PP ....Where Did It Go

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PP ....Where Did It Go

Post by portart » Tue Apr 07, 2015 7:55 pm

Not that many years ago, PP was the darling of the investment world. PRPFX led all mutual funds in performance and this site was humming with activity. It's like a beach that has eroded. We don't have many cheerleaders left and the threads aren't as active. Do you think it will every find it's way back?
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Re: PP ....Where Did It Go

Post by Tyler » Tue Apr 07, 2015 8:53 pm

Everyone's drunk on stock market returns since the last crash.  No worries -- when the bubble inevitably bursts you'll see a lot of new interest in the PP.  In the meantime, the people who stick with the PP are more likely to debate politics, modern monetary theory, and camping gear.  Being agnostic about the stock market frees up a lot of time and energy for other interests.
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Re: PP ....Where Did It Go

Post by Pointedstick » Tue Apr 07, 2015 8:54 pm

This forum is plenty active, but I think that by and large, all the tough questions about the PP itself have been answered to a good enough standard that there's no reason to go over things again and again. At this point, the forum is pretty much a honeypot for highly intelligent people to talk about stuff in the Other Discussions section.

As for the portfolio's performance, we're in a stock bull market. During these times, people fall all over themselves to exit any position not sufficiently stock-like to chase those juicy returns. People should start noticing the PP again the next time the stock market craters and gold shoots up.
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Re: PP ....Where Did It Go

Post by Greg » Tue Apr 07, 2015 8:58 pm

Pointedstick wrote: At this point, the forum is pretty much a honeypot for highly intelligent people to talk about stuff in the Other Discussions section.
It's actually kinda interesting how this morphed like this. The forum originally was about the investing but agreed, once all the questions were for the most part answered, we liked each other enough to stay around and find new things to speak about. It's been said before but I'll say it again, this is a very intelligent and civil forum that is a great place to learn about new things happenin' in our world.
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Re: PP ....Where Did It Go

Post by EdwardjK » Tue Apr 07, 2015 8:58 pm

If you think that PRPFX is representative of the HBPP, you are mistaken.

As stated elsewhere on these boards, the current composition of PRPFX is closer to an earlier incarnation of the HBPP.  But Harry modified the portfolio components to the current cash, equity, LTT and gold.  PRPFX includes silver and real estate, I believe.

PRPFX performance was great while the price of silver was rising.  But its fortunes sunk as the price of silver sunk.

The only person making money off of PRPFX is its portfolio manager, Michael Cuggino.
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Re: PP ....Where Did It Go

Post by HB Reader » Wed Apr 08, 2015 11:10 am

Pointedstick wrote: This forum is plenty active, but I think that by and large, all the tough questions about the PP itself have been answered to a good enough standard that there's no reason to go over things again and again. At this point, the forum is pretty much a honeypot for highly intelligent people to talk about stuff in the Other Discussions section.

As for the portfolio's performance, we're in a stock bull market. During these times, people fall all over themselves to exit any position not sufficiently stock-like to chase those juicy returns. People should start noticing the PP again the next time the stock market craters and gold shoots up.
Yeah, the HBPP is really pretty simple.  You either buy into it or you don't.  I've followed it for so many years it is second nature to me.

I gave the Rowland/Lawson book to an old college friend of mine (who has a masters degree in economics) a couple of years ago.  "It's all just commonsense," he told me last year when I asked him about it.  Then I asked him if he knew anyone besides me that invested that way.  He just said "no" and shrugged.

The stock market kind of reminds me of the late 1990s.  Sooner or later something no one expects will happen.   
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Re: PP ....Where Did It Go

Post by dualstow » Wed Apr 08, 2015 12:37 pm

It's not surprising that a lot of people moved on when gold started to fall and stocks really started taking off.

I am curious to see if a boom in treasuries would ever bring a significant number of people over to the pp. Perhaps not, because treasuries have already done well, and the fund PRPFX missed out compared to the HBPP.

I guess it's just us lucky chap-wearing few who have stayed the course.

