:
1) Lower costs.
2) Simpler to setup and manage.
3) Fewer moving parts inside the asset classes.
4) No leverage.
5) Doesn't try to complicate things with dubious backwards looking volatility measures.
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Re: PSA: I now have a 3-year period with no gains
interesting read about them and their risk parity use . yeeeech , i will take a good ole fashioned fund any day
http://www.streetinsider.com/Hedge+Fund ... 67437.html
http://www.streetinsider.com/Hedge+Fund ... 67437.html
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Re: PSA: I now have a 3-year period with no gains
Yeah, and it's unfortunate that people jumped into the PP without realizing this. Gumby stated something about this in the bogleheads forum, quoting John Chandler.Pointedstick wrote:I agree, but I think it's a case of expectations not matching up with reality. Right now, everything is treading water, and I think some people assumed that this should be the ideal condition for the PP, and, specifically, that the PP would zig when other things zagged, and on a daily basis, to boot! It's the same old case of wishing for a portfolio that only ever went up, never down. Now that it's going down, there's panic because this wasn't supposed to happen! It's just not realistic.iwealth wrote: ONE single year (2013) makes up the entirety of the 2.6% CAGR difference. All of this angst over one year's worth of underperformance in a historic bull market. You read these threads and you'd think the PP was in the midst of a massive drawdown or something. Seriously, sixdollars quote is on the money. It's crazy in here.
Gumby wrote:
He was. However, he never believed in limiting yourself to a 12 month timeline when comparing investments.
John Chandler, who was instrumental in helping Harry Browne research the Permanent Portfolio, said the following about 12-month returns:
JOHN CHANDLER: The world doesn't really work according to the calendar...A lot, a lot of harm has been done because of the calendar. And one of the harms is trying to make everything fit neatly into a 12 month, or four week, or seven day pattern. The idea of the Permanent Portfolio is is that it invests in asset classes, which respond differently in different economic conditions. The economic conditions that makes one thing goes down, is the same condition that makes another asset go up. But, here is the key and that is that it does not happen overnight. It does take time for these economic forces to take hold. And I rememember back in the seventies, early eighties when we were doing research on the Permanent Portfolio, we found periods as long as 18 months where the portfolio could lose money. But, now that was about the longest we found. Now bear in mind that this is not a promise. It's not a guarantee without — saying that with only 18 months it can work. I can simply say, during the periods when it was being tested. The prices... doing tests on the Permanent Portfolio and what would happen in the different situations over long, long, long periods of time — about 18 months is the maximum we found where the portfolio could lose money before the economic forces took hold and balanced the portfolio out.
"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."
-William J. Bernstein
-William J. Bernstein
Re: PSA: I now have a 3-year period with no gains
Good to see you guys posting a little bit more often!
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Re: PSA: I now have a 3-year period with no gains
"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."
-William J. Bernstein
bernsteins opinions and theory's change way to fast himself , he changes them far to much to take anything he says for more than the moment .
first he was big on retiree's investing through retirement using equity's and bonds for their income , then he switched sides in his book the age of the investor . now it was short term bonds , tips and a longevity annuity , equity's were only if you had extra money to inveast after essential expenses were covered . then he re-canted that strategy for now after another researcher pointed out that rates are just to damn low to make that an option .
i don't take bernstein's opinion on anything for more than the thought in his head at the moment .
-William J. Bernstein
bernsteins opinions and theory's change way to fast himself , he changes them far to much to take anything he says for more than the moment .
first he was big on retiree's investing through retirement using equity's and bonds for their income , then he switched sides in his book the age of the investor . now it was short term bonds , tips and a longevity annuity , equity's were only if you had extra money to inveast after essential expenses were covered . then he re-canted that strategy for now after another researcher pointed out that rates are just to damn low to make that an option .
i don't take bernstein's opinion on anything for more than the thought in his head at the moment .
Last edited by mathjak107 on Fri Sep 04, 2015 4:04 am, edited 1 time in total.
Re: PSA: I now have a 3-year period with no gains
Ah, interesting to know that about Bernstein. I only know of him from his oft-cited quote about PP followers chasing returns.
mathjak, I am only posting so early because I have jetlag and keep waking up at 4:00AM. Don't get too used to having someone to discuss investing with in the middle of the night!
mathjak, I am only posting so early because I have jetlag and keep waking up at 4:00AM. Don't get too used to having someone to discuss investing with in the middle of the night!
