PP Performance for 2016

General Discussion on the Permanent Portfolio Strategy

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EdwardjK
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Re: PP Performance for 2016

Post by EdwardjK » Tue Jan 31, 2017 9:38 pm

I believe the current method to measure the PP performance is not realistic.

A commonly used method is to go to the ETFReplay website and enter the four ETFs (VTI, TLT, GLD & SHY) with equal weights. This assumes that the 25% equal weighting is carried through every day of the year. Since daily rebalancing is not required nor desired by PP adherents, this approach is meaningless. No rational investor rebalances their portfolio daily.

I think the better approach is to assume an equal 25% investment on day one of every year and then track daily performance throughout the year. Here you would only rebalance when any asset falls outside the 15%-35% rebalancing bands, as stated by Harry Browne. The yearend balance is then measured against the starting balance to determine overall return.

I think this is a more meaningful and realistic approach to reporting the annual PP performance.
tennpaga
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Re: PP Performance for 2016

Post by tennpaga » Tue Jan 31, 2017 10:14 pm

EdwardjK wrote:A commonly used method is to go to the ETFReplay website and enter the four ETFs (VTI, TLT, GLD & SHY) with equal weights. This assumes that the 25% equal weighting is carried through every day of the year. Since daily rebalancing is not required nor desired by PP adherents, this approach is meaningless. No rational investor rebalances their portfolio daily.

I think the better approach is to assume an equal 25% investment on day one of every year and then track daily performance throughout the year. Here you would only rebalance when any asset falls outside the 15%-35% rebalancing bands, as stated by Harry Browne. The yearend balance is then measured against the starting balance to determine overall return.
FWIW, I think ETF Replay does the calculations as you describe in the second paragraph (i.e. the portfolio composition is set on Day 1, and there is no rebalancing), and *not* as you describe in your first paragraph.

One way to verify is to simply check that the portfolio return is a weighted average of the individual fund returns.
* Gresham's Law: Bad behavior drives out good.
* Gresham's corollary: Avoid participating in systems where good behavior cannot win.

https://fs.blog/2009/12/mental-model-greshams-law/
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Xan
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Re: PP Performance for 2016

Post by Xan » Tue Jan 31, 2017 10:23 pm

TennPaGa wrote:So he cloned himself 99,999 times and invented... wait for it...

The Bar.
boooooo
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Desert
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Re: PP Performance for 2016

Post by Desert » Wed Feb 01, 2017 9:34 am

Xan wrote:
TennPaGa wrote:So he cloned himself 99,999 times and invented... wait for it...

The Bar.
boooooo
I just phoned security, they're on the way. ;)
tennpaga
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Re: PP Performance for 2016

Post by tennpaga » Wed Feb 01, 2017 12:20 pm

Desert wrote:
Xan wrote:
TennPaGa wrote:So he cloned himself 99,999 times and invented... wait for it...

The Bar.
boooooo
I just phoned security, they're on the way. ;)
That made me LOL out loud.
* Gresham's Law: Bad behavior drives out good.
* Gresham's corollary: Avoid participating in systems where good behavior cannot win.

https://fs.blog/2009/12/mental-model-greshams-law/
EdwardjK
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Re: PP Performance for 2016

Post by EdwardjK » Wed Feb 01, 2017 6:26 pm

TennPaGa wrote:FWIW, I think ETF Replay does the calculations as you describe in the second paragraph (i.e. the portfolio composition is set on Day 1, and there is no rebalancing), and *not* as you describe in your first paragraph.

One way to verify is to simply check that the portfolio return is a weighted average of the individual fund returns.
You are correct. Here is a reply to my question to ETFReplay:

"You enter the STARTING weight and then yes, the weights will drift as performance differs between the securities vs the starting amount.

There is a rebalancing option as well for subscribers in a drop-menu on the right."

I stand corrected.
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Re: PP Performance for 2016

Post by geaux saints » Fri Feb 10, 2017 12:53 pm

TennPaGa wrote:
EdwardjK wrote:A commonly used method is to go to the ETFReplay website and enter the four ETFs (VTI, TLT, GLD & SHY) with equal weights. This assumes that the 25% equal weighting is carried through every day of the year. Since daily rebalancing is not required nor desired by PP adherents, this approach is meaningless. No rational investor rebalances their portfolio daily.

I think the better approach is to assume an equal 25% investment on day one of every year and then track daily performance throughout the year. Here you would only rebalance when any asset falls outside the 15%-35% rebalancing bands, as stated by Harry Browne. The yearend balance is then measured against the starting balance to determine overall return.
FWIW, I think ETF Replay does the calculations as you describe in the second paragraph (i.e. the portfolio composition is set on Day 1, and there is no rebalancing), and *not* as you describe in your first paragraph.

One way to verify is to simply check that the portfolio return is a weighted average of the individual fund returns.
Interesting, thanks for the info.
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Re: PP Performance for 2016

Post by LC475 » Mon Feb 13, 2017 9:27 am

Kbg wrote:The PP is not a good grow your assets over the long term portfolio.
Seems pretty good to me!

Very good!

Stupendously good!!

It's been a smashing success during its entire existence, since it was invented. I don't know what else you could ask from a portfolio. Seriously.

Now if you're going to be comparing actually-existing portfolios to imaginary-backtested portfolios.... indeed: ALAS! You shall always be pining for the gains what might have been. :D
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technovelist
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Re: PP Performance for 2016

Post by technovelist » Mon Feb 13, 2017 9:42 am

mathjak107 wrote: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
Only 100% equity? Why limit yourself so?
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technovelist
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Re: PP Performance for 2016

Post by technovelist » Mon Feb 13, 2017 9:44 am

Kbg wrote: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.
So we do know how to improve investor psychology!
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Re: PP Performance for 2016

Post by LC475 » Fri Feb 17, 2017 5:26 pm

technovelist wrote:
mathjak107 wrote: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
Only 100% equity? Why limit yourself so?
Indeed! Lame sauce. Get the 3X fund. Obviously.

Stupid conservative investors being stupidly conservative.

Are there any 10X funds around yet? (If not, why not? >:( )
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