Gyroscopic Investing

williswine wrote: ↑Wed Jun 20, 2018 7:10 pm Tyler, would you mind sharing which fund or ETF you are now using for SCV? If you are investing in a taxable account, have you considered using Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX)? I recall reading at bogleheads that at least some people found it has a small cap value orientation. Of course some ETFs may be sufficiently tax-efficient there as well... thanks!

I personally use VBR, but there are several good SCV ETFs out there. I'm not familiar with VTMSX so don't have much to offer on that front.

Personally I use IJS as my core holding and have been happy aside from the low trading volume. Prices can stay fixed for 10-15 minutes until they adjust if there is a large move in either direction.

Supposedly it is more small and value oriented than most, which differs from others I’ve seen that include a healthy dose of mid-caps as well.

Indeed, the choices are many. VBR's E/R is appealing. IJS may have low trading volume but other offerings had even lower ones last time I checked: PXSV is one example, despite being considered by some bogleheads as having an ideal profile, perhaps better than even DFA US Small Cap Value. Of course, the difference in E/R (PXSV is at 0.39%) compared to VBR (0.07%) may take away any advantage PXSV may have over VBR in terms of "small-ness" and "value-ness"...

What's wrong with large growth? That's basically the S&P 500, isn't it?

I actually think that the US stock market includes international diversification. Most of the big corporations operate internationally to a large extent. Plus, gold is a form of international diversification. Assuming you hold the stuff, or enough of it, as in around 20% not 5%.

I only bother with international stocks in my 403b portfolio, where I can't hold gold.

Desert wrote: ↑Mon Jul 23, 2018 8:42 am Sophie, I don't think there's anything particularly wrong with Growth stocks, but value stocks have generally performed better in the past, probably for a variety of reasons. Some folks are also not real happy with the fundamental structure of large cap weighted indices like TSM or S&P500, since they tend to be dominated by a few large growth companies, inherently leading investors to "buy high" as those stocks occupy an increasing percentage of the index. I haven't totally bought into that theory, but I can see a bit of the point. The outperformance of the S&P 500 equal weighted index is often used to support this idea.

Anyway, I think my last post included backtesting that is probably getting too detailed/granular anyway. But I do think a foreign allocation could make sense, even though U.S. companies do a lot of business overseas. I think of Japan (and no, I don't think w'ere in a 1990 Japan-style bubble), with all their business overseas, and their status as the second largest economy in the world, and yet their stock market went into a multi-decade decline. So while I don't think it'll play out that way in the U.S., I wouldn't mind diversifying a bit just in case. Also, foreign stocks have underperformed domestic stocks pretty heavily in recent years. Foreign stocks and gold look the most interesting to me right now, since everyone hates them again.

I'm going to be a bit persnickety here...cuz it matters. What we can say is value and growth have periods where one outperforms the other and which is which is a function of the start and end dates (see the gold thread where I picked various dates of stocks vs. stocks...you can find exactly the same thing here.)

When I transitioned into the GB a couple of years ago I set things up so that all of the SCV is in my Roth IRA's.

So how is the GB doing so far this year?

Don wrote: ↑Thu Oct 04, 2018 9:06 pm So how is the GB doing so far this year?

The beauty of only dealing with annual data is that I honestly didn't know and had to look it up.

According to ETF replay, a perfectly rebalanced GB is basically at the same place it started YTD (down 0.4%). My own portfolio is slightly up. So not great by any means, but well within historical norms in terms of range of possible returns.

Tyler wrote: ↑Thu Oct 04, 2018 9:23 pm

Don wrote: ↑Thu Oct 04, 2018 9:06 pm So how is the GB doing so far this year?

The beauty of only dealing with annual data is that I honestly didn't know and had to look it up.

According to ETF replay, a perfectly rebalanced GB is basically at the same place it started YTD (down 0.4%). My own portfolio is slightly up. So not great by any means, but well within historical norms in terms of range of possible returns.