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Re: PSA: I now have a 3-year period with no gains
you will rarely hear from me after 8pm as i am falling asleep .
60 may be the new 40 but 9pm is the new midnight . i am up so early every day , even retired . been that way for decades . by 7 am we are at the gym daily .
headed to the bronx zoo later with the kids and grand kids .
60 may be the new 40 but 9pm is the new midnight . i am up so early every day , even retired . been that way for decades . by 7 am we are at the gym daily .
headed to the bronx zoo later with the kids and grand kids .
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Re: PSA: I now have a 3-year period with no gains
mathjak107 wrote: 60 may be the new 40 but 9pm is the new midnight .
Sam Bankman-Fried sentenced to 25 years
Re: PSA: I now have a 3-year period with no gains
We are getting close -- 1.5% CAGR over the last 36 months. Slightly positive nominally but 0 real return. I'd be curious to know if MT has looked under the hood yet and what he sees.AdamA wrote:2014 returned like 12% on the PP. Where are you getting this 3-year period of negative returns?dragoncar wrote:
That's kinda what spurred my post to begin with. From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look." We are nearing that point.
MT's simpler alternative of 90% PRPFX + 10% EDV has gone literally nowhere on a nominal basis for 4 years.
I wavered for a short time, but I'm glad that I ultimately stuck with a BH portfolio. PP is good for maintaining wealth (although if you're really risk averse, a CD ladder will probably do almost as well) but not for growing it. A good long-term comparison would be PRPFX vs. Wellington. PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation. Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy. I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Re: PSA: I now have a 3-year period with no gains
Since 1972, the real CAGR of the HBPP is 5.0%. For Wellington, it's 5.9%. Perhaps you'd trade the nearly double volatility for an additional 2-3%. But for less than 1%? That's still up to you, but it's not as big a difference as you think.kka wrote: A good long-term comparison would be PRPFX vs. Wellington. PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation. Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy. I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009. The PP beat it in the 70's and 2000's and was generally more consistent throughout.
Re: PSA: I now have a 3-year period with no gains
Since 1975, it's almost 3% CAGR difference. I don't think we can count on gold quadrupling again in just a few years like it did after the gold window was closed.Tyler wrote:Since 1972, the real CAGR of the HBPP is 5.0%. For Wellington, it's 5.9%. Perhaps you'd trade the nearly double volatility for an additional 2-3%. But for less than 1%? That's still up to you, but it's not as big a difference as you think.kka wrote: A good long-term comparison would be PRPFX vs. Wellington. PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation. Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy. I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009. The PP beat it in the 70's and 2000's and was generally more consistent throughout.
Last edited by kka on Fri Sep 04, 2015 1:47 pm, edited 1 time in total.
Re: PSA: I now have a 3-year period with no gains
http://gyroscopicinvesting.com/forum/pe ... #msg128483AdamA wrote:2014 returned like 12% on the PP. Where are you getting this 3-year period of negative returns?dragoncar wrote:
That's kinda what spurred my post to begin with. From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look." We are nearing that point.
Re: PSA: I now have a 3-year period with no gains
Even at today's price levels, gold has quadrupled from where it was in 2000.kka wrote:Since 1975, it's almost 3% CAGR difference. I don't think we can count on gold quadrupling again in just a few years like it did after the gold window was closed.Tyler wrote:Since 1972, the real CAGR of the HBPP is 5.0%. For Wellington, it's 5.9%. Perhaps you'd trade the nearly double volatility for an additional 2-3%. But for less than 1%? That's still up to you, but it's not as big a difference as you think.kka wrote: A good long-term comparison would be PRPFX vs. Wellington. PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation. Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy. I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
Like all stock-heavy portfolios, VWELX made its name in the 80's and 90's and looks great since 2009. The PP beat it in the 70's and 2000's and was generally more consistent throughout.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: PSA: I now have a 3-year period with no gains
Don't you see where that logic is flawed, though?dragoncar wrote: The caveat is that I've been regularly and aggressively contributing to the PP. So my early gains in 2011/2012 were small as a percent of my current total portfolio value. Losses in 2015 are applied to a much higher portfolio value. Hopefully that makes sense.