Which is more likely, that stocks will keep rising or that the pp will shoot up again? I suppose I'm happy either way, though I wish I'd had more money to put into the pp in 2013-2014.
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Re: PP ....Where Did It Go

Post by MachineGhost » Wed Apr 08, 2015 7:21 pm

portart wrote: Not that many years ago, PP was the darling of the investment world. PRPFX led all mutual funds in performance and this site was humming with activity. It's like a beach that has eroded. We don't have many cheerleaders left and the threads aren't as active. Do you think it will every find it's way back?
Yep, when we are on the way to double digit inflation again, the Johnny-Come-Latelys will appear.
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Re: PP ....Where Did It Go

Post by barrett » Thu Apr 09, 2015 7:31 am

I'm still newish around here but I kind of doubt that the PP was ever the "darling of the investment world." It has three components in weightings that 99% of investors wouldn't even consider. Of the few that do, many of them discard the concept, most likely because the idea of holding an asset that is doing poorly for years just seems like idiocy, unless you grasp the underlying idea of being agnostic about the future. HB Reader's experience is very telling to me. Even someone who says "it's all common sense" doesn't change what he or she is doing.

I agree with what others are saying about stocks as well. Focussing on the carnage of 2008 just doesn't resonate with those who have been in stocks the last six years. They don't care that just maybe stocks are entering bubble territory due to super-low interest rates. They are just focussed on how much damn money they have made recently and, quite honestly, it's hard to blame them. I would wager that most stock investors don't even know how bad the period from 2000 to 2009 was. They don't think in terms of sequence of returns, the benefits of not having a lot of down years, etc. The question of how to invest almost never goes deeper than "should I be holding more bonds?" And even then, they are not talking about long bonds, a tool that can actually do something when their stock are taking a pounding.

If I am lucky, I'll live another 40 years or so and I don't believe that at any point in that time span individual investors will take the words "the market" or "the markets" to mean anything but stocks.

PP investors are a tiny minority. Hopefully for us the future will show that we have chosen a good investment path. Hopefully for everyone else, their chosen path will turn out OK as well.
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Re: PP ....Where Did It Go

Post by dualstow » Thu Apr 09, 2015 9:33 am

barrett wrote: I'm still newish around here but I kind of doubt that the PP was ever the "darling of the investment world." It has three components in weightings that 99% of investors wouldn't even consider.
Ha, that's a good point. It had some inflows, but it was still barely a blip compared to traditional investments. I think people who got turned off of stocks often just invested in nothing for a while. Their loss, of course.
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Re: PP ....Where Did It Go

Post by Cortopassi » Thu Apr 09, 2015 11:07 am

Me, last 25 years:

Bonds?  Never invested before PP.  Not on radar.
Gold?  Started in 2009 in prep for the end of the world, never before in any fashion.
Cash?  Emergency fund only.  Money market at 5% was nice.  I long for those days.
Stocks?  Individual stocks and stock funds.  Mainly DODGX from 1995 to 2008.  It survived the tech bubble pretty well.  Got destroyed in 2008, and I sold near the lows.
Options?  Yeah, unfortunately I had a friend who showed me these.  Wish he never, ever did...

Never again.  I will make sure my kids follow some variant of PP.  Stress and time involved in stock trading has been the singlemost stupidest thing I've ever done in my life.

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Re: PP ....Where Did It Go

Post by buddtholomew » Thu Apr 09, 2015 6:00 pm

7/10 or 70% of the years stocks rise according to the latest estimates presented to me by several financial advisors. These advisers, when presented with the PP concept, question why any reasonable investor would decide to hold only 25% of their portfolio in this asset class and the balance in gold, cash and fixed income instruments?

Conflict of interest aside, the above is certainly a valid argument until you take investor psychology into consideration and have an awareness of historical equity declines that left even the most seasoned market participants selling at the lows (forced liquidation or panic).

I personally have come to terms with behavioral psychology pitfalls and realize that I too am not immune to buying and selling at the most in opportune times. I also realize that I have retirement goals that may require me to hold a significant portion of my portfolio in equities. To appease my concerns I arrived at the following compromise - one that I have shared before and seems to work for me. I started investing in 2008/9 and was introduced to the PP in 2011.