Thanks. Tyler, I like your portfolio based on the eye test. How would it look with a 10% SCV and 30% TSM? I'm looking for less down years and a slightly lower CAGR. I'm retired.

I'd also prefer something like 10% gold and 30% STTs for stability. Just by the eye test.

30%TSM
10% SCV
20% LTTs
30% STTs
10% gold

Sorry, I'm not very good using your charts or I'd do it myself.

Don wrote: ↑Thu Oct 04, 2018 9:44 pm Sorry, I'm not very good using your charts or I'd do it myself.

I recently updated the charts to be a little easier to use. Try this: https://portfoliocharts.com/portfolio/my-portfolio/ Just enter the percentages you want to study in the black boxes, and everything should update automatically.

But in general, even without looking at the charts I personally have no problem with your tweaks as long as the portfolio meets your needs. The best asset allocation is one that you're comfortable sticking with.

Hey all, I just wanted to resurrect this thread because it seems the Golden Butterfly has been gaining traction as a topic of conversation as of late. This thread has a ton of useful information and perspective on the allocation.

I'm still not the biggest fan of the name (;D), but the allocation is certainly phenomenal!

Smith1776 wrote: ↑Wed Dec 18, 2019 5:42 pm Hey all, I just wanted to resurrect this thread because it seems the Golden Butterfly has been gaining traction as a topic of conversation as of late. This thread has a ton of useful information and perspective on the allocation.

I'm still not the biggest fan of the name (;D), but the allocation is certainly phenomenal!

Thanks for resurrecting the thread! I've moved from classic PP to GB a few years back and I like it.

foglifter wrote: ↑Wed Dec 18, 2019 7:14 pm

Smith1776 wrote: ↑Wed Dec 18, 2019 5:42 pm Hey all, I just wanted to resurrect this thread because it seems the Golden Butterfly has been gaining traction as a topic of conversation as of late. This thread has a ton of useful information and perspective on the allocation.

I'm still not the biggest fan of the name (;D), but the allocation is certainly phenomenal!

Thanks for resurrecting the thread! I've moved from classic PP to GB a few years back and I like it.

Yup!

This thread reminds me of a redux version of the original PP thread back on the Bogleheads forum.

foglifter wrote: ↑Wed Dec 18, 2019 7:14 pm

Smith1776 wrote: ↑Wed Dec 18, 2019 5:42 pm Hey all, I just wanted to resurrect this thread because it seems the Golden Butterfly has been gaining traction as a topic of conversation as of late. This thread has a ton of useful information and perspective on the allocation.

I'm still not the biggest fan of the name (;D), but the allocation is certainly phenomenal!

Thanks for resurrecting the thread! I've moved from classic PP to GB a few years back and I like it.

Soon I will be going back to read all of these prior posts for the first time. I'm still in the process of creating my plan to go Permanent Portfolio but from what I've read about the Golden Butterfly it is an option that I am considering.

Vinny

I'm implementing it from an EU perspective. If anyone is interested in my list of funds, please let me know.

i tend to look at pp vs gb as i do investing when i was in my accumulation stage.

in my early days when i was in my accumulation stage i was always 100% equities .. if i was down it did not matter much as i had decades to go but also because my fuel tanks were relatively empty and if i crashed and burned , well at that stage there was not a lot to burn since the tanks were not anywhere near full .

today a mere 7% drop in my portfolio represents about 10 or 11 years in 401k contributions at catch up .. back then maybe it represented a few months .

so , if you were heavily invested in broad based equity funds the last 11 years you likely made quite a lot in gains . you made your money and not only that the gains were so juicy those gains can hold you for quite a while through crappy times and you would still have done well .

so with all those gains banked at this point , 11 years in to a bull , and the most chaotic gov't i can remember , i like going more conservative at this point and preserving those juicy gains so in that case i would go 2/3's pp and one third whatever model i like , but keeping equities in the 25-30% range with low beta equity funds ( no small cap value 600) which can be volatile as heck} would be an overall target .

