Gyroscopic Investing

Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.

I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.

MachineGhost wrote:

Kbg wrote: With a PP I'm not sure dollar cost averaging or spacing out purchases makes a whole lot of sense...it is a pretty good bet one of the three assets will oinking and another flying...remember the assets are meaningless, it is the portfolio construction that matters.

I don't think you would be saying that living through that 108 week drawdown.  DCA is the best way to deal with sequence of returns risk, epsecially the dismal 2013 and 2015.

Come on MG you KNOW that's a bad argument to make unless you think you can predict the future. I'll make you a pride of I told you so bet that if we make the bet starting Jan 16 and go through Dec 17 that DCA will be the exact wrong thing to have done.

The efficacy of DCA is entirely time series dependent and the ONLY reason it is superior is because it lowers average price. It is by no means a good risk mitigation strategy. I can see it for a single asset to avoid sequence risk (which will work ONLY if price goes down), but not for a PP.

Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.

Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

I'm up 8.39% YTD and extremely happy about that.  S&P 500 up only 2.78%.  Happy I never wavered (not that I really considered it).

Kbg wrote: Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

Actually, one of the data mining hobbyists with access to daily data (Tyler?) could quantify how likely this "most likely" is and what the range of the long term penalty might be.

Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.

Kbg wrote: Either you buy into HBs premise that the future can't be predicted or you don't. You saying DCA is a good thing is the same as you predicting the PP is going down and on an annual returns basis is a very poor bet to make.

You're worried about the returns.  I'm worried about the risk.  The risk is the PP has had 108-week in a row of of being underwater.  That is a fact.  DCA is a way to mitigate that risk if it reappears.  The returns will more than take care of themselves -- that's why we invest in the PP after all, right?

But if it's "market timing", then investing a lump-sum all at once in the PP at this juncture seems riskier than normal because you're relying on several things continuing to happen: extremely overvalued stocks continue to go up, extremely overvalued bonds continue to go up and gold is not going to fall victim to the deflationary forces that would finally consume us all if either/both of the first two finally mean-revert and because the central banks QEternity has finally lost their magical and illusionary power on the masses.  The context of that 108-week drawdown isn't so dissimilar to where the PP is at the moment.

Lest I go all theoretical on us, if I had a very large chunk of money I was going to roll into a PP I would spread it out over year, but using PP historical returns this most likely will prove to not be beneficial to the bottom line.

A year or 108 weeks, its all the same DCA.

108-weeks might actually be too long if you're new and don't have sufficient gold exposure.  I do already so I'm less worried about it.

rickb wrote: Just guessing, I'd expect on a daily basis going all in ends up better something like 70-80% of the time and, even if you lose, the long term loss (measured against a 12 monthly DCA where you keep the uninvested portion in cash - which earns more than nothing) is never more than about 10%.

Let's get this debate settled!!!  Maths has a way of being objectively and factually truthful.

Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?

dualstow wrote: Off-topic note: for the longest time, MG, I thought you were American. The avatar, for starters. But, you just have to have grown up with a British education. "Maths." "Colo(u)red people." Right?

No?

dualstow wrote: No?

Okay, I went to boarding school in England for a few years... 

MachineGhost wrote:

dualstow wrote: No?

Okay, I went to boarding school in England for a few years... 

Excellent call, Dualstow! I caught the "Maths" thing too but I thought MG was just putting on airs (or that maybe he was from India!).

Or Singapore.

My net worth is at an all-time high at the moment and has recently reached a significant milestone. But seeing how this portfolio gyrates over time, I'm expecting a plunge any day now.

A plunge in the portfolio as a whole, or just one asset?

ZedThou wrote: My net worth is at an all-time high at the moment and has recently reached a significant milestone. But seeing how this portfolio gyrates over time, I'm expecting a plunge any day now.

Low overall volatility is why most of use the PP so I guess you would have to define what you mean by "gyrate". If you are talking about daily fluctuations then I think it is pointless to even pay attention to those.

I'm getting ready to retire next year and am also hitting all-time highs so I hope your post doesn't turn into a self-fulfilling prophecy.

curlew wrote:

ZedThou wrote: My net worth is at an all-time high at the moment and has recently reached a significant milestone. But seeing how this portfolio gyrates over time, I'm expecting a plunge any day now.

Low overall volatility is why most of use the PP so I guess you would have to define what you mean by "gyrate". If you are talking about daily fluctuations then I think it is pointless to even pay attention to those.

I'm getting ready to retire next year and am also hitting all-time highs so I hope your post doesn't turn into a self-fulfilling prophecy.

I'm guessing he means gyrate like a gyroscope.  A gyroscope in which you invest. Dot com

Perhaps oscillate would've been a better word. Anyway, it's just my nature to be pessimistic. It certainly doesn't mean anything other than that I'm a nervous nelly.

There was a swoon in the portfolio around the time of this posting, but the assets have recovered nicely to keep the momentum intact.