Discussion of the Stock portion of the Permanent Portfolio
Moderator: Global Moderator
If you want a break from all the bearish talk and look at things from a different angle, check this video out which shows an eerily similar setup between 2018/early 2019 and 1990/early 1991. He shows the possibility that what has happened in 2018 could just have been the shakeout prior to the start of a 90s like long term speculative equity bubble. It's an interesting opinion: https://www.youtube.com/watch?v=yv_LzyF__Js
The rarity of the combination of signals, and just how similar the two time periods look from a price action standpoint. Not to mention 1991 was also ~10 years into a cyclical bull market that most people thought was long in the tooth. I find it interesting at least. It's always good to look at both perspectives. There is a possibility that instead of sitting on the ledge of the next bear market, we could actually be on the launching pad of the next bull market. I can't say that I would complain with a decade long blowoff in the market since my goal is FI within 10 years, haha. We will have to see. It's rare to see bull thesis like that these days, so it's a nice reprieve from all the doom and gloom that has been in the financial media lately.
25% stock allocation just about perfect for these confusing times without any clear signals. Gasp where have I seen that 25% figure before???
There is definitely a lot of wisdom in permanently holding some of all asset classes just in case. Even in times when the direction and trend seems certain, the market really can do anything.
Was this posted here yet? "The Key To Investing Success Is Less Stress." Advocating for 35% stocks:
Financial advisers will generally recommend what has become the standard asset allocation, which is 80 percent in stocks and 20 percent in bonds, with investors allocating more to bonds as they age. But even that is too risky. Some well-known hedge funds have put out papers saying that even a 60/40 portfolio isn’t well diversified when viewed from the perspective of how each asset class contributes to the overall risk of the portfolio.
I propose an allocation to stocks of 35 percent for all investors in all circumstances, and an allocation to bonds of 65 percent. The reason being is that most advisers focus on returns to the exclusion of all else. They start by asking how much money you want in retirement, then they have you figure out how much you are willing to contribute and back out the rate of return you need. Most people assume an 8 percent return from an equity portfolio. I’m not going to quibble with the historical returns of the stock market—everyone knows what they are—but I will say that few people realize those returns because of suboptimal behavior along the way. In other words, buying on the highs and selling on the lows. Or, they only faithfully dollar cost average on the way up.
Only a few prefer liberty-- the majority seek nothing more than fair masters.
- Gaius Sallustius Crispus
- Gaius Sallustius Crispus
35% also happens to be pretty close to risk parity.
I feel like we are playing ping pong. Every other day we are just bouncing back and forth between about 2800 and 2820. Neither level wants to give.
PMWARD, USMV iShares Edge MSCI Minimum Volatility USA ETF looks like a possibility. It has several years of track record, seems to work as designed, tested out will during Q4 2018. I could get back to my 40% stock position and only be exposed to 25% SPX volatility. Only 15 bips expenses.
Is it going to be for a long term hold or just a temporary thing? Low vol as a factor has done pretty well on the whole, but for the part of your equities that is in your PP I think that volatile assets are a part of what makes the PP strategy work as a whole. Low vol might be something you could do temporarily on anything above that. Though this might at least be worth a read: https://www.etf.com/sections/index-inve ... nopaging=1
Oh geez, USMV is at 52 week highs. Everyone is piling into it. Not a good idea. SCHD, a dividend payer, is a better idea. I could use the div to buy some put options.pmward wrote: ↑Thu Mar 28, 2019 6:06 pmIs it going to be for a long term hold or just a temporary thing? Low vol as a factor has done pretty well on the whole, but for the part of your equities that is in your PP I think that volatile assets are a part of what makes the PP strategy work as a whole. Low vol might be something you could do temporarily on anything above that. Though this might at least be worth a read: https://www.etf.com/sections/index-inve ... nopaging=1