That doesn't mean the PP has had 3 consecutive negative years, just that you put a large sum of money in during a period in which it took a loss.
Last edited by AdamA on Fri Sep 04, 2015 11:12 pm, edited 1 time in total.
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Re: PSA: I now have a 3-year period with no gains
It is only natural to change your thoughts when presented with convincing contradictory evidence. I don't know enough about Bernstein personally, so I'll reserve my judgment. In any case, what Bernstein said that I have quoted was only an observation. To me it seems that this observation still holds as evidenced by this very thread. Even if that is a reason to not believe much of what Bernstein says, I would still say that there's no need to throw the baby out with the bathwater...mathjak107 wrote: bernsteins opinions and theory's change way to fast himself , he changes them far to much to take anything he says for more than the moment .
first he was big on retiree's investing through retirement using equity's and bonds for their income , then he switched sides in his book the age of the investor . now it was short term bonds , tips and a longevity annuity , equity's were only if you had extra money to inveast after essential expenses were covered . then he re-canted that strategy for now after another researcher pointed out that rates are just to damn low to make that an option .
i don't take bernstein's opinion on anything for more than the thought in his head at the moment .
"There’s nothing wrong with Harry’s portfolio—nothing at all—but there’s everything wrong with his followers, who seem, on average, to chase performance the way dogs chase cars."
-William J. Bernstein
-William J. Bernstein
Re: PSA: I now have a 3-year period with no gains
Pardon the intrusion, but I didn't have time to read all 17 pages of posts in this thread. I dusted off my PP historical performance spreadsheet and wanted to share some food for thought. (Note: the numbers below assume you bought a PP on 1/1 of each year and held it without rebalancing until 1/1 of the following year, at which point you rebalanced to 4x25%):
The worst 3-year performance for the PP was 1999-2001, when it returned a total of 7.8%, or 2.6% annually.
The worst 4-year performance for the PP was 1999-2002, when it returned a total of 14.9%, or 3.8% annually.
The worst 5-year performance for the PP was 1998-2002, when it returned a total of 25.9%, or 5.2% annually.
Notice that the longer you hold the PP, the more it stabilizes. As of 12/31/2014 (the most recent full calendar year of PP performance we have), here are the numbers:
3-year performance from 2012-2014 = 13.5%, or 4.5% annually.
4-year performance from 2011-2014 = 24.0%, or 6% annually.
5-year performance from 2010-2014 = 38.5%, or 7.7% annually.
As you can see, the PP as of 12/31/2014 is still far from experiencing the worst 3, 4, or 5-year period on record. Again, the longer you hold the PP, the more it stabilizes.
In fact, in order for the PP to become the worst performer over 3, 4, and 5-year periods as of the end of this year (12/31/2015), the PP would need to provide a dismal 1% return this year. Is that possible? Most certainly. Would you abandon the PP at that point? If so, consider this...
After the PP experienced its worst 3, 4, and 5-year periods as shown above, its performance steadily improved over the next 5 years. By 2007, it had rebounded to a 5-year total return (2003-2007) of 52.3%, or 10.5% annually over those 5 years.
In other words, don't buy high and sell low. I'm certainly not, although I will admit that I only hold about 40% of my portfolio in a PP, simply because I don't like to put all my eggs in one basket (or in this case, investing strategy). I treat my PP as the low-volatility portion of my portfolio, almost as if it were a low-volatility bond. The rest (my VP) I keep in stocks, commodities, and REITs.
Stick with your plan, and assuming you're a long-term investor don't sweat the short-term gyrations. As Keynes once said, "The market can stay irrational longer than you can stay solvent."
The worst 3-year performance for the PP was 1999-2001, when it returned a total of 7.8%, or 2.6% annually.
The worst 4-year performance for the PP was 1999-2002, when it returned a total of 14.9%, or 3.8% annually.
The worst 5-year performance for the PP was 1998-2002, when it returned a total of 25.9%, or 5.2% annually.
Notice that the longer you hold the PP, the more it stabilizes. As of 12/31/2014 (the most recent full calendar year of PP performance we have), here are the numbers:
3-year performance from 2012-2014 = 13.5%, or 4.5% annually.