Retirement Accounts (BH with a small amount of gold)
65/30/5 equities/fixed income/gold with 5.6 years FI duration.
S&P500, Extended Market, INT Developed, INT SC, Emerging Markets, REITS and PM.

Taxable Accounts (HBPP 4x25)
Additional cash that serves as an emergency fund and reduces FI duration to 5.6 years.

Total Portfolio
50/40/10 equities/fixed income/gold

Each allocation is managed individually with its own set of rebalancing bands. As I reach retirement age, I expect to decrease equities and increase gold to more closely align with the 4x25 portfolio. The transition will be gradual as I currently feel I can have my cake and eat it too...
Last edited by buddtholomew on Thu Apr 09, 2015 6:04 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by MachineGhost » Thu Apr 09, 2015 7:19 pm

buddtholomew wrote: 7/10 or 70% of the years stocks rise according to the latest estimates presented to me by several financial advisors. These advisers, when presented with the PP concept, question why any reasonable investor would decide to hold only 25% of their portfolio in this asset class and the balance in gold, cash and fixed income instruments?
That's a weak argument.  I would find it better propaganda to use a rolling 10-year period never had a loss argument or even that cockamamie 10 best days baloney.

But remember, HB said to focus on the career to generate wealth, not investments (savings).  Relying on investments (savings) to secure retirement is part of the fiction that keeps financial advisors in business.  Advisors are only for the deluded that they think are going to have a retirement with the 100K that they only think they need, even though only a very small minority of the population has even saved that much.  We're in a very exclusive, elite club around here.

** Although in reality, my view of financial advisors is they service wealthy but ignorant capital.  They just don't deal with the "little people" due to the economics of the business.  That will have to change in the future.  The roboadvisors are a great first step!
Last edited by MachineGhost on Thu Apr 09, 2015 7:23 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by sophie » Thu Apr 09, 2015 8:21 pm

Cortopassi wrote: Me, last 25 years:

Bonds?  Never invested before PP.  Not on radar.
Gold?  Started in 2009 in prep for the end of the world, never before in any fashion.
Cash?  Emergency fund only.  Money market at 5% was nice.  I long for those days.
Stocks?  Individual stocks and stock funds.  Mainly DODGX from 1995 to 2008.  It survived the tech bubble pretty well.  Got destroyed in 2008, and I sold near the lows.
Options?  Yeah, unfortunately I had a friend who showed me these.  Wish he never, ever did...

Never again.  I will make sure my kids follow some variant of PP.  Stress and time involved in stock trading has been the singlemost stupidest thing I've ever done in my life.

Mike
Good for you Mike.  I think a lot of us have these stories.  example:  I made a stupid stock purchase in my Roth IRA, following the advice of my uncle the Wall Street broker.  It's now a penny stock and I leave it in the Roth as a constant reminder to myself not to ever, ever do something so idiotic again.
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Re: PP ....Where Did It Go

Post by buddtholomew » Thu Apr 09, 2015 9:22 pm

Desert wrote:
buddtholomew wrote: 7/10 or 70% of the years stocks rise according to the latest estimates presented to me by several financial advisors. These advisers, when presented with the PP concept, question why any reasonable investor would decide to hold only 25% of their portfolio in this asset class and the balance in gold, cash and fixed income instruments?

Conflict of interest aside, the above is certainly a valid argument until you take investor psychology into consideration and have an awareness of historical equity declines that left even the most seasoned market participants selling at the lows (forced liquidation or panic).

I personally have come to terms with behavioral psychology pitfalls and realize that I too am not immune to buying and selling at the most in opportune times. I also realize that I have retirement goals that may require me to hold a significant portion of my portfolio in equities. To appease my concerns I arrived at the following compromise - one that I have shared before and seems to work for me. I started investing in 2008/9 and was introduced to the PP in 2011.

Retirement Accounts (BH with a small amount of gold)
65/30/5 equities/fixed income/gold with 5.6 years FI duration.
S&P500, Extended Market, INT Developed, INT SC, Emerging Markets, REITS and PM.

