Nobody believes in the Permanent Portfolio
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- dualstow
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Re: Nobody believes in the Permanent Portfolio
Well, only if Tony Robbins goes by "Tyler" on this forum.
Anyway, I think it's good too. Not *that* different from the pp.
Anyway, I think it's good too. Not *that* different from the pp.
Re: Nobody believes in the Permanent Portfolio
It is more than 1% more in returns...dualstow wrote:Well, only if Tony Robbins goes by "Tyler" on this forum.
Anyway, I think it's good too. Not *that* different from the pp.
Do you think this works also in Europe?
Thank you !
- dualstow
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Re: Nobody believes in the Permanent Portfolio
Seems like it could, to the same extent that the pp does.
Re: Nobody believes in the Permanent Portfolio
Hello!
SMALL CAPS give the GB more than 1%, which is a big difference, let's say + 20% of annual returns?
In Europe I can't find SMALL CAPS ... I only found LARGE CAPS
Any ideas?
Best regards.
SMALL CAPS give the GB more than 1%, which is a big difference, let's say + 20% of annual returns?
In Europe I can't find SMALL CAPS ... I only found LARGE CAPS
Any ideas?
Best regards.
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
fidelity has a small cap international fund .not sure if you can get it in europe .
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
gb is the golden butterfly .frugal wrote:mathjak107 wrote:depends what you consider a higher return and acceptable volatility .
a cd is lower volatility and the return for that volatility may be the best to you if that is an acceptable return that meets your goals ..
to me the gb is an acceptable return so i could say the same thing about the gb . for the return and volatility it is the best . best is a relative term .
to me the pp return vs volatility is not as an acceptable return as the gb.
so we all have our own ideas as what is best for the volatility , returns and our investment goals . .
hello
how are you?
GB is gold bullion?
What is your asset allocation now?
All the best.
i run about 40% the butterfly and the rest are my models from fidelity insight . i keep 5 years withdrawals in their income portfolio , 5 years in the growth and income portfolio and the rest in the growth portfolio . that way each portfolio is optimized for the time frame .
- mortalpawn
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Re: Nobody believes in the Permanent Portfolio
I've started very slowly moving into the Golden Butterfly from the PP after being in the PP for the last 3+ years (though returns the last few years were a bit weak). It does make me a bit nervous as the small value and regular large stock funds have about an 80% correlation (much higher than the other assets) but the historical performance is quite convincing - slightly higher returns, about the same deviation and drawdown performance, slightly higher risk/reward and good staying power when the stock market crashed.
I decided to take it a bit at a time so I've been rolling stock gains from last few years over into small value stocks first, then I'll probably move a few percentage from bonds and cash and leave the gold as the last asset to re-balance. I'm only moving a few percent a month from PP to GB so I can dollar cost average if there is a major market move coming up. I've also done a bit of rebalancing between taxable and retirement accounts to try to minimize the tax bill by holding less stocks/bonds in taxable accounts.
I can't find a major downside to the Golden Butterfly - and it tracks well with the PP philosophy.
I decided to take it a bit at a time so I've been rolling stock gains from last few years over into small value stocks first, then I'll probably move a few percentage from bonds and cash and leave the gold as the last asset to re-balance. I'm only moving a few percent a month from PP to GB so I can dollar cost average if there is a major market move coming up. I've also done a bit of rebalancing between taxable and retirement accounts to try to minimize the tax bill by holding less stocks/bonds in taxable accounts.
I can't find a major downside to the Golden Butterfly - and it tracks well with the PP philosophy.
Re: Nobody believes in the Permanent Portfolio
As of today, Gold is up over 11% YTD and long bonds > 3% for a very nice YTD gain, well above a stock only portfolio whether large or small cap.
And nobody should believe in the PP because of why exactly?
And nobody should believe in the PP because of why exactly?
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
farjean2 wrote:As of today, Gold is up over 11% YTD and long bonds > 3% for a very nice YTD gain, well above a stock only portfolio whether large or small cap.
