Gyroscopic Investing

mathjak107 wrote:i didn't refer to the pp as a doomsday portfolio . i was referring to mitigating short term temporary dips having no logic for a long term investor with a long term perspective . heavy betting against each other is for mitigating things in the short term as long term these dips have no meaning .

According to Tyler's website, the longest drawdown was ~3 years. So people should not invest in the PP unless their time horizon is > 3 years. No point worrying too much about the daily movement of the different assets.

This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:

I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.

I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

I think you're doing the right thing. As much as I love the pp, telling him about that first might be like that story about the people who are afraid of melons. You know, the normal guy goes to the Land of Melons, where people are terrified of them and think they're monsters. Normal guy takes out a machete and cuts one in half. "See? Nothing to fear," he says. They freak out and kill him.

Another normal guy, but wiser, comes along and finds that these people fear melons. He says, "Yes, shh, we better tread carefully, and gradually, over time, teaches them that there's nothing to fear.

Anyway, hooray for your brother. I can picture you starting him off with a boglehead-type lazy portfolio. Eventually he might ask, "Is this what you do?"

For what it's worth, I have a sister who works at a brokerage firm and she's never bought bonds either. (Sunday edit: sister-in-law)

sophie wrote:This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:

I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.

I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

I told my Friend Charles there are only three things that MIGHT sense in this funny world:
VWIAX
PP
Ladder of CD or Treasuries

sophie wrote:

I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.

I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

At least introduce him to Harry's writing on investing. Given that he's already decided to split his investments into risk-taking and conservative buckets, the Permanent/Variable Portfolio concept will resonate with him.

Harry has some good writing on speculative investing in "Why the Best-Laid Investment Plans..." Page 276 "Spring Cleaning" seems relevant here:

"Try to begin the Variable Portfolio from scratch, with a sum of cash. Once you've actually dumped all the baggage you've acquired over the years -- the Edsel stock, the strategic metals, the Imperial Russian bonds, and the Vegematic -- you'll probably find that you're delighted to be rid of it all. With the cash in hand, you can buy for the Variable Portfolio whatever seems best now -- rather than living with what you did two or three or ten years ago."

Thanks Jack!

I pointed him to the Bogleheads website to start with. The Best Laid Plans book is great, but it's too long. And Fail-safe investing would introduce him to the PP. Maybe I can just send him that and tell him to read just the "golden rules" part. The radio show would be great too. Harry does such a beautiful job of explaining the "golden rules" concepts on that show.

Like, "why would someone who has a sure-fire way to beat the market write a newsletter, instead of using their system to beat the market and then buying an island in Tahiti?" [I made up that last part :-)]

sophie wrote:This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:

I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.

I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

Early wins are very deceptive and can lead people into false beliefs. Many never figure it out, but at least your brother is smart enough to see it now. I work in the casino biz and we love it when a new player hits a big jackpot... because we know the hook has been set. They, more often than not, try to recapture that high. Buying a penny stock and having it skyrocket probably has the exact same feeling, with one exception... one might be inclined to think it's all skill... so it's a vindication of their brilliance as opposed to just "being lucky".

I helped my good friend a couple of years ago by telling him to fire his financial advisor (who was doing an immensely terrible job and charging him a fortune) and to google lazy portfolios. He picked a portfolio I don't particularly care for, but one he really likes. He continues to thank me to this day for that. I would start there with your brother. It's easy and fun to explore for someone new to passive investing. If he inquires further, take the next step with him.

He picked a portfolio I don't particularly care for

Was it Sheltered Sam?

dualstow wrote:

He picked a portfolio I don't particularly care for

Was it Sheltered Sam?

No. Though I'm not fond of that either.

He never gave me the name of the allocation, but it went something like this:

30% Total Stock Market
20% Total Bond Market
20% Inflation Protected Bonds (TIPS)
15% REIT
15% Emerging Markets

He then shifted to equal weights of each.

It's not a terrible portfolio, really. It's a million times better than the 50% Large Cap Blend, 50% High Yield Corporate Bonds his "advisor" had him in. I'd obviously prefer some Gold in there and I've never been a fan of Emerging Markets, so I'd dump those for sure.

eufo wrote: He never gave me the name of the allocation, but it went something like this:

30% Total Stock Market
20% Total Bond Market
20% Inflation Protected Bonds (TIPS)
15% REIT
15% Emerging Markets

He then shifted to equal weights of each.

