Vanguard REIT index fund, #5123

[dualstow]

I haven't looked at individual REIT stocks but VGSLX was up 30% this year.
Not bad, not bad.
A small but nutritious component of my vp.

[sophie]

Nice!!

I have a chunk of TIAA CREF's real estate fund in my 403b.  It did almost as well (28%).  I didn't want too much of that though...I figure my home is an awful lot of real estate exposure as it is.  But then why didn't my apartment go up 30%???  I guess earnings account for a large chunk of that figure.

[dualstow]

But then why didn't my apartment go up 30%???

maybe next time.
I only own a tiny sliver of the REIT fund myself. It reinvests, but I don't add to it.

[Longstreet]

Just started my HBPP mid year and opted for a 30-30-30-10, but substituted REIT funds for gold.  Worked out well for 2014, but when the crash comes I will not have the protection that gold offers.  Hope to eventually purchase at least 15% gold, but hard to pull the trigger with gold looking so hopeless short term. 
However, I am considering switching my REIT'S to Matthews India fund as a temporary holding cell until I get the courage to buy gold.  With REIT'S being interest sensitive, their outlook may not continue as rosy in 2015.  Hopefully mindx will offer some diversification from the us market as basically I'm 40-30-30-0 with a big "X" on my back for a fall.

[rickb]

Just started my HBPP mid year and opted for a 30-30-30-10, but substituted REIT funds for gold.  Worked out well for 2014, but when the crash comes I will not have the protection that gold offers.  Hope to eventually purchase at least 15% gold, but hard to pull the trigger with gold looking so hopeless short term. 
However, I am considering switching my REIT'S to Matthews India fund as a temporary holding cell until I get the courage to buy gold.  With REIT'S being interest sensitive, their outlook may not continue as rosy in 2015.  Hopefully mindx will offer some diversification from the us market as basically I'm 40-30-30-0 with a big "X" on my back for a fall.

Please don't call this a HBPP.  Perhaps, MOWASA (My Own Wild Ass Speculative Allocation).  The HBPP will protect your assets in virtually any conceivable economic condition (and many you've probably never conceived of) - hence the advice to use it for "money you can't afford to lose".

What you're doing is speculating.

Which fundamentally means you're OK with losing large portions of your assets (50% or more).  If that's what floats your boat, go for it.  But, please don't imagine even for a second that you're following Harry Browne's PP.

Here's a performance chart of VNQ (Vanguard's REIT ETF) and GLD (close enough to call it gold)

http://stockcharts.com/freecharts/perf.php?vnq%2C%20gld

Pull the starting point as far back as it will go.

Notice that these are not even remotely similar.  In particular notice what happened toward the end of 2008.  VNQ got killed (down 60%).  Gold, not so much (down 20%).   

The HBPP assets are chosen for specific reasons.  No substitutions allowed.

If you want to make a pound cake you can't replace the flour with ice cream because you like ice cream better.  Well, you can - but you're not going to end up with a pound cake.

[Longstreet]

Point well taken, but I just think gold is expensive and while I'm guilty of trying to predict the market, I think IAU (for example) will drop to $11.00/share before it will go above $12.00/share.  I rolled over my retirement plan to an individual IRA in Oct. and I just haven't found an entry point for gold that I'm comfortable with.

Also, initially, I excluded my wife's TIAA account (still working) from the permanent portfolio, and started with a 30-30-30-10 (with the REIT as a temporary holding cell for the gold allocation), but I've found it easier to track one portfolio rather than two, thus the higher allocation to stock.

So, I could buy $200,000 of gold and say I'm 25X4 and call her TIAA a variable portfolio, but I'm not sure that I would be in a better position.  I'm a very frugal person and can't differentiate money that I need from money that I don't need (I need it all) so I can't comprehend the happy haven of a variable portfolio.  I'm fortunate that once my wife retires (August) we'll be able to meet our living expenses with Social Security and Pension checks and will not need to tap the retirement savings for the foreseeable future.

However, I do appreciate your comments and I'm sure they will alter my thought processes in the future.

Thanks

[sophie]

The key comment in your post is " I think IAU (for example) will drop to $11.00/share before it will go above $12.00/share."  In other words, you are market timing based on your prediction of what gold is going to do in the near future.

This is of course your prerogative, but you must realize that what you are doing here is not investing.  It is speculating, another word for which is "gambling".  The idea of investing according to either Permanent Portfolio or Boglehead principles is specifically not to attempt to predict the future - because your predictions are nothing more than random guesses.  I personally think gold is cheap right now and it's absolutely the time to be buying it.  We can't both be right.  And remember how no one wanted to buy stocks in 2009??

I suggest you get a copy of Harry Browne's "Why the best laid investment plans usually go wrong" and read it.  He does a masterful job of debunking market predictions of all kinds.  If you want more proof, check out this thread:

http://gyroscopicinvesting.com/forum/pe ... or-fun%29/

The forum was polled for their predictions of how the four assets would do in 2014.  Most of us were dead wrong.  We're doing another poll this year just to see how wrong we'll be again - feel free to participate!