And nobody should believe in the PP because of why exactly?
the problem is holding the gains once the fear factor slides . i have very nice gains on the gb but i know the portions that are up are generally only nice and juicy until things calm down and risk is back on again in equity's , as it is most of the time . took some gold profits on thursday .
same thing happened after brexit as double digit gains in gold and bonds evaporated back down to mid single digits again once the temporary fear left.
you can be sure anyone who thought they would seek shelter in the pp after brexit and bought in to the idea of having a nice safe portfolio , was horrified at the double digit losses they had by years end .
when it comes to juicy gains in the flight to safety assets like gold and bonds , it seems these juicy gains are more about timing the markets than time in the markets . their roll in the pp is not big gains but rather mitigating the temporary dips so it is not about holding on to these untypical gains as much as we all would like it to play out that way .
not that there is anything wrong with the pp's returns , but looking at what seems excessive returns in the fear factor assets when they are up usually is something that does not stick around long . it just mitigates the dips and then slides back to more typical action for that asset .
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Re: Nobody believes in the Permanent Portfolio
Because gold doesn't pay dividends, and isn't even backed by anything!farjean2 wrote:As of today, Gold is up over 11% YTD and long bonds > 3% for a very nice YTD gain, well above a stock only portfolio whether large or small cap.
And nobody should believe in the PP because of why exactly?
Re: Nobody believes in the Permanent Portfolio
The best argument for the Golden Butterfly is that the four economic conditions that the PP is designed to leverage don't occur in equal measure in the 35+ year history that we are able to to use for backtesting. Prosperity clearly dominated.
The GB is a bet that Prosperity will continue to be more prevalent than inflation or deflation. That may well be true, but of course we can't know for certain. A Japanese investor, for example, would certainly disagree! If you decide to remain agnostic, stick to the PP.
Another reason to stick to the PP is if you are in my situation: a retirement account that is large compared to your PP savings, and that you can't integrate into the PP. I keep a standard 50/50 stock/bond portfolio in this account. I'm well aware of both its strengths and its weaknesses, and I need the PP to backstop the weaknesses.
The GB is a bet that Prosperity will continue to be more prevalent than inflation or deflation. That may well be true, but of course we can't know for certain. A Japanese investor, for example, would certainly disagree! If you decide to remain agnostic, stick to the PP.
Another reason to stick to the PP is if you are in my situation: a retirement account that is large compared to your PP savings, and that you can't integrate into the PP. I keep a standard 50/50 stock/bond portfolio in this account. I'm well aware of both its strengths and its weaknesses, and I need the PP to backstop the weaknesses.
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
a Japanese investor equivalent here would not be locked in to buying only his country's own stocks and bonds so in that respect that example of what happened in japan would not hold true here. we can invest anywhere in the world .
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Re: Nobody believes in the Permanent Portfolio
sophie wrote:The best argument for the Golden Butterfly is that the four economic conditions that the PP is designed to leverage don't occur in equal measure in the 35+ year history that we are able to to use for backtesting. Prosperity clearly dominated.
The GB is a bet that Prosperity will continue to be more prevalent than inflation or deflation. That may well be true, but of course we can't know for certain. A Japanese investor, for example, would certainly disagree! If you decide to remain agnostic, stick to the PP.
Another reason to stick to the PP is if you are in my situation: a retirement account that is large compared to your PP savings, and that you can't integrate into the PP. I keep a standard 50/50 stock/bond portfolio in this account. I'm well aware of both its strengths and its weaknesses, and I need the PP to backstop the weaknesses.
same here , i hold the gb to 35% or so of all invest-able money right now but the other 65% is invested in the same models i always used and optimized for when the money is needed .
i keep about 5 years withdrawals in an income model that is about 23% equity and the rest various bond funds , years 6-10 are in a growth and income model that is 60% equity and all the rest in a growth model that is 100% equity that will feed us 11-30 years from now .
i find that method helps optimize the portfolio to the time frame .
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Re: Nobody believes in the Permanent Portfolio
MJ,
You say you took some gold profits on Thursday, so is that outside your GB, or are you trading the GB vs. holding it? Or do you rebalance daily....