It's not a terrible portfolio, really. It's a million times better than the 50% Large Cap Blend, 50% High Yield Corporate Bonds his "advisor" had him in. I'd obviously prefer some Gold in there and I've never been a fan of Emerging Markets, so I'd dump those for sure.

I think you'd be doing your friend a favor if you talked him into selling half of his EM allocation, and buying gold. It's an OK portfolio, if he's younger. If he's over 50, he's going to have trouble when the 60% stocks and REIT lose 1/2 or more of their value in the next bear market.

eufo wrote:

sophie wrote:This post isn't about the Permanent Portfolio so much as active vs. passive investing, which most of the posts in this thread (and many others) are really about.

My brother has long been a staunch believer in market timing with stocks as the best way to invest. He's also become increasingly busy, between family and his business. Today, to my amazement, I got an email from him asking for advice about index funds. Here's an excerpt from it that deserves to be immortalized:

I bought my house on XXX stock I bought at $00.14 and sold at $3.75. I fear that move may plague me throughout my lifetime into thinking I can win the stock market bet. Right now, I am $(a large number)K up on several stocks, but also $(large number + 5)K down on some others. All this investing and trading and watching the stock market in order to lose some money in the end. Just silly I'm realizing. Not worth the effort.

Anyway, I'm thinking of keeping the money I have in the market, and everything moving forward quickly put into index funds so that I am not tempted to trade it. That way I can plan responsibly for my future but still have something to satisfy my risk taking appetite.

I'm debating whether to go whole hog and introduce him to the Permanent Portfolio, but I think I'll start slow with the simplest possible stock/bond mix first. He's never bought a bond or fund in his life!

Early wins are very deceptive and can lead people into false beliefs. Many never figure it out, but at least your brother is smart enough to see it now. I work in the casino biz and we love it when a new player hits a big jackpot... because we know the hook has been set. They, more often than not, try to recapture that high. Buying a penny stock and having it skyrocket probably has the exact same feeling, with one exception... one might be inclined to think it's all skill... so it's a vindication of their brilliance as opposed to just "being lucky".

I helped my good friend a couple of years ago by telling him to fire his financial advisor (who was doing an immensely terrible job and charging him a fortune) and to google lazy portfolios. He picked a portfolio I don't particularly care for, but one he really likes. He continues to thank me to this day for that. I would start there with your brother. It's easy and fun to explore for someone new to passive investing. If he inquires further, take the next step with him.

I was very fortunate in that my first attempt to outsmart the market led to an almost instant margin call, which convinced me to avoid margin afterwards.

eufo wrote:
He never gave me the name of the allocation, but it went something like this:

30% Total Stock Market
20% Total Bond Market
20% Inflation Protected Bonds (TIPS)
15% REIT
15% Emerging Markets

He then shifted to equal weights of each.

It's not a terrible portfolio, really. It's a million times better than the 50% Large Cap Blend, 50% High Yield Corporate Bonds his "advisor" had him in. I'd obviously prefer some Gold in there and I've never been a fan of Emerging Markets, so I'd dump those for sure.

Sounds like a 60/40 Swenson-ish.

http://www.npr.org/2015/10/17/436993646 ... portfolios

ochotona wrote: I think you'd be doing your friend a favor if you talked him into selling half of his EM allocation, and buying gold. It's an OK portfolio, if he's younger. If he's over 50, he's going to have trouble when the 60% stocks and REIT lose 1/2 or more of their value in the next bear market.

Indeed I would, but I never offer advice unless I'm asked. When he originally asked I wasn't comfortable with gold like I am now. I've mentioned that I hold gold, but unless he asks I won't interfere. Like I said, he's very happy with it.

Libertarian666 wrote: I was very fortunate in that my first attempt to outsmart the market led to an almost instant margin call, which convinced me to avoid margin afterwards.

I'm sure you didn't feel fortunate in that moment, but at least you learned early instead of late. Can you imagine amassing a fortune and then getting margin called out of it? A disaster sure to befall some unlucky fool.