4-year performance from 2011-2014 = 24.0%, or 6% annually.
5-year performance from 2010-2014 = 38.5%, or 7.7% annually.
As you can see, the PP as of 12/31/2014 is still far from experiencing the worst 3, 4, or 5-year period on record. Again, the longer you hold the PP, the more it stabilizes.
In fact, in order for the PP to become the worst performer over 3, 4, and 5-year periods as of the end of this year (12/31/2015), the PP would need to provide a dismal 1% return this year. Is that possible? Most certainly. Would you abandon the PP at that point? If so, consider this...
After the PP experienced its worst 3, 4, and 5-year periods as shown above, its performance steadily improved over the next 5 years. By 2007, it had rebounded to a 5-year total return (2003-2007) of 52.3%, or 10.5% annually over those 5 years.
In other words, don't buy high and sell low. I'm certainly not, although I will admit that I only hold about 40% of my portfolio in a PP, simply because I don't like to put all my eggs in one basket (or in this case, investing strategy). I treat my PP as the low-volatility portion of my portfolio, almost as if it were a low-volatility bond. The rest (my VP) I keep in stocks, commodities, and REITs.
Stick with your plan, and assuming you're a long-term investor don't sweat the short-term gyrations. As Keynes once said, "The market can stay irrational longer than you can stay solvent."
Last edited by rocketdog on Fri Sep 04, 2015 4:02 pm, edited 1 time in total.
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- mathjak107
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Re: PSA: I now have a 3-year period with no gains
if i remember correctly the idea for the pp didn't exist in 1975 . which also happened to be its best run years but it didn't exist . to be fair tracking it before it existed is really not the way to track things ..
Re: PSA: I now have a 3-year period with no gains
Well the first S&P500 index fund was established in 1973. Surely you believe tracking that index before it existed (in any form accessible to normal people) is also a waste of time.mathjak107 wrote: if i remember correctly the idea for the pp didn't exist in 1975 . which also happened to be its best run years but it didn't exist . to be fair tracking it before it existed is really not the way to track things ..
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Re: PSA: I now have a 3-year period with no gains
kka wrote:We are getting close -- 1.5% CAGR over the last 36 months. Slightly positive nominally but 0 real return. I'd be curious to know if MT has looked under the hood yet and what he sees.AdamA wrote:2014 returned like 12% on the PP. Where are you getting this 3-year period of negative returns?dragoncar wrote:
That's kinda what spurred my post to begin with. From when mediumtex said "A rolling three year period of negative returns would make me open up the hood and take a look." We are nearing that point.
MT's simpler alternative of 90% PRPFX + 10% EDV has gone literally nowhere on a nominal basis for 4 years.
I wavered for a short time, but I'm glad that I ultimately stuck with a BH portfolio. PP is good for maintaining wealth (although if you're really risk averse, a CD ladder will probably do almost as well) but not for growing it. A good long-term comparison would be PRPFX vs. Wellington. PP no longer follows PRPFX exactly, but that is the original formulation and it's a good approximation. Wellington is actively managed but low cost, low turnover, and has been around along time, so it makes a good 60/40 BH proxy. I'll accept double the volatility for 2% or 3% higher CAGR, otherwise I'll be working until I'm 80.
the interesting part to me would be the comparison of the recovery , both in speed and magnitude .
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Re: PSA: I now have a 3-year period with no gains
the pp to me is different , it is a concept like a fund would be that used unconventional investing methods . anyone could have bought the s&p 500 stocks as they dominated just about any large cap fund back then but no one could really buy the pp concept since it wasn't out yet to the public . first index trust came out in 1976 .Tyler wrote:Well the first S&P500 index fund was established in 1973. Surely you believe tracking that index before it existed (in any form accessible to normal people) is also a waste of time.mathjak107 wrote: if i remember correctly the idea for the pp didn't exist in 1975 . which also happened to be its best run years but it didn't exist . to be fair tracking it before it existed is really not the way to track things ..
the pp wasn't really out there in its current form until much later .
Last edited by mathjak107 on Fri Sep 04, 2015 5:43 pm, edited 1 time in total.