Poll Regarding LTT Allocation for Newbie

[stuper1]

If you vote for anything besides 25% in bonds, please tell us what percentages you would put in stocks/bonds/cash/gold.

As you can tell, I'm looking for advice to set up my PP or strategically-tilted-PP, as the case may be.

Thanks!

[stuper1]

Somebody voted for 15% but didn't provide a recommended allocation for stocks/bonds/cash/gold.  Come on now; don't be shy.  And don't worry about leading me astray; I'm taking all of this under careful advisement and will probably just stick with the 4x25, especially since that's what most people are advising so far.  But I am interested in what different people think.

[dragoncar]

People are voting 25%, but the poll assumes you are "starting into the PP".

In other words, we don't know IF people would start a PP now, or what percent of their assets would be dedicated to a PP vs a VP.

I suspect many people who want to tilt would Do something like 50% PP, 50% equities.  But the PP portion would still be 25% bonds.

Just sayin (I voted 25%)

[stuper1]

What I'm trying to ask is whether you would go a bit light on LTTs right now, if you were planning to start into the PP with 100% of your assets.  I don't want a VP.

I know that a PP starting with less than 25% LTTs isn't really a PP, but I'd rather leave that aside for now.

[rocketdog]

What I'm trying to ask is whether you would go a bit light on LTTs right now, if you were planning to start into the PP with 100% of your assets.  I don't want a VP.

I know that a PP starting with less than 25% LTTs isn't really a PP, but I'd rather leave that aside for now.

In that case, given your scenario I probably would go a little lighter on LTT if I was starting a 100% PP now.  But then I don't much like any asset class at the moment: too many things feel "toppy" to me.  Stocks might have some room to run as more people feel it's "safe" to invest again, but summertime is approaching and that's historically been a soft period for stocks.  So who knows what's going to happen? 

Maybe you could buy into a PP a little at a time, say 5% in each holding every couple of months.  That would increase your costs a bit and probably wouldn't buy you any better performance than an "all-in" approach, but it might make you sleep a little better. 

[rhymenocerous]

I voted for 25%, but this is my opinion on the matter:

1. If you want a 25x4 split, then that means that you want the volatility of LTTs, Gold, and Stocks in equal proportions.  It doesn't make sense to start out at anything but 25x4 because then you'd be undermining the safety of that allocation.  If you DCA into 25x4 and the market stays flat, then you'd essentially be in the exact same place as if you had just bought everything right from the start.  Thus, if you have a problem with 25x4 in the beginning, you will have a problem with it when you've DCAed into it.

2. The PP is meant to be agnostic about the future.  The founding premise is that no once can predict the future. You are making an implicit prediction that LTTs will crash.  That shouldn't bother you, because one of the other assets will go up and you'd use those profits to buy cheaper LTTs.  I don't know what it is about interest rates, but it seems that people feel it's easier to predict what direction they're heading over stocks.  Maybe it's because you feel like there's a smaller range of possible outcomes.  If 30 year treasuries are at 3%, then you feel like the window for upside from 0-3% is small relative to the range of 3-infinity.  Don't be fooled by this.  You don't know what direction interest rates are going.

3. I think people have a tendency to confuse "normal" with the recent past.  Where do you think 30 year treasury interest rates "should" be?  5%?  7%?  If you asked a person what they thought "normal" interest rates were in 1980, 1990, and 2000, what do you think the answers would be?  Could we be in a new normal now?  Could you imagine kicking yourself in 10 years for not locking in those 3% rates today? 

[Pointedstick]

If I were starting a PP now, I'd go with the full 25% LTT.  However, if the volatility/risk feels too high, you could increase cash to 40% and put 20% each in LTT, stocks and gold.

That's about what I would say. if you want to monkey with the allocations, you at least need to keep the three volatile assets in equal proportions or you're really breaking the PP promise.

LTTs are hard for me too, but I think rhymenocerous really nailed it. Fretting about interest rates is basically a form of predicting that they will rise and hurt you, which is market timing. Maybe they will indeed rise, but gently over 15 years and we'll barely notice it. Maybe they'll fall sharply and our bonds will make us rich. Maybe they'll stay where they are for a decade, or exhibit choppy and gut-wrenching swings. We just don't know.

[RuralEngineer]

There's not enough room for rates to fall sharply and make me rich.

[stuper1]

There's not enough room for rates to fall sharply and make me rich.

So, what did you vote for?  And what would you suggest for an overall asset allocation?

[notsheigetz]

I voted 25% which is what I did when I started out 3 years ago because I figure you either buy the PP concept or you don't, and if you're trying to time the purchase of assets then it seems to me you really haven't bought into it.

I think at any given when you are starting out, one of the sectors will make you wary (except maybe cash). That just seems to be the nature of the beast.