Dieter wrote: Sounds like a 60/40 Swenson-ish.

http://www.npr.org/2015/10/17/436993646 ... portfolios

That is rather close. I know for sure there was no talk of Developed International, but other than that, extremely close. It still ends up being like a 60/40, though REITs can be a bit feisty when compared with normal equities.

A picture is worth a thousand words... A variable chart is worth a thousand pictures...I think a great place to suggest to "seekers" is to send them to Tyler's excellent portfoliocharts.com site and let them play with the various portfolios or plug in what they are now doing and see how the compare. They might find out on their own that perhaps a little gold dust is just the secret ingredient they have been looking for.

https://portfoliocharts.com/

eufo wrote:Indeed I would, but I never offer advice unless I'm asked.

Very wise!

PP67 wrote:A picture is worth a thousand words... A variable chart is worth a thousand pictures...I think a great place to suggest to "seekers" is to send them to Tyler's excellent portfoliocharts.com site and let them play with the various portfolios or plug in what they are now doing and see how the compare. They might find out on their own that perhaps a little gold dust is just the secret ingredient they have been looking for.

https://portfoliocharts.com/

Try:

15% Total Stock Market
15% Mid cap Value
25% Small cap Value
20% Long term Treasuries
25% Gold

Modeljc Butterfly? 7.7% REAL RETURNS

That might be why NO BELIEVES IN THE PERMANENT PORTFOLIO?

PP RETURNS ARE SMALL AND BORING AND WE ALL HOPE FOR MORE

I don't know if HB's book is too simple for some analytical types. I think maybe you need to have battle scars to appreciate it fully.

Sophie I would recommend Berstein's Four Pillars book. Assuming he is smart and analytical. It really showed me the error of my ways as far as using active funds, let alone stock picking.

So are the principles espoused by Benjamin Graham still valid today, or should you just say "I don't know what is going to happen" and go for the PP?

http://www.conscious-investor.com/books ... vestor.pdf

modeljc wrote: Try:

15% Total Stock Market
15% Mid cap Value
25% Small cap Value
20% Long term Treasuries
25% Gold

Modeljc Butterfly? 7.7% REAL RETURNS

That might be why NO BELIEVES IN THE PERMANENT PORTFOLIO?

PP RETURNS ARE SMALL AND BORING AND WE ALL HOPE FOR MORE

Add in 10% to 15% cash, by removing say 5% SCV and 5% to 10% gold, and rebalance annually, and I'd say that would be a lot better portfolio than what most people have.

I believe!

Gold could drop like a stone tomorrow, but the bond and gold bears continue to be wrong, and right. You just never know. TLT is coming back, and silver/gold are leading the pack.

Cortopassi wrote:I believe!

Gold could drop like a stone tomorrow, but the bond and gold bears continue to be wrong, and right. You just never know. TLT is coming back, and silver/gold are leading the pack.

Judging from about 8 years in the PP, you can almost always count on gold and long bonds to lead the pack when there is bad news on the horizon. You just have to hope the bad news doesn't fully materialize.

Cortopassi wrote:I believe!

Gold could drop like a stone tomorrow, but the bond and gold bears continue to be wrong, and right. You just never know. TLT is coming back, and silver/gold are leading the pack.

https://i.imgur.com/UyHO6BL.png

Hey, didn't you just finish telling me not to jinx it?

It's always a little bittersweet when gold and bonds are strengthening. I'm currently overweight both in my long and slow transition from PP to semi-GB. Days like today feel pretty good in my brokerage account, but at what cost? I really hope peace prevails.

dualstow wrote:

Cortopassi wrote:I believe!

Gold could drop like a stone tomorrow, but the bond and gold bears continue to be wrong, and right. You just never know. TLT is coming back, and silver/gold are leading the pack.

https://i.imgur.com/UyHO6BL.png

Hey, didn't you just finish telling me not to jinx it?

I prefaced with "Gold could drop like a stone tomorrow..."

Hi pp friends.

Is there any low volatility and higher returns portfolio?

I believe not, so this is the best.

Am I right?

Happy easter!