How bad was my timing?

[far north steve]

I apologize if this topic has been covered before.  I am new to the Permanent Portfolio but really felt that this made a lot of sense.  I read the book  and finally committed  to it 100%.  Promptly, the 30 year bonds fell over 10%.  I locked in at 2.6% and re-read the section on timing and it said clearly to just buy the bonds and do not try to dollar cost average.  I bought in the first week of April, right at the bottom. Now I am thinking that I really screwed up by buying in at the bottom.  What happens if the rates rise to 4.5%?  Do I just keep them when I reach the 20 year mark and not sell since that would incur such a large loss?  I wake up at night and think "Did I screw up?"  Any advice would be appreciated.

[Tom]

It's tough to not have those thoughts and worries, but the idea is that over the course of a year and longer losses from one asset should balance out with gains in another or at the very least protect your overall portfolio from severe losses.  10% loss in one asset will be minimized by the overall portfolio.

The markets are unstable and that's why you're here.  If you hadn't bought the bonds would you really feel better?  If you hadn't bought the bonds, would you go forever without them?  Probably not - at some point you'd have to decide when to buy and you probably wouldn't feel comfortable making that call.  No one knows what's going to happen, which again is why you chose this strategy.  Everyone thinks bonds are going to tank.  Maybe they're right.  But it wouldn't be the first time everyone has thought this and it hasn't happened.  In 2009 it was the same general thought.  Bonds gained about 30%.

By going all in, I think you're avoiding having to make a timing the market decision and protecting yourself from a potential devastating loss by mis-timing.  You have all the assets and just have to put your faith into the idea that what's winning will protect you from what's losing.  If it's any peace of mind, I have a good deal of money in this and I'm full in on all assets.

[stuper1]

I went all in to the PP in April 2013.  Gold crashed soon after that, and I thought I had made a big mistake.  But I just let things ride, and I'm glad I did.  2013 wasn't a great year, but 2014 was pretty good.  2015 doesn't look so great, but that can change.  Just keep telling yourself that nobody can predict the future of the markets.  Be agnostic and passive.  I'm convinced that's the best approach.  Try not to look at the portfolio performance too much.  You're in this for the long term.  Whatever you do, don't sell now and lock in your losses.  Remember "buy low, sell high" and keep fees low.  Those are the two keys.

[far north steve]

I appreciate the wise advice.  I got a little shaky!  Thanks.

[barrett]

If you bought when the yield was at 2.6%, that wasn't "the bottom." The most recent low was 2.25% at the end of January. Bonds are just really volatile right now and most of that volatility has been on the downside over the last 4 & 1/2 months. If it makes you feel any better, we are ALL down about the same amount as you are over the last couple of months.

To answer your question about what happens if rates go to 4.5%, well holding long bonds during that time won't feel great but the underlying idea of the PP is that one or two of the other assets should pick up the slack. A rise in interest rates means that investors on balance are predicting a higher rate of inflation. In that environment, cash will start yielding something (assuming the short end of the yield curve also goes up). Gold might do well. Stocks can also do fine with some inflation.

The long bonds carried the PP in 2008, 2011 and 2014. If you can find someone who called all of those moves correctly (and exactly at the right time!), then maybe follow whatever they are doing. If you listen to Harry Browne's radio shows, one of the things he said about future asset prices over and over is "we just don't know." He made this huge call on gold in 1970 and was smart and humble enough to admit that he, for the most part, got lucky.

When you have time, go back on this forum and check out predictions at the beginning of the year - there is usually an informal poll - for where asset prices will end up 12 months later. We all get it wrong.

One of the things Craig, MT and other PP veterans say over and over is not to look at assets in isolation. Some air has been let out of the bonds recently but it's the real rolling returns of the PP that you should be focussed on.

It's tough to let go of frequent portfolio checking and just focus on other stuff, but that is the healthiest thing to do. If you knew you were going to slip into a coma for a year or two, would you want to have all your money in one basket? If so, which one?. Most of us posting on here have come to the conclusion that we'd like some real diversification (not slicing and dicing stock sectors).

Hope this helps a bit.

[LC475]

I don't think you necessarily bought in at the bottom, Steve.  Rates could go lower.  I think maybe they will before the year is out.  We'll just have to see.

[Dieter]

Started with gold in Aug 2012, multiple purchases over the 'years' / DCA'd in. Gold down ~15%.... Overall portfolio still up (although I'm heavy in stock / light in cash.)

So overall doing as advertised.

[AdamA]

Promptly, the 30 year bonds fell over 10%.

Keep in mind too that this is only a 2.5% loss to your portfolio.  Try not to look at the assets in isolation.  Look at the portfolio as a whole.

[InsuranceGuy]

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[MediumTex]

I'm right there with you, bought in mid April with all of my Roth IRA holdings.  Some days are rougher than others, but I just have to ignore short-term swings and trust the model.

Insulating yourself emotionally from daily market fluctuations can be hard to do, but it's worth the effort.

I used to drive myself crazy looking at the markets, but at some point I just stopped and it only made my life better.