Taxable Accounts (HBPP 4x25)
Additional cash that serves as an emergency fund and reduces FI duration to 5.6 years.

Total Portfolio
50/40/10 equities/fixed income/gold

Each allocation is managed individually with its own set of rebalancing bands. As I reach retirement age, I expect to decrease equities and increase gold to more closely align with the 4x25 portfolio. The transition will be gradual as I currently feel I can have my cake and eat it too...
The psychology involved with holding different portfolios in different accounts is always interesting to me.  It's great that you do boil it down to what amounts to essentially a very traditional 50/50 portfolio with a slice of gold added.  I'm not sure why many feel led to think of their total portfolio as a collection of individual portfolios.  I care only about return and volatility of my household total investments.  It makes things so much simpler.
I value simplicity, but each allocation has a different investment horizon and is constructed with that perspective in mind. Both will merge into a single portfolio at retirement to resemble a 4x25 HBPP.
Last edited by buddtholomew on Thu Apr 09, 2015 9:25 pm, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 6:37 am

You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
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Re: PP ....Where Did It Go

Post by barrett » Fri Apr 10, 2015 7:48 am

ochotona wrote: You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
What balance of assets will grow enough going forward? If the world economy becomes even more deflationary in the next 5-10 years, that could be terrible for stocks.
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 8:16 am

Ochotona,

Yes, please tell me what balance of assets will grow!  And you should start your own fund if you know the answer...

My "investing" career started around 1990 when I got out of school.  Not making a lot of money, but not a lot of expenses either, so I was able to save a lot.  In the medium term, my salary peaked around 2003 at a very high flying tech company.  It took until last year for me to get back to the salary I had in 2003.  In the meantime look at the S&P during that timeframe which I know you are all very aware of.  In the 2000/2001 bubble I didn't really care too much, I was still in my early 30s and just one young girl at home so I didn't touch my investments.  In 2008, in my 40s, two girls at home, I seriously thought it was the end and bailed on everything, near the lows.  Of course that was stupid, but I would imagine it was relatively typical -- my retired father couldn't deal with it and as well sold everything near the lows fearing the worst.

The time since then, up until 2014 I spent mostly in gold and miners.  Another freaking stupid all eggs in one basket move and rollercoaster.

Since the PP, I have calmed down and accepted the fact that I cannot predict the future and when I try I am way more often wrong than right.  The biggest gainer in the PP since I started has been bonds.  What knowledgeable intelligent person would have ever figured US bonds, after multiple rounds of QE would still be flying so high?  I would bet not a lot.  At the same time, who would have bet gold would be crushed from 1900 to 1200 and tread water around this level for years.  Not many.  And that the stock market just rolls and rolls on with nary a correction.

Go ahead and try to predict what you should and shouldn't be in, what percentage changes fit your style better, etc.  My 25 years of trading experience tells me I always lose when I try that.  If the PP doesn't get an annual rate of return as good as some other vehicles, that's fine with me.  I certainly know it will get a better return than if I try to monkey with it or trade on my own.  And it should be relatively immune to huge drawdowns that have scared me out at exactly the wrong times before.
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Re: PP ....Where Did It Go

Post by hoost » Fri Apr 10, 2015 8:44 am

buddtholomew wrote: Total Portfolio
50/40/10 equities/fixed income/gold
This is actually what I target as well, although I do it across all accounts.  I also hold the fixed income (bonds) portion as a barbell rather than a bullet.  Meaning I shoot for roughly 20% cash/20% LT bonds, although I do have some intermediate bonds due to limited retirement account options, and I think my actual was somewhere around 25/15 or 30/10 last time I looked.

