PP Europe (Germany)

General Discussion on the Permanent Portfolio Strategy

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brownehead
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Re: PP Europe (Germany)

Post by brownehead » Wed Jan 23, 2019 12:52 pm

That's the "current yield", what is usually used as "yield" is the "yield to maturity":

https://www.investopedia.com/terms/y/yi ... turity.asp
johntaylor
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Re: PP Europe (Germany)

Post by johntaylor » Wed Jan 23, 2019 4:28 pm

brownehead wrote:
Wed Jan 23, 2019 12:52 pm
That's the "current yield", what is usually used as "yield" is the "yield to maturity":

https://www.investopedia.com/terms/y/yi ... turity.asp
Thanks that helped.
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I could calculate the 'rendite' /YTM now myself and got the same outcome as on the info of the bond it self. But I still have more questions about bonds and placed them in the right forum:
viewtopic.php?f=3&t=9824
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Re: PP Europe (Germany)

Post by johntaylor » Thu Jan 24, 2019 9:25 pm

Okay, so now I am quite confident I have calculated returns and cagr's for both etf bonds and LT german bonds in such a way that they can be compared. First the overall results in a table:
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The year returns differ quite a bit between the different funds. This triggered me in the first place and made me consider changing my current etf's (50% exx6, 50% e20y) for LT german bonds as they clearly had higher returns then the etf's. But I realized that this could also be purely coincidental. So therefor I also calculated the returns on monthly base and presented them in a chart. I also calculated the cagr's both from 2014-1-1 onward and 2016-1-1 onward and presented them in the charts underneath.
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Both the chart with prices (not here) and the one with returns look for all funds quite similar,but both the cagr's from 2014-01-01 and the cagr's from 2016-1-1 are diverging quite a bit between all the funds. exx6 (etf) looks most different from the others and I can explain that, because exx6 is more MT then LT bonds and so quite different from the other funds. All LT bonds and the e20y etf look more similar which I would expect. But the final cagr still has a difference of 1.5% between de highest and the lowest of the funds.

On this information I consider ending the exx6 etf, but keep e20y etf for the moment. I will change exx6 for the most recent LT german bonds.
brownehead
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Re: PP Europe (Germany)

Post by brownehead » Fri Jan 25, 2019 6:18 am

The differences you've found with different bond maturities (including the EXX6) are expected: longer bonds are more volatile so you can expect bigger ups and downs with perfect correlation. However, with the e20y ETF you can expect some different behavior, as it includes less quality bonds, and my understanding is that for the bond part of the PP ideally you need the best bonds (i.e. with best rating/lower yield).

I base this assumption not only on Harry Browne teachings, but also on empirical data because at years which we more needed bonds in EuroPP (2008, 2011 and perhaps 2018) German long bonds where quite superior. Anyway, I think a mix of e20y and longest bund is a good enough choice, because selling and buying the German bonds as years go on is not so convenient.
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