Gyroscopic Investing

A few numbers from my various portfolios:

PP (stocks 24-27%, bonds 21%, gold 23%): -0.55%
Vanguard three-fund portfolio (60% stocks/40% bonds): -1.13%
TIAA-CREF (50% stocks & real estate, 50% guaranteed, no bonds): +0.48%
Total market index (VTI): -0.70%

Don't over-interpret obviously as it's only a 3 month period, but I thought the comparison would be kinda interesting. No miracles with the PP, but you can't complain about its ability to contain losses even with two assets losing value. The winner in the mix was due to the TIAA guaranteed annuity, which you can't duplicate anywhere else.

Canadian PP: 0.40%
Federal Bonds (long): 0.68%
Federal Bonds (short): -1.32%
Gold: 4.54%
TSM: -1.95%


Makes me wish I had originally went with 3 month T-Bills rather than 1-5 year bonds for the cash portion. When my short bonds reach the green again (someday...) I'll be switching to T-Bills.

My PP for Q1 is -0.89%. High of 2.66% on Jan 25.

European PP is exactly 0,0 % for Q1 2018.

My version of the GB is down 0.40% for Q1 2018. My buddy's portfolio is down 1.76%, so at least I'm beating him out. Lol!

My PP was down -0.16% in 1st Quarter 2018, pretty much in line with what others have reported here.

As I did an annual rebalance in August 2017, I am now pretty close to 25/25/25/25.

The only “innovation” I am planning for this year for the portfolio as a whole is to switch from an annual rebalance to 35/15 bands. I am hoping that will dampen my urge to tinker even further.

I started my PP in late 2010 with 15/35 rebalance bands, and more than seven years later still haven’t had to rebalance due to one of the volatile assets hitting a band.

Tortoise wrote:I started my PP in late 2010 with 15/35 rebalance bands, and more than seven years later still haven’t had to rebalance due to one of the volatile assets hitting a band.

What have you been doing with new contributions?

Switching from annual rebalancing to 15/35 bands is a result of my growing confidence in the PP. When I started my PP in 2013, I thought I would be limiting buying and selling by rebalancing annually. I have since concluded that using bands will probably yield superior results in the long run, as both desert and tortoise indicate has been their experience.

As I retired two years ago, any new contributions I make will form only a small part of my overall portfolio. Until I hit 70 ½ I am prioritizing Roth IRA conversions and making annual contributions to I bonds and EE bonds- my barbell within a barbell. I also hope that rearranging PP Cash will satisfy any unhealthy urge to tinker with my PP.

Xan wrote:What have you been doing with new contributions?

In my 401(k), which has a small balance (new employer), new contributions every two weeks go automatically to cash until it hits 35%, at which point I rebalance. Simple that way.

In my IRAs and taxable PP, my new contributions are less regular, so I usually just manually buy the lagging asset(s).

Great philophy, to tinker only within the PP assets. It keeps you from doing real damage to your portfolio :-)

Interestingly, I've been "tinkering" with stocks. There's a world of optimization possibilities: forming a collection of directly owned stocks to be held forever for "deep stocks", switching to lower cost funds even if you have to pay a commission, shifting more tax efficient funds to taxable and the others into the Roth, tax loss harvesting etc. I got a bit concerned that 100% FSTVX could be a bit too many eggs in one managerial basket, and it went on from there.

What’s the quote: “the enemy of a good plan is the search for the perfect one”?

It’s fun for a period of time to immerse yourself in the intricacies of each asset in the portfolio. I’m just at the point where I want to free myself from those shackles.

PP has performed on par if not slightly better than other portfolios YTD - depending on allocation to gold and LTT’s. No complaints here.

sophie wrote:Great philophy, to tinker only within the PP assets. It keeps you from doing real damage to your portfolio :-)

Interestingly, I've been "tinkering" with stocks. There's a world of optimization possibilities: forming a collection of directly owned stocks to be held forever for "deep stocks", switching to lower cost funds even if you have to pay a commission, shifting more tax efficient funds to taxable and the others into the Roth, tax loss harvesting etc. I got a bit concerned that 100% FSTVX could be a bit too many eggs in one managerial basket, and it went on from there.