You say you took some gold profits on Thursday, so is that outside your GB, or are you trading the GB vs. holding it? Or do you rebalance daily....
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
i rebalanced the gold in to the small and midcaps as after the run up in small caps i use an extended market fund which is not as volatile . although it can still be much more than the s&p or total market fund is . as well as cut the gb down a bit to 35% of assets from 40% .eventually i will likely hold at 30% of assets .
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Re: Nobody believes in the Permanent Portfolio
The decision to do this was totally based off your current perception of the markets and that gold has moved too far, too fast, right?
So what drives your next rebalancing decision if gold doesn't do what you expect, and rises to, say, $1325? Do you say oops?
You've obviously been successful investing during your life, but these decision are what always got me screwed. Fixed bands or once a year work better for me.
In my past life I would probably do the level of tweaking you are doing on a multiple times/year rate, and I can guarantee you I'd get the direction wrong >50% of the time.
So what drives your next rebalancing decision if gold doesn't do what you expect, and rises to, say, $1325? Do you say oops?
You've obviously been successful investing during your life, but these decision are what always got me screwed. Fixed bands or once a year work better for me.
In my past life I would probably do the level of tweaking you are doing on a multiple times/year rate, and I can guarantee you I'd get the direction wrong >50% of the time.
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Re: Nobody believes in the Permanent Portfolio
the gb is really just being used as an awe crap portfolio,. but if opportunity presents itself with what i think are gains that are just here temporary and over the top , then i will take some of the profits while they are there . think about what slipped through one's fingers after brexit if you waited until years end .
i think once the fear dies down along with the flight to safety and interest rates rising are back in the spot light the profits will diminish .
i think once the fear dies down along with the flight to safety and interest rates rising are back in the spot light the profits will diminish .
Re: Nobody believes in the Permanent Portfolio
TOP!sophie wrote:The best argument for the Golden Butterfly is that the four economic conditions that the PP is designed to leverage don't occur in equal measure in the 35+ year history that we are able to to use for backtesting. Prosperity clearly dominated.
The GB is a bet that Prosperity will continue to be more prevalent than inflation or deflation. That may well be true, but of course we can't know for certain. A Japanese investor, for example, would certainly disagree! If you decide to remain agnostic, stick to the PP.
Another reason to stick to the PP is if you are in my situation: a retirement account that is large compared to your PP savings, and that you can't integrate into the PP. I keep a standard 50/50 stock/bond portfolio in this account. I'm well aware of both its strengths and its weaknesses, and I need the PP to backstop the weaknesses.
thank you Shopie.
Re: Nobody believes in the Permanent Portfolio
It does not surprise me at all that people do not like the Permanent Portfolio or are at least very wary of it. All things excellent are as difficult as they are rare. In this case, difficult might mean difficulty in accepting the strategy.
Gold is probably the most contentious part of the overall portfolio. It would make sense that the financial community in general would not take too kindly to gold as an investment. I think part of it rests on the fact that the time value of money is the central concept in modern finance. Bonds are marked at the present value of future coupon payments and principal. Stocks are supposedly worth the present value of future dividends along with some growth rate.
What's gold worth? It requires a different way of looking at assets in order to appreciate it.
Gold is probably the most contentious part of the overall portfolio. It would make sense that the financial community in general would not take too kindly to gold as an investment. I think part of it rests on the fact that the time value of money is the central concept in modern finance. Bonds are marked at the present value of future coupon payments and principal. Stocks are supposedly worth the present value of future dividends along with some growth rate.
What's gold worth? It requires a different way of looking at assets in order to appreciate it.
MB
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Re: Nobody believes in the Permanent Portfolio
Very well put.Smith1776 wrote:It does not surprise me at all that people do not like the Permanent Portfolio or are at least very wary of it. All things excellent are as difficult as they are rare. In this case, difficult might mean difficulty in accepting the strategy.
I think one difficulty people face when considering the PP is that it's the ultimate agnostic portfolio, and therefore requires complete financial humility.