but if one is first starting out , or missed most of the gains so far then i would go gb since there is no gains to preserve , you need the growth and more growth may be warranted over preserving big gains you have not accumulated .

by the same token if we correct 10% or more i would move back to the gb in my situation since at least some of the froth is out and i can pick up a 10% savings over not doing anything .... i would move from the overall 30% equity position back to as high as 50% .

but with multiple 6 figure gains just this year alone i have no intention of riding much of it back down . if anything i will get exra alpha trading in and out of gld and tlt since the worst that can happen is i may lose some gain but the money would just be in cash waiting to get back in .

the extra gains i racked up already doing this would carry me over any way so basically at this point it is win /win .

so i think if someone is gun shy this could be a time for the pp if you already made those nice juicy gains and time for the gb if you did not .

I just realized recently that I must be an odd duck. Many investors and advisors opt for a glidepath approach to their portfolios. They become more conservative over time.

I really don't like this line of thinking. Unexpected expenses pop up everywhere and at anytime in life. And in your younger years, things like the first house, marriage, tuition, and the first kid are expenses that need to be paid. If anything, I think young people may sometimes need to take LESS risk than older folks. Especially when older people have more money in absolute terms, their marginal utility for dollars is lower.

It's one of the reasons why I like the GB/PP. A static allocation works just fine for me. We can glidepath all we want because we think we know and can plan our future with some precision, but we really can't. Unexpected risks and expenses are surprisingly unexpected.

In other words: sh*t happens.

There is zero logic to the young , mitigating temporary short term dips with bonds and hurting long term performance permanently. So the young should be fully invested ...if they have a low pucker factor then they should use a 3rd party to handle things ..

There is no evidence that gun shy investors stay the course any better because they just have lower trigger points . The Morningstar investor data shows us balanced funds show the same bad investor behavior

Allocations in the 40-60% range to equities have had the best success rates for a retirement draw at 4% or higher .... 90% of the 119 rolling 30 year periods ended with more than you started with . 67% ended with 2x what you started and 50% ended with 3x ..

Odds of failure were 5% , about the same odds as ending with 6x what you started with so sequence risk goes both ways

mathjak107 wrote: ↑Thu Dec 19, 2019 3:37 pm There is zero logic to the young , mitigating temporary short term dips with bonds and hurting long term performance permanently. So the young should be fully invested ...

Allocations in the 40-60% range to equities have had the best success rates for a retirement draw at 4% or higher ....

We'll have to agree to disagree there then, or maybe we imagine different circumstances with young people.

Having small savings and not much of a buffer, on top of expenses always seeming to come out of left field, I would feel extremely uncomfortable in anything other than a PP type of portfolio.

Smith1776 wrote: ↑Thu Dec 19, 2019 3:40 pm

mathjak107 wrote: ↑Thu Dec 19, 2019 3:37 pm There is zero logic to the young , mitigating temporary short term dips with bonds and hurting long term performance permanently. So the young should be fully invested ...

Allocations in the 40-60% range to equities have had the best success rates for a retirement draw at 4% or higher ....

We'll have to agree to disagree there then, or maybe we imagine different circumstances with young people.

Having small savings and not much of a buffer, on top of expenses always seeming to come out of left field, I would feel extremely uncomfortable in anything other than a PP type of portfolio.

Show us any accredited study that takes that stance , that those saving for retirement should go with anything but pedal to the metal ..no one should be investing in volatile assets without a decent emergency fund ...you need to differentiate what the money is for and the time frames .

But retirement money with decades to go should be in very high equity portfolios , there is no logic that will show otherwise.

Retirement wise 40-60% equities have been through the worst of times and work fine.

As I said there is no financial logic to mitigating temporary dips as a long term investor with decades to go and permanently reducing long term results.

