PP now beating SP500 YTD

[Pointedstick]

[img width=600]https://i.imgur.com/p6FhMoY.png[/img]

Chugga chugga chugga...

[Libertarian666]

I'm sure that's just a fluke. 

[sophie]

Go PP!!

Sometimes we LIKE "tracking error"!!

[Libertarian666]

Go PP!!

Sometimes we LIKE "tracking error"!!

Yes, everyone likes tracking error when the error is in their favor. Like my portfolio from 2000 through 2012!

[Reub]

Take it easy! 6.4% is not all that great. As a matter of fact, I believe that the CAGR for the PP over the last 3 years is just over 5%, also not fantastic. It works for me because I'm newly retired and lesser, less volatile returns are what I seek. However, if I were still in my formative years (up until age 50 at least) I might not be so thrilled.

(Sorry to rain on your parade).

[Jan Van]

How does it compare to something like the Vanguard Balanced Index Fund?

[sophie]

Well sure, stock heavy portfolios have been beating the pants off the PP since 2009.  But if you extend the timeline back through 2008, they aren't making a terribly good show.  When you hear about the Dow or S&P reaching "record highs" translate that as "finally making money".  The fact is that the wonderful stock market performance since 2009 has mainly been about recovering from the earlier debacle.

Of course, many of us didn't start in with the PP until 2009 or later, so we're not personally reaping those benefits.  But the idea is that the next time a 2008 (or 2000) rolls around, we will be in far better shape.  I am more than willing to accept a few years of modest gains in exchange for not having to suffer through another 2000 or 2008.  And recent events + history suggest that we won't have long to wait for the next down cycle.

[goodasgold]

When you hear about the Dow or S&P reaching "record highs" translate that as "finally making money".  The fact is that the wonderful stock market performance since 2009 has mainly been about recovering from the earlier debacle.

Yep, and the delirious celebrations over alleged "new highs" for the Dow and S&P fail to take inflation into account. 

[stuper1]

The CAGR for the S&P500 from 1/1/2000 through 10/8/2014 was 3.44%.

For the period 1/1/2000 through 1/1/2010, the CAGR for the S&P500 was -1.41%.  Talk about a lost decade.

I'm very happy to have found the HBPP.

[mabcpa17]

I am thrilled with YTD returns of the PP!!! S&P 500 returns, with 1/4 the risk.....hmmmmm what's not to like?

PP is not the only investement strategy I use, but it makes a great hedge!

[stuper1]

I used to have a fair amount of money invested in the Dodge and Cox Balanced Fund.  Seemed like a reasonable thing at the time.  Just for fun, I just looked up it's performance on Yahoo for 1/1/2000 to 10/8/2014 (the last 14+ years).  If I did the math right, the CAGR was 3.03% (I'm not sure if the Yahoo results include reinvested dividends).  By comparison the CAGR for the HBPP over that time period was 7.14%.

Moreover, the Dodge and Cox expense ratio is 0.53%; whereas my total expense ratio for my PP is about 0.15%, so I'm getting an extra 0.38% from that each year.

I'm thrilled too.

[Pointedstick]

Looking even better!

[img width=600]https://i.imgur.com/TGElvOZ.png[/img]


FYI, this data comes from http://www.etfreplay.com/combine.aspx

[buddtholomew]

We should probably include a 60/40 allocation to benchmark the PP performance. The outperformance is not as substantial as shown in the above graphic. Gold is only up approximately 1% YTD.

[sophie]

OK, here you go....

[img width=700]http://i60.tinypic.com/2enm846.jpg[/img]

[Pointedstick]

...Which makes perfect sense, because a 60/40 portfolio behaves simply like a slightly less volatile stock portfolio most of the time.

Here's 100% VTI vs VBINX (60/40):

[img width=600]https://i.imgur.com/ilx6FBu.png[/img]

Personally, it looks like like a lousy portfolio to me. If I want stock-like returns and can tolerate high drawdowns, I'll go with 100% stocks.

[sophie]

I agree.  Unfortunately it's one that many of us hold in our non-PP-friendly retirement accounts (mine is 50/50 not that it makes much difference).  I am thoroughly jealous of you, dualstow, and others who have managed to avoid this problem.

While we're on the subject...anyone with an independent consulting or other side gig can effectively transfer retirement funds out of their employer's 401k plan and into a solo 401K account, which of course can be 100% PP friendly.  Side bonus, the profit sharing contributions means you can increase the total tax deferrals.  I keep a spreadsheet that I use to figure out how much to reduce my employer contributions for the year, and track my solo 401K contributions for the required tax form.  Another side bonus, this lets my employer figure and pay my estimated taxes, so I don't have to.