When tinkering with individual stocks, have a sell plan, always. There are some amazingly simple momentum strategies that work with stocks and will get you a nice premium over an index fund. The cost is more volatility. Funds will hold triple digit #s of stocks, but if you are willing to hold low double digits then one can do quite well This is a very nice sweet spot funds can't do because these strategies won't scale for them. Another option is buying something like Berkshire Hathaway and there are other companies that have similar models. Essentially with BRK.A/B and the like you are buying an index fund that will never cost you anything (fee and tax wise) unless you decide to pull the trigger on a sell.

There is an excellent BRK board at the Motley Fool...pretty much read everything by "mungofitch" and you will be well served.

In any event, depending on one's objectives this could be a VP or a small slice/satellite from of the PP stock core. If one does MoMo it will take a lot more of your time. So if more time on investments is not for you, I'd skip individual stocks unless you do something like a buy and forget BRK strategy.

@sophie:
Conceptually, I like the idea of “deep stocks.” I-bonds are attractive as “deep cash” Treasury securities held outside the traditional banking system. Physical gold is likewise “deep gold” that you ideally never sell. Nothing works quite the same way for LTTs, though I think that in one of his threads moda tried to make a case for EE bonds acting, in part, as “deep bonds.”

I don’t think any company issues stock certificates any more. Is it even possible to own stocks outside of a brokerage account with a street name designation? I had a problem similar to yours of being 100% in FSTVX, but I thought I miitgated it by buying ITOT in tax deferred and Roth IRA accounts. ITOT (0.03%) has a slightly lower ER than FSTVX (0.035%) and also provides institutional diversification. Do you expect to reap some effciencies from “deep stocks?” If you put them in taxable to do tax loss harvesting, won’t that be potentially offset by dividends taxed as ordinary income?

jhogue wrote:I don’t think any company issues stock certificates any more. Is it even possible to own stocks outside of a brokerage account with a street name designation?

My feeling on this is that whatever catastrophe has wiped out your brokerage has probably wiped out whatever company you owned stock in anyway.

Another Canadian here,
I run a slightly modified Permanent portfolio, interesting how currency, hedging and exposure can tilt the results. The figures below do not count dividends...

Gold:
CGL.C (unhedged gold etf): +4.76%

Stocks (split between Developed europe and emerging markets without any US or Canada exposure):
VEE (50%): + 5.04%
VE (50%) + 0.60%

Cash:
High interest savings account earning 1.0%: +0.25%

Long Bonds:
ZFL: +0.64%


Q1 OVERALL: +2.1 % (CDN Dollars)

However, it's worth noting that the US dollar ETF valued in Cdn Dollars (DLR) is up 2.76% in q1, suggesting that I'm flat to slightly negative when seen relative to US dollars.

jhogue wrote: Do you expect to reap some efficiencies from “deep stocks?” If you put them in taxable to do tax loss harvesting, won’t that be potentially offset by dividends taxed as ordinary income?

As index funds get to be more of a mainstream investment, I worry that they'll progressively become more attractive targets for gamesmanship (e.g. price manipulation of stocks being added to or taken out of an index). Plus there's always some degree of managerial risk. In the Good Old Days, investing in stocks meant buying, holding, and reinvesting dividends. There's something to be said for that. I don't have time to mess around with momentum plays, so I'm picking Berkshire-Hathaway-blessed leaders and planning on holding them essentially forever. Oddly, it feels almost as good to own individual stocks as it does to own physical gold.

I'm not too fussed about the dividend issue, as I don't anticipate getting to enjoy a < 15% bracket for more than a few years - if ever. The higher dividend payers are going into the Roth anyway.