You may justify it mentally but that is a different issue than financial logic

mathjak107 wrote: ↑Thu Dec 19, 2019 3:41 pm
Show us any accredited study that takes that stance

I don't have one, but I don't think that matters or is relevant to this discussion. I don't have any accredited study telling me to look left and right before crossing the street, but I still do it. I don't need an accredited study to use my sensibilities.

My point is this: many young people are teetering on the edge, and that's on top of needing to pay for expensive tuition, their first car, etc. They probably also want to buy their first home once their career gets started. So they need to save for a downpayment. That doesn't sound like someone who can take a lot of equity risk.

Either way, I've made my case, so again, we'll just have to agree to disagree.

mathjak107 wrote: ↑Thu Dec 19, 2019 3:41 pm

You may justify it mentally but that is a different issue than financial logic

The financial logic is pretty simple. You have many upcoming expenses you need to pay for when you're young and getting started. You can't take risk with the money you want to use for your home downpayment or first car.

Separating your emergency fund from your portfolio is nothing more than mental accounting. So if i'm justifying something mentally but not using financial logic, then we're both guilty.

Like, really, most young people don't even have the money for a full emergency fund, so one could argue that all their savings should be in cash (in other words, LOW risk). So, really you and I are in agreement to a certain extent.

Either way, I'm not responding to this anymore.

Smith1776 wrote: ↑Thu Dec 19, 2019 3:53 pm

mathjak107 wrote: ↑Thu Dec 19, 2019 3:41 pm

You may justify it mentally but that is a different issue than financial logic

The financial logic is pretty simple. You have many upcoming expenses you need to pay for when you're young and getting started. You can't take risk with the money you want to use for your home downpayment or first car.

Separating your emergency fund from your portfolio is nothing more than mental accounting. So if i'm justifying something mentally but not using financial logic, then we're both guilty.

Like, really, most young people don't even have the money for a full emergency fund, so one could argue that all their savings should be in cash (in other words, LOW risk). So, really you and I are in agreement to a certain extent.

Either way, I'm not responding to this anymore.

We are talking long term money in 401ks , iras ,etc .......

Most of us start out with nothing ....but we devote as much as we can to retirement and as much as we can to living now .....it is like fighting a war ....you can’t pull from one front to shore up another front or you win a battle and lose the war .

You need a lot of money to compensate for decades of lower growth or you risk having an underfunded retirement.

Going to conservative for decades has a price to pay later on so you better save a load of dough to compensate....

But pre retirement or in retirement the pp is fine ....it can be great for PRESERVING THE ASSETS YOU GREW and keeping you ahead of inflation...unless you can bank some serious bucks from your income and have the luxury of being less aggressive during the growth years .

When I started in 1987 a hypothetical 10k in the fidelity insight growth model grew to 268k by 2017 .....the data I show on line says the pp grew to about 135k over the same time frame ....it stopped at 2017 so that is as far as I could compare ...today the 10k is worth 321k in the fidelity insight growth model ..

The same 10k in the insight sector portfolio in 1988 was 391k by 2017 and 421k today .


So you need to save an awful lot to compensate over decades of growth

What if your lifestyle at retirement would be fully funded by the amount generated by the PP or whatever “suboptimal” portfolio you chose?

flyingpylon wrote: ↑Thu Dec 19, 2019 7:44 pm What if your lifestyle at retirement would be fully funded by the amount generated by the PP or whatever “suboptimal” portfolio you chose?

Actually, I think you do bring up an excellent point. The biggest factor in what determines your wealth upon retirement is really just your savings rate. Dan Bortolotti has some excellent work/podcasts on this.

Budgeting, saving, and being prudent is so much more important than quibbling about portfolio construction. But saving isn't sexy. Talking shop about exotic portfolios and trading strategies is.

As long as your allocation is something reasonable, just stick with it. Our personal budgeting and planning is what should take centre stage.