PP Performance for 2016

General Discussion on the Permanent Portfolio Strategy

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Cortopassi
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Re: PP Performance for 2016

Post by Cortopassi » Thu Jan 12, 2017 10:46 am

Quite a similar start to the PP compared to last year, gold and bonds rising and stocks taking a breather. No complaints.
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Re: PP Performance for 2016

Post by barrett » Sat Jan 14, 2017 7:19 am

Back to the point earlier in the thread about unlucky PP entry timing... Both my wife and I opened TD Ameritrade accounts back in March or so of 2014 for our Solo 401(k)s and our Solo 401(k) Roths. The money was almost all invested after early-in-the-year runups in the PP. Because our overall PP is spread out over several accounts, these accounts are roughly 40% SPY, 35% TLT, 15% IAU and 10% Cash. Total return over that time works out to be about .2%. We've made a couple hundred bucks on about $110,000. Ouch! Fortunately our timing hasn't always been so bad and most of our other investments have done better.

We are both self-employed people and just tend to throw whatever we can in retirement accounts around March when we are doing our taxes. Obviously three years is not a super long time frame, but this certainly demonstrates how important one's entry point is. And hopefully I've given a few people their daily dose of Schadenfreude!
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Re: PP Performance for 2016

Post by mathjak107 » Sat Jan 14, 2017 8:21 am

traditionally markets tend to spend about 2/3's of the time up over our long term investing time frames and down only 1/3 . so weighting for prosperity makes the most sense .

the gb makes far greater sense to me than the pp . yeah , those small caps will get hit hard in a downturn along with the equity's but along with it likely other assets will do fine and just the fact that the odds of being up are more likely over your long term investing time frame says the outcome will likely be better despite the greater weighting in to stocks . .

as peter lynch said 30 years ago "more money has been lost preparing for downturns and in anticipation of downturns than has been lost in any downturns in this country . it still has been pretty true .
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Re: PP Performance for 2016

Post by Mr Vacuum » Sat Jan 14, 2017 8:34 am

Ouch, that an unpleasant "period of underperformance." I started around the same time but returned 2.5% in 2014-2016 (including the first four months of 2014 in 80% stocks, which were mostly flat). 2015 wasn't pleasant, but at least it came back.

You also missed a chunk of early 2016 gold run-up by contributing later in the year at tax time. I suspect that bit plus your overall lower gold allocation in that spread accounts for lower performance over that particular time period. Not only does the start time matter but also the sequence of all the moves within the time. I also lost a surprising amount of 2016 run-up by being incidentally cash heavy at the beginning of the year.
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Re: PP Performance for 2016

Post by sophie » Sat Jan 14, 2017 8:49 am

Sorry about the bad timing barrett. It's a risk whenever you plow a single large contribution into any investment portfolio. If you have more to invest, why not spread it out over several contributions to minimize the chances of that happening again?

"Dollar cost averaging" from cash overall doesn't win over lump sum investing on average, but it will protect you from these discouraging situations.
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Re: PP Performance for 2016

Post by dualstow » Fri Jan 20, 2017 3:09 pm

heads up, rickb

I know the schedule does not always dovetail with Fidelity's, but I see 2-year notes as well as other notes and bills for sale at auction at Vanguard. If they're not available at Fidelity, they should be soon.

rickb wrote:
barrett wrote: Hey rickb, Can you please explain how you are doing your treasury ladder? When I think of laddering, I always think of having CDs or treasuries with different maturities. A
...
...
As these mature I'll buy new issue 2-year Treasuries.
....
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Re: PP Performance for 2016

Post by barrett » Fri Jan 27, 2017 2:01 pm

sophie wrote:Sorry about the bad timing barrett.
Shall we call this Sequence Of Contributions Risk?
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Re: PP Performance for 2016

Post by dualstow » Fri Jan 27, 2017 2:34 pm

That sucks, Barrett, but take a look at those yahoo finance threads where people invested their 401(k)'s in the company that was going to make sapphire screens for Apple. Apple stuck with gorilla glass, and the stock was toast. Your wealth is preserved, and it *will* grow.
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Re: PP Performance for 2016

Post by mathjak107 » Sat Jan 28, 2017 11:26 am

anytime you bet on one company and the whims of that one company whether you work there or not i consider that speculating , not investing . i don't care if the company was general motors .

accepting the returns the collective markets give you without the whims of anyone company is in my opinon "investing "

until you own enough individual stocks to make individual company risk go away i call that speculating .
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Re: PP Performance for 2016

Post by Kbg » Sat Jan 28, 2017 11:44 am

The PPs performance profile is easily detectable with just a bit of historical data review and the last 5 years have been particularly poor. The performance gap will close during the next bear market and will lag during a bull market.