[Libertarian666]

We should probably include a 60/40 allocation to benchmark the PP performance. The outperformance is not as substantial as shown in the above graphic. Gold is only up approximately 1% YTD.

I have gold up almost 5% YTD. Spot gold closed 2013 at $1180, and it is now $1233, for a $53 gain so far this year.

[dualstow]

I agree.  Unfortunately it's one that many of us hold in our non-PP-friendly retirement accounts (mine is 50/50 not that it makes much difference).  I am thoroughly jealous of you, dualstow, and others who have managed to avoid this problem.
...

I'd trade it all for your brains, or at least a sense of direction. 

[buddtholomew]

We should probably include a 60/40 allocation to benchmark the PP performance. The outperformance is not as substantial as shown in the above graphic. Gold is only up approximately 1% YTD.

I have gold up almost 5% YTD. Spot gold closed 2013 at $1180, and it is now $1233, for a $53 gain so far this year.

GLD YTD chart on Yahoo reflects .44%, not including today. I hold GLD, so my calculations are based on the performance of this ETF.

PS, interesting comment on the 60/40 allocation. I of course disagree and I'm sure there is a significant BH following that would consider the comment ludicrous. I see your point and you are entitled to an opinion.

[stuper1]

PS, interesting comment on the 60/40 allocation. I of course disagree and I'm sure there is a significant BH following that would consider the comment ludicrous.

It's hard to de-program those who have been brainwashed.  Their religious fervor blinds them to the lack of diversification present in a stock/bond portfolio.

[sophie]

I think most Bogleheads will agree that goal of the 60/40 (or 70/30 or whatever) is to soften the drawdown % in exchange for sacrificing some gains.  We here in PP-land are all about protecting our hard-earned money with maximal diversification.  It's a very different goal.  The Bogleheads will tell you that they just don't believe that a bulletproof portfolio can match the gains of a stock-heavy portfolio, since gold doesn't pay dividends and "cash is trash", and that has certainly been true recently.  Per etfreplay, the 60/40 returned 77% from 2007 - present, while the PP returned 62%.

The problem, of course, is that the Boglehead who plans to retire soon after a big market correction will be a very unhappy camper.  And "soon" can easily mean "less than 10 years".  I just don't think the Boglehead strategy is sufficient for protecting your core savings.  And make no mistake, by the time we retire, anyone who manages to get shafted in the investment game, or didn't save enough to support their ingrained spending habits, is going to be in serious trouble.

[barrett]

A couple of weeks ago two friends of mine were talking about a book called The Crash of 2016. I asked them what crash was predicted and they took it as given that anyone with half a brain would understand that they were talking about the stock market. It's a nice feeling to just be able to say "Oh, that market."

A couple things that struck me about these two friends is that they are on the cusp of retiring and that "their guy" had lead them to believe that a 6% withdrawal rate was safe. The lessons of 2008 (2000-2002, 1987, take your pick) are so quickly forgotten.

Mind you, it's easy to feel good about the PP today when gold & LTTs are way up and stocks are tanking. Check back in a couple of hours for the current temperature.

[Cortopassi]

Quite a good feeling lately being in the PP.  I have friends a few cubes down who have been watching their near 100% stock portfolios vaporize lately, and here I am stress free just watching...

Mike

[goodasgold]

Mind you, it's easy to feel good about the PP today when gold & LTTs are way up and stocks are tanking. Check back in a couple of hours for the current temperature.

Amen, brother B.

As always, we gotta remind ourselves to think long term. (But I can't help peeking at the daily gyrations of the markets, which are, in turn, intriguing, puzzling, satisfying or a train wreck.)

[Libertarian666]

I think most Bogleheads will agree that goal of the 60/40 (or 70/30 or whatever) is to soften the drawdown % in exchange for sacrificing some gains.  We here in PP-land are all about protecting our hard-earned money with maximal diversification.  It's a very different goal.  The Bogleheads will tell you that they just don't believe that a bulletproof portfolio can match the gains of a stock-heavy portfolio, since gold doesn't pay dividends and "cash is trash", and that has certainly been true recently.  Per etfreplay, the 60/40 returned 77% from 2007 - present, while the PP returned 62%.

The problem, of course, is that the Boglehead who plans to retire soon after a big market correction will be a very unhappy camper.  And "soon" can easily mean "less than 10 years".  I just don't think the Boglehead strategy is sufficient for protecting your core savings.  And make no mistake, by the time we retire, anyone who manages to get shafted in the investment game, or didn't save enough to support their ingrained spending habits, is going to be in serious trouble.

How about from 2000 to 2010?