It forces one to completely abandon the idea that one might be able to successfully tilt one's portfolio in a particularly profitable direction based on predictions about the future or analyses of past returns.
Humility is difficult.
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Re: Nobody believes in the Permanent Portfolio
Financial humility, perfect!
Waiting for mathjak's 2 cents now....
Waiting for mathjak's 2 cents now....
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
nothing to really say about it . you already know my thoughts
Re: Nobody believes in the Permanent Portfolio
Hello!
GB depending on how much savings you have done and your age.
If you just want to keep the same amount, to be above the inflation, the PP is the answer.
What do you suggest?
GB depending on how much savings you have done and your age.
If you just want to keep the same amount, to be above the inflation, the PP is the answer.
What do you suggest?
- mathjak107
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Re: Nobody believes in the Permanent Portfolio
the gb can be very volatile on a daily basis if that matters to you. that small cap value fund can swing 2 to 3x the s&p 500 on any given day .
get a day when all 4 assets move together and it is greater than my 100% equity model
get a day when all 4 assets move together and it is greater than my 100% equity model
Re: Nobody believes in the Permanent Portfolio
Smith1776, are you the same guy fighting so valiantly in that PP thread on the bogleheads forum? I tried to support you since you were beleaguered from all sides. Your posts there, as here, are great.
I'm not sure the Golden Butterfly is going to be any easier to stomach than the Permanent Portfolio in the long run, because it would only reduce the tracking error slightly. Perhaps a better model would be to use the PP as your safe, core holding, and then indulge yourself with 100% stocks when it's safe to do so. The role of bonds in a standard Boglehead portfolio is to dampen the swings of the stock market, not to counteract them, and it doesn't seem worthwhile for the added risk you take with them. Why not use the PP instead? Psychologically, it would also help you to compare its returns not to the stock market, but to a total bond fund.
If you're starting out in your 20s and ignoring 401K issues for now, you could even do something like this:
1. Save a minimal emergency fund.
2. Save everything into the PP until the cash allocation is big enough to hold a comfortable size emergency fund. Then add in the existing efund.
3. Split future savings into 100% stocks and the PP. Use whatever split you like (50/50, 75/25, etc).
4. At 25 years from planned retirement (e.g. age 40), switch to saving 100% into the PP. Leave the stock funds alone except to rebalance as needed. Alternatively, you could merge them into the PP.
5. If your savings get large enough, figure how big you need your PP to be (could be anything from "25x annual expenses" to "infinite"). Once you hit that cap, start putting all your new savings into the stock portfolio.
This is way too complicated for me, but perhaps it would be helpful for people with the portfolio optimization bug. On the other hand, you don't get to enjoy switching portfolios every few months :-)
I'm not sure the Golden Butterfly is going to be any easier to stomach than the Permanent Portfolio in the long run, because it would only reduce the tracking error slightly. Perhaps a better model would be to use the PP as your safe, core holding, and then indulge yourself with 100% stocks when it's safe to do so. The role of bonds in a standard Boglehead portfolio is to dampen the swings of the stock market, not to counteract them, and it doesn't seem worthwhile for the added risk you take with them. Why not use the PP instead? Psychologically, it would also help you to compare its returns not to the stock market, but to a total bond fund.
If you're starting out in your 20s and ignoring 401K issues for now, you could even do something like this:
1. Save a minimal emergency fund.
2. Save everything into the PP until the cash allocation is big enough to hold a comfortable size emergency fund. Then add in the existing efund.
3. Split future savings into 100% stocks and the PP. Use whatever split you like (50/50, 75/25, etc).
4. At 25 years from planned retirement (e.g. age 40), switch to saving 100% into the PP. Leave the stock funds alone except to rebalance as needed. Alternatively, you could merge them into the PP.
5. If your savings get large enough, figure how big you need your PP to be (could be anything from "25x annual expenses" to "infinite"). Once you hit that cap, start putting all your new savings into the stock portfolio.
This is way too complicated for me, but perhaps it would be helpful for people with the portfolio optimization bug. On the other hand, you don't get to enjoy switching portfolios every few months :-)