Investing new money now

General Discussion on the Permanent Portfolio Strategy

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ochotona
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Re: Investing new money now

Post by ochotona » Mon May 21, 2018 11:01 pm

I'm starting to get the idea that the next few years could be an easier time period in which to invest new money in the PP.

1. cash is actually earning something again
2. bonds are actually earning something again; prices are depressed; buying opportunity
3. eventually, stocks will have another real bear market; buying opportunity
4. gold hasn't really taken off yet

The pivotal moment would be bond yields spike (bond dream room - 4.5% on the 20 year?) which tightens financial conditions, tanks the stock market, and pressures zero-yielding gold back towards $1050.

""When E. F. Hutton talks, people listen"

"When Budd is screaming, PP investors listen"
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Desert
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Re: Investing new money now

Post by Desert » Tue May 22, 2018 5:01 am

ochotona wrote:
Mon May 21, 2018 11:01 pm
I'm starting to get the idea that the next few years could be an easier time period in which to invest new money in the PP.

1. cash is actually earning something again
2. bonds are actually earning something again; prices are depressed; buying opportunity
3. eventually, stocks will have another real bear market; buying opportunity
4. gold hasn't really taken off yet

The pivotal moment would be bond yields spike (bond dream room - 4.5% on the 20 year?) which tightens financial conditions, tanks the stock market, and pressures zero-yielding gold back towards $1050.

""When E. F. Hutton talks, people listen"

"When Budd is screaming, PP investors listen"
Yes! I agree. I'm particularly encouraged by numbers 1 and 2 in your list. With multiple CD's maturing over the next year or two, I'm finally able to buy treasuries again, without losing ~2 percent interest relative to CD's.
Jeffreyalan
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Re: Investing new money now

Post by Jeffreyalan » Tue May 22, 2018 11:19 am

Not to hijack the thread, but for someone who is making regular contributions to the PP, in my case bi-weekly, are there any thoughts as to when or how to invest those funds? Am I better off just buying 25% of each asset bi-weekly? Or should I buy only cash and then rebalance at a set time or when an asset has had a drop? Opinions??
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Cortopassi
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Re: Investing new money now

Post by Cortopassi » Tue May 22, 2018 11:39 am

Jeffreyalan wrote:
Tue May 22, 2018 11:19 am
Not to hijack the thread, but for someone who is making regular contributions to the PP, in my case bi-weekly, are there any thoughts as to when or how to invest those funds? Am I better off just buying 25% of each asset bi-weekly? Or should I buy only cash and then rebalance at a set time or when an asset has had a drop? Opinions??
I buy only cash and only rebalance if something hits the bands, or annually.

I have to date done it annually, but like will change to bands.

I just want to minimize trading. Resultant returns with peak to trough are different based on style, but also different based on the timeframe you look at so I am guessing it is a wash.

I think bands may be best because you are buying severely discounted assets, vs. potentially buying assets all the way down if doing it constantly.
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pugchief
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Re: Investing new money now

Post by pugchief » Tue May 22, 2018 12:11 pm

I buy the lagging asset, with the same idea that it usually happens to be whatever has been discounted by poor recent performance.
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mrbk2fi
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Re: Investing new money now

Post by mrbk2fi » Tue May 22, 2018 1:16 pm

I invest the stock portion of my portfolio along the lines of Paul Merriman's suggestions - worldwide diversity in large, small and value. That seems to help me buy in all market conditions because I'm not focused solely on US investments. I understand this not a pure HB approach, but it works for me.
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Desert
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Re: Investing new money now

Post by Desert » Tue May 22, 2018 3:16 pm

pugchief wrote:
Tue May 22, 2018 12:11 pm
I buy the lagging asset, with the same idea that it usually happens to be whatever has been discounted by poor recent performance.
This has always been my approach as well. It drives a healthy contrarian buying behavior.
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Re: Investing new money now

Post by Jeffreyalan » Tue May 22, 2018 3:28 pm

Desert wrote:
Tue May 22, 2018 3:16 pm
pugchief wrote:
Tue May 22, 2018 12:11 pm
I buy the lagging asset, with the same idea that it usually happens to be whatever has been discounted by poor recent performance.
This has always been my approach as well. It drives a healthy contrarian buying behavior.
So how do you measure the lagging asset? In my case since I am investing in the portfolio every other week, not enough time has passed since the last deposit for any one asset to have moved enough to reach any sort of bands.
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pugchief
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Re: Investing new money now

Post by pugchief » Tue May 22, 2018 4:02 pm

Jeffreyalan wrote:
Tue May 22, 2018 3:28 pm
Desert wrote:
Tue May 22, 2018 3:16 pm
pugchief wrote:
Tue May 22, 2018 12:11 pm
I buy the lagging asset, with the same idea that it usually happens to be whatever has been discounted by poor recent performance.
This has always been my approach as well. It drives a healthy contrarian buying behavior.
So how do you measure the lagging asset? In my case since I am investing in the portfolio every other week, not enough time has passed since the last deposit for any one asset to have moved enough to reach any sort of bands.
I use a google sheets spreadsheet to automatically tell me what % of each of the 4 assets comprise the entire portfolio. If you want 4x25, whichever is the furthest below 25% gets the deposit.
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Kbg
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Re: Investing new money now

Post by Kbg » Wed May 23, 2018 9:11 am

Jeffreyalan wrote:
Tue May 22, 2018 11:19 am
Not to hijack the thread, but for someone who is making regular contributions to the PP, in my case bi-weekly, are there any thoughts as to when or how to invest those funds? Am I better off just buying 25% of each asset bi-weekly? Or should I buy only cash and then rebalance at a set time or when an asset has had a drop? Opinions??
Let's cut to the chase...you can not know the answer (performance wise) in advance. Therefore, it doesn't really matter. I would add a small caveat...unless there are clearly identifiable tax or cost consequences and if so, go with the option that minimizes both.

If you have chosen the classic 4x25% allocation, stay close to it as that is what will keep you closest to the risk/return profile of the portfolio.
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sophie
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Re: Investing new money now

Post by sophie » Thu May 24, 2018 7:33 am

We've had past threads on this, including some simulations that a few of us ran...

The approach that maximizes returns is to contribute equally to all 4 assets. Contributing to the lagging asset is a close second, and may be superior after-tax as it reduces the frequency of rebalancing. I like it also because you end up making fewer purchases and minimizing commissions.

Harry Brown's approach of adding new money to cash is easiest, but resulted in a CAGR around 0.5% less than equal contributions.

I also compared annual rebalancing vs different rebalance bands. Tight bands (e.g. 20-30%) resulted in poorer performance than wider bands (15-35%). Annual rebalancing had the worst performance.

I use kind of a hybrid approach: fixed monthly auto-investments, small extra contributions to cash, and large amounts (e.g. the annual Roth contribution) to the lagging asset(s).
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Kbg
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Re: Investing new money now

Post by Kbg » Thu May 24, 2018 9:33 am

Sophie’s observation is widely backed by research. It pretty much never pays to wait on deploying cash. Of course, all these studies presume the future will be like the past ( past data upon which they are built).
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