The Reason to Quit PP

[mathjak107]

not my data , it was a poster that was complaining about the 3 year losses . i don't track the pp other than what i had  once owned back in june .

[Tyler]

over the last almost 30 years i  don't think i ever had  two years back to back that were negative .  i think 3 years in a row would have me very concerned if it happened . in fsct  i just looked , nope , never 2 years in a row .  in fact looking at all 3 models  from very aggressive to very conservative i see none ever had losses two years in a row  .

[img width=300]http://s2.postimg.org/aory1oqt5/FI_Growth2.jpg[/img]

[mathjak107]

what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story . since i started back then i would be curious .

[Pointedstick]

what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story . since i started back then i would be curious .

That would be known as "changing the goalposts."

[mathjak107]

Not at all , I didn't pick a goal post , Tyler randomly picked a time frame . It means nothing to me but I am curious what the total return was from day 1  since I owned it  and never worked out the cagr on it. I can only tell you in dollars .

[iwealth]

what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story . since i started back then i would be curious .

You definitely got in at the right time. But if today were 1999, you'd be telling us the same amazing stories about all of those Fidelity newsletters.

And if we followed the growth plan we'd experience a 10-year period of negative real returns.

That said, it's awesome you got started in 1986.

[Tyler]

Not at all , I didn't pick a goal post , Tyler randomly picked a time frame . It means nothing to me but I am curious what the total return was from day 1  since I owned it  and never worked out the cagr on it. I can only tell you in dollars .

Randomly picked a time frame? The chart shows the performance of the Fidelity Insights Growth model since day 1 of its existence!

what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story . since i started back then i would be curious .

A $10k investment on Dec 31st 1986 (in the front end of one of the biggest bull markets in history) became $202k nominal by the end of 2014 and $95k real.  That's a nice return, but the claims of never losing money are clearly inaccurate. Perhaps you personally did not because you were pouring new money into the fund over time, but to imply others had the same experience is very misleading. 

[Pointedstick]

http://rationalwiki.org/wiki/Moving_the_goalposts

Moving the goalposts is an informal logical fallacy in which previously agreed upon standards for deciding an argument are arbitrarily changed once they have been met.

Mathjak: over the last almost 30 years i  don't think i ever had  two years back to back that were negative .  i think 3 years in a row would have me very concerned if it happened . in fsct  i just looked , nope , never 2 years in a row

Tyler: [shows a 3-year period of consecutive negative returns]

Mathjak: what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story

[mathjak107]

If you read above I had corrected that statement  after I did notice the 2000's had followed the s&p so trying to dispute the above is foolish if you read the post.

But the more conservative models I listed did not have even 2 years back to back that were negative , the conservative capital preservation income model which is 30% equity is  more in line with the pp

[Tyler]

If you read above I had corrected that statement  after I did notice the 2000's had followed the s&p so trying to dispute the above is foolish if you read the post.

But the more conservative models I listed did not have even 2 years back to back that were negative , the conservative capital preservation income model which is 30% equity is  more in line with the pp

Fair enough on your corrected post.  I didn't see that.

It's still important to note that while it's true that the growth and income model never had two consecutive years of negative returns, it did lose 34% in 2008 and took four years to recover.  So on a compound basis it was down four years straight. 

For the record, the PP has had two consecutive years of negative returns twice since 1972.  Only one in the last three was negative -- in 2013.  It's negative YTD but there's still time left.  So when people talk about having negative returns for three years, they are referring to compound returns on their own personal schedule of contributions.  Other portfolios -- including the Fidelity Insight models -- have seen much longer negative stretches using that standard. 

[Pointedstick]

If you read above I had corrected that statement  after I did notice the 2000's had followed the s&p so trying to dispute the above is foolish if you read the post.

To be fair, the correction was to a post like three pages ago so nobody saw it.

[dualstow]

This thread has been hijak'd.
Just kidding, MJ. Kind of.

[mathjak107]

If you read above I had corrected that statement  after I did notice the 2000's had followed the s&p so trying to dispute the above is foolish if you read the post.

To be fair, the correction was to a post like three pages ago so nobody saw it.

you can move 1 years difference and get totally different results most of the time . playing with charts is in the end meaningless if it is not your own time frame .

we can all pick dates to make something look good or bad .  why pick 10 years . why not the last 7 when equitys soared a few hundred percent ?

all that matters is your own results  over your own time frame .

[iwealth]

you can move 1 years difference and get totally different results most of the time . playing with charts is in the end meaningless if it is not your own time frame .

we can all pick dates to make something look good or bad .  why pick 10 years . why not the last 7 when equitys soared a few hundred percent ?

all that matters is your own results  over your own time frame .

Haven't you been extremely critical of the PP partly due to its recent performance? Why not judge on that incredibly successful stretch of years from 1972-2012?

[mathjak107]

because i bought it in june . who cares what it did when i didn't own it .  no different then you caring what the models i used for decades did .

i didn't like it's behavior the short term i did own it so chose not to use it for my own reasons .  but that does not mean i don't have my opinions going forward as to why i felt that way .

[Cortopassi]

I'm trying to understand.  Really.

As I understand your position:

You make assumptions on returns going forward for your specific investment mix, based off your long or short history with it, yet it is quite possible someone else with the same mix, having invested at a slightly different starting point, could well be looking for something else because it did not work out at all.

As you say, and I agree, it is meaningless going forward, no disrespect intended for you or Tyler who has put together some amazing historical stuff.