The PP is not a good grow your assets over the long term portfolio. There is no risk premia in 50% of the portfolio. I categorically do not recommend it for younger people (unless you leverage it and know how to do that properly).
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Re: PP Performance for 2016

Post by mathjak107 » Sat Jan 28, 2017 1:14 pm

Personally i much prefer the golden butterfly . I think it models more typically what happens over time which is markets are up 2/3's of the time and down only 1/3 over long periods of time.

I never saw the logic in betting the same amount of money on anything but equal chances of outcomes.

I think the gb can give good growth where the mix of alternative portfolios are not 100% equity
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Re: PP Performance for 2016

Post by stuper1 » Sat Jan 28, 2017 4:04 pm

Kbg wrote:The PP is not a good grow your assets over the long term portfolio. There is no risk premia in 50% of the portfolio. I categorically do not recommend it for younger people (unless you leverage it and know how to do that properly).
What portfolio(s) would you recommend for younger people?
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Re: PP Performance for 2016

Post by mathjak107 » Sat Jan 28, 2017 5:15 pm

it is likely nothing will grow more money than equity's . if you are young and don't mind the swings than 100% equity's is the way i would go .

it makes little sense in my opinion to mitigate or hedge temporary drops with bonds and other assets with less growth potential , permanently reducing your long term gains when shorter term drops likely mean nothing in the span of decades of the accumulation stage . the logic just isn't there .

all these other asset classes are for when you don't have the pucker factor or the recovery time for aggressive investing .

the growth model i used up until retirement ,which i started using in 1987 has returned 10.90% cagr for 30 years and that includes the lost decade .

now i am retired and use a more conservative model .

the past is no indication of the future but right up until the moment i am typing this the 4 most expensive words in the english language are still "this time is different "

if you want something more conservative the golden butterfly has much better growth potential than the pp although the small cap fund can be rough in a bear market to watch . there are days slyv swings 3 or 4x what the s&p 500 does . but as a portfolio it can potentially do fine . i like it more now since gold and bonds came way down from where they were in july under the uncertainty we are facing today as opposed to a year ago ..
Last edited by mathjak107 on Sun Jan 29, 2017 4:54 am, edited 2 times in total.
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Re: PP Performance for 2016

Post by flyingpylon » Sat Jan 28, 2017 6:45 pm

Somebody please define "young".
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Re: PP Performance for 2016

Post by mathjak107 » Sat Jan 28, 2017 7:04 pm

I would say if you are in your 20-30's that is young,even 40's today could go 100% equity and have enough growth and recovery time. The real determining factor is your own pucker factor. I ran 100% until about 55 . Retired at 62 and even ran in to 2008 on the way
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Re: PP Performance for 2016

Post by dragoncar » Sun Jan 29, 2017 4:47 am

Crap does nobody believe in gyroscopic investing anymore? I know the forum changed hands but now we need to change the domain name?
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Re: PP Performance for 2016

Post by mathjak107 » Sun Jan 29, 2017 4:49 am

sure they do , but the question was asked about how to BEST grow the money , not preserve it or just go for a positive real return.
stuper1 wrote:
Kbg wrote:The PP is not a good grow your assets over the long term portfolio. There is no risk premia in 50% of the portfolio. I categorically do not recommend it for younger people (unless you leverage it and know how to do that properly).
What portfolio(s) would you recommend for younger people?
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Re: PP Performance for 2016

Post by dualstow » Sun Jan 29, 2017 10:13 am

dragoncar wrote:believe in gyroscopic investing anymore?
Of course. Plenty!

