PP Performance for 2016

[mathjak107]

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

[stuper1]

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?

[mathjak107]

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 ..

[flyingpylon]

Somebody please define "young".

[mathjak107]

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

[dragoncar]

Crap does nobody believe in gyroscopic investing anymore? I know the forum changed hands but now we need to change the domain name?

[mathjak107]

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.

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?

[dualstow]

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.

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).

[mathjak107]

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 .

[dragoncar]

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?

[mathjak107]

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 .

[Kbg]

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.

[mathjak107]

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%

[mathjak107]

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 :



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 .

[mathjak107]

good question , be right back

[mathjak107]

wellesley is an interesting case , likely because wellesley is a favorite of investors who are usually pretty sharp more than i think just the masses . .

it is a boglehead favorite as well as the early retirement forum .

5 year shows fund got 7.29 / investor 6.70

10 year fund 6.66 investor 6.08

15 year fund 6.87 investor 6.26

[dualstow]

You don't put non-retirement funds in there, though, do you Desert?

I've always found Wellesley attractive*, but my Roth is still very small.

*Not claiming to be sharp here, haha, but perhaps well-read.

[mathjak107]

wellesley has been a long term favorite for as long as i can remember on financial forum and retirement forum sites .

it is always like there is wellesley and then there is everything else when you talk conservative investing on these forums .

we tend to get blindsided to what the masses do financially when we are communicating with those who share our interests .

from the numbers it appears that wellesly attracts a higher quality group of investors . they certainly do look better investor return wise . there could be retiree's who were told to just buy it and forget it so they pay no attention to markets or it could be because it is heavily promoted to more sophisticated investors on retirement and financial forums . but whatever the reason for such a small spread wellesley seems to be the exception . although it still exhibits enough bad investor behavior too to effect the numbers

[Kbg]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

[dualstow]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

The former also make ideal neighbors. Very quiet.

[sophie]

My apologies if this has been posted in this thread or else where. Fidelity did a study a few years back on their best performing accounts and they found that the best performing accounts had a couple of characteristics. One, The account holder was found to be deceased. Two, the account holder forgot they had the account.

That is outstanding. If you can find that study let us know!

[Kbg]

http://www.morningstar.com/advisor/t/10 ... estors.htm

[mathjak107]

i haven't researched it but i wonder if you compared index funds from vanguard vs other fund family's if you would see a higher success rate in general from vanguard investors . for the same reason wellesley seems to do better investor return wise vanguard is hot among the investing sophisticated and hobbyists too .

[mathjak107]

interesting enough i took the vanguard s&p 500 vfinx which is used by most higher level investors and compared it to an s&p 500 fund from dryfus which is likely used by those who don't manage their own money or really don't care much about it i think after the investment is made,

it seems our sophisticated investors did a lot worse with vanguard in the 10 year which included the volatile 2008-2009 years .

vanguard had a spread of 3.34% between investor returns and what the fund got . dryfus investors had only a 1.82% spread. could vanguard bogleheads be attempting a whole lot more market timing then we are led to believe ?
i know with me i used the fidelity insight newsletter for 30 years because i am not happy being average at anything , so i was always thinking about how to beat the markets by either 2nd guessing my last move or planning the next .

once i took the shot calling out of my hands i did very well , so i can see vanguards index funds maybe showing poorer investor returns since these are the folks more in to diy investing and who make investing a hobby and focus ..

[Kbg]

There is another study at Longboard which shows investors kill their bond returns (and alts) even more than their stock returns as a percentage of total return.

We humans really aren't very well wired for this stuff as a general rule.