It does all come down to your own results and your own timeframe and your own contribution (or withdrawal) rate.

[mathjak107]

for sure , all this back testing means little going forward , no better than driving and looking in the rear view mirror  at  places you never even went to .. . it is all about your own returns .

think about someone first buying the pp today .  odds are they may do very nicely out of the box , relatively quickly if things turn around  compared to when i tried it in june .

buying something and getting whacked day one before developing a cushion from an up cycle can be a lot more painful then after you have some gains as a cushion .

my pp fell in a hole day one and i am not convinced it will pull itself out easily from that hole any time soon .  i feel a lot more secure , whether it happens or not that i will see the 50/50 mix have the equity portion pull it out before my x pp turns positive again .

[buddtholomew]

for sure , all this back testing means little going forward , no better than driving and looking in the rear view mirror  at  places you never even went to .. . it is all about your own returns .

think about someone first buying the pp today .  odds are they may do very nicely out of the box , relatively quickly if things turn around  compared to when i tried it in june .

buying something and getting whacked day one before developing a cushion from an up cycle can be a lot more painful then after you have some gains as a cushion .

my pp fell in a hole day one and i am not convinced it will pull itself out easily from that hole any time soon .  i feel a lot more secure , whether it happens or not that i will see the 50/50 mix have the equity portion pull it out before my x pp turns positive again .

The only difference I see between the two portfolios is the PP allocation to Gold. You've decided to allocate this 25% to equities whereas a PP investor has chosen to further diversify in PM's.

[dragoncar]

http://rationalwiki.org/wiki/Moving_the_goalposts

Moving the goalposts is an informal logical fallacy in which previously agreed upon standards for deciding an argument are arbitrarily changed once they have been met.

Mathjak: over the last almost 30 years i  don't think i ever had  two years back to back that were negative .  i think 3 years in a row would have me very concerned if it happened . in fsct  i just looked , nope , never 2 years in a row

Tyler: [shows a 3-year period of consecutive negative returns]

Mathjak: what does the 1986 to 2014 show as far as total return ?  looking at what was a miserable 10 year period which was after the best 17 year period in history does not tell the story

Correct me if I'm mistaken, but Tyler's chart shows cumulative returns, not consecutive.  I.e. Year 1 0% returns, Year 2 -1% returns, Year 3 0% returns is three years of negative cumulative returns, but no two years of consecutive negative returns

[Kbg]

That's what I like best about mathjak, selective history at its best. I'm not a big gold fan either, but I absolutely love his analysis on 70s/early 80s gold prices that will never happen again. While not as extreme, he seems to not be aware of the 2005-2011 run up of 400%+.  What I find even more fascinating is people who hang out on an investing board about a system they apparently have no belief in. I just don't see the point of it other than a cure for extreme boredom.

[Pointedstick]

Correct me if I'm mistaken, but Tyler's chart shows cumulative returns, not consecutive.  I.e. Year 1 0% returns, Year 2 -1% returns, Year 3 0% returns is three years of negative cumulative returns, but no two years of consecutive negative returns

In the corner, Tyler wrote, "2000-2002: 3 consecutive years of negative returns"

[Tyler]

Correct me if I'm mistaken, but Tyler's chart shows cumulative returns, not consecutive.  I.e. Year 1 0% returns, Year 2 -1% returns, Year 3 0% returns is three years of negative cumulative returns, but no two years of consecutive negative returns

It reads cumulative returns left to right.  But the first column on the left shows the 1-year returns only, so you can read that up and down to see what happened each year. 2000-2002 were all negative both cumulatively and individually.

[I Shrugged]

Hi,

as I remember, a few time ago, our boss MEDIUM TEX said that 3 consecutive losing years would be enough to leave PP strategy.

Is it correct?


Thank you.

Frugal,

We are all going to have to get used to losing years happening more often than in the past.  Interest and dividends are an important part of returns.  As long as interest rates are 0%, it doesn't take much to have a losing year.  We are being screwed. 

I'm sure there are people having similar complaints about their "normal" portfolios.  And I cannot imagine how investors are making ANY money with full service brokerages, given the high expenses. 

I am watching this scene closely.  I do not think that reaching for more yield is a good idea.  But that is what everyone is being tempted to do.

[ochotona]

Don't go for high-yield bonds. They are full of hydraulic fracturing oil producers. Money losers.

[koekebakker]

for sure , all this back testing means little going forward , no better than driving and looking in the rear view mirror  at  places you never even went to .. . it is all about your own returns .

think about someone first buying the pp today .  odds are they may do very nicely out of the box , relatively quickly if things turn around  compared to when i tried it in june .

buying something and getting whacked day one before developing a cushion from an up cycle can be a lot more painful then after you have some gains as a cushion .

my pp fell in a hole day one and i am not convinced it will pull itself out easily from that hole any time soon .  i feel a lot more secure , whether it happens or not that i will see the 50/50 mix have the equity portion pull it out before my x pp turns positive again .

The only difference I see between the two portfolios is the PP allocation to Gold. You've decided to allocate this 25% to equities whereas a PP investor has chosen to further diversify in PM's.

This is why I don't get Mathjak's crusade against the PP. There's hardly any difference between a conservative stock/bond portfolio and the PP. If you believe the PP has too much gold just dial it down a bit and put the rest in equities. Or run a 40/20/20/20. No big deal.