And while I agree with kbg (if I'm paraphrasing correctly) that there are *more aggressive* growth strategies out there, "categorically" not recommending the pp but then giving a nod to leveraging sounds like a recipe for bankrupting young investors.

On the other hand, maybe bankrupting them early will help them then adopt the pp strategy. O0
Kbg wrote:The PP is not a good grow your assets over the long term portfolio. There is no risk premia in 50% of the portfolio. I categorically do not recommend it for younger people (unless you leverage it and know how to do that properly).
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Re: PP Performance for 2016

Post by mathjak107 » Sun Jan 29, 2017 10:23 am

the irony is that studies show when investors get spooked they are no more inclined to stay with a balanced portfolio than a growth portfolio . there is no allocation bounds when it comes to bad investor behavior . you can look at the balanced fund investor returns at morningstar during volatile times and they are pretty much just as poor compared to what the fund got . they have the same issues growth funds do .

humans hate losing money no matter what the situation . how many who would have tried the pp last july at the peak would have bailed out when they saw double digit losses from where they bought in ?

the fact is to date it has been not markets that would have caused investors losses but either poor investor behavior or the mis-matching of assets to time frames .
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Re: PP Performance for 2016

Post by dragoncar » Sun Jan 29, 2017 7:39 pm

So if I've stuck with the PP through it's dog years, I'll probably also stick through a 100% equities portfolio through it's inevitable dog years?
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Re: PP Performance for 2016

Post by mathjak107 » Mon Jan 30, 2017 2:47 am

yep , and if not you would not stick with either most likely .

we like to think that less volatile investments have people staying the course but there is no evidence of that . the study's all show that humans tend to bail out of balanced funds just as much . they do not want to be left behind in the bull and they can''t stand losses in the bear .

even the pp can be wild at times . like i said if you bought in at the top last year because you had it with the market volatility right after brexit , you had double digit losses. in the mean time you watched the s&p clock in with a 12% gain and small caps at over 30% .

that is one of the reasons i much prefer the golden butterfly to the pp . you still have the fighter cover but the up years can be so much better . the gb clocked in at around 10% for 2016 . but the small cap funds can be very volatile , moving 2 or 3x what the s&p does in a session . so you still need to have that discipline .
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Re: PP Performance for 2016

Post by Kbg » Mon Jan 30, 2017 9:00 am

Leverage is not evil, stupid use of it is stupid. At the end of the day I don't personally care what anyone invests in. It's not my money. My best most useful advice that I could give anyone is to simply find something you are comfortable with and can stick with over the long haul.

I like the PP. I use a leveraged version of it because I like it a lot. But I've done my homework too and it is clear it is not a good growth portfolio compared to other options one could use. This is indisputable history. Who knows going forward.
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Re: PP Performance for 2016

Post by mathjak107 » Mon Jan 30, 2017 9:33 am

in a way the small cap tilt can be leverage like . the fact it can move typically two to 3x what the s&p does has a big effect for the same money .

today is a down day for the markets . the s&p 500 at the moment is down .90% while slyv is down 1.80%
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Re: PP Performance for 2016

Post by mathjak107 » Mon Jan 30, 2017 11:48 am

they did not go out far enough past 2010 or in years looked at in that article so it was not typical results . .only going 3 years really does not tell much and in fact conflicts with 10 and 15 year periods which show the opposite for balanced funds .


ibbotson went out to 2013 and found these results over a 10 year period . in fact balanced funds did worse than equity funds . it could make sense since those in balanced funds tend to be more skittish :

Image

just taking a quick look at fidelity growth co vs fidelity balanced for a 15 year period pretty much shows the same results .

fdgrx over 15 years got 8.49 , investors got 6.71 a difference of 1.69% left on the table .

fidelity balanced got 7.30% and investors got 5.23% a difference of 2.07% left on the table .

even if results were the same it still makes the point . investors show just as much bad behavior in balanced models as growth models and if the data is correct , balanced shows they do worse , which in my opinion is because they are more nervous about things and that is why they are in balanced models and not growth .. but they still don't have the pucker factor to lose money .
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Re: PP Performance for 2016

Post by mathjak107 » Mon Jan 30, 2017 1:26 pm

good question , be right back
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