For me, this helps avoid the desire to tinker with the portfolio when stocks are flying high...we'll see how hard it drops when the market tanks.
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Re: PP ....Where Did It Go

Post by dualstow » Fri Apr 10, 2015 8:53 am

Desert wrote:
buddtholomew wrote: I personally have come to terms with behavioral psychology pitfalls and realize that I too am not immune to buying and selling at the most in opportune times.
...
Each allocation is managed individually with its own set of rebalancing bands.
...
The psychology involved with holding different portfolios in different accounts is always interesting to me.  It's great that you do boil it down ...
I'm not sure why many feel led to think of their total portfolio as a collection of individual portfolios.  I care only about return and volatility of my household total investments.  It makes things so much simpler.
I think about total return from my total holdings because that of course is what ultimately counts. However, I definitely think about individual portfolios when it comes to execution and implementation. I have different kinds of bonds for income and how I trade them has nothing to do with my pp's rebalancing bands.

Perhaps I could generate enough supplemental income from putting everything into the pp (probably not), but I feel better holding a mix of munis and corporate bonds. As you and Budd both said, it's psychology.
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Re: PP ....Where Did It Go

Post by sophie » Fri Apr 10, 2015 9:14 am

Dualstow, how come you need bonds for income at this stage?

I've also been very attracted to the idea of investments that generate income - as who doesn't??  It feels good to see dividends and interest pile up.  But when tax time rolls around, I realize that it's just a way of converting a piece of my assets to a taxable event, so that a good chunk of the "income", instead of sticking around to become capital gains, disappears into the federal, state, or city coffers.  If anything, I was thinking about putting small cap funds into the taxable stock allocation to try to minimize dividends.

ochotona:  one of the reasons I moved to the PP was the simple act of sitting down with a calculator to figure out the return on my retirement investments over time.  These were mostly target retirement funds which were 90% stocks.  Since the late 1990s, my investment return was PITIFUL, in fact I'd barely managed to break even.  I laugh at the headlines that proclaim "record-breaking" levels for the Dow, because all that means is that the Dow has finally gained enough to make money in the years since the previous high.  I realized that, unlike all the back testing that looks at 30-50 years of the stock market, I personally can't wait that long.  The stock market's 9%+ returns do me little good if they don't happen on my schedule.  So it's not just about CAGR averaged over 50 years...volatility is important too, and I don't think it matters which decade you're in.  No one has a long enough working life to ride out the stock market without relying on a good bit of luck.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:41 am

Cortopassi wrote: Ochotona,

Yes, please tell me what balance of assets will grow!  And you should start your own fund if you know the answer...

In 2008, in my 40s, two girls at home, I seriously thought it was the end and bailed on everything, near the lows.  Of course that was stupid, but I would imagine it was relatively typical -- my retired father couldn't deal with it and as well sold everything near the lows fearing the worst.

The time since then, up until 2014 I spent mostly in gold and miners.  Another freaking stupid all eggs in one basket move and rollercoaster.

Go ahead and try to predict what you should and shouldn't be in, what percentage changes fit your style better, etc.  My 25 years of trading experience tells me I always lose when I try that.  If the PP doesn't get an annual rate of return as good as some other vehicles, that's fine with me.  I certainly know it will get a better return than if I try to monkey with it or trade on my own.  And it should be relatively immune to huge drawdowns that have scared me out at exactly the wrong times before.

Why you failed and had to recover through the use of the PP is very clear in your use of the words "predict" and "trading" above (and you are right, no one can really do that), and you didn't stick to a strategic plan when we all experienced the 2008 valley of death, and you overconcentrated risk in a single asset class at certain times (gold miners). I mean no disrespect, but these three types of mistakes are extremely common and well known and somewhat avoidable. Everyone learns by mistakes, but please don't call everything non-PP unsuitable. It's unsuitable for you.

I don't try to trade or really predict much, except with my 5% of my portfolio "mad money", but I am cognizant of the concept of a glidepath and age-appropriate asset allocations. There are many glidepath formulations out there, but you have to pick one that you like a stick to it. Until I found PP, I was using a simple one, equity exposure = 120 - AGE, 10% cash, rest fixed income. 25% of equity non-US... pretty darned hot allocation at that. So then I learned that PP can give you quite good returns, much less volatility, which in my 50s starts to be important because I am planning for retirement, so sequence-of-returns risk comes to the forefront. So then, why be so hot in the allocation? It's much more risk for not a lot more return.

I was happy to convert ~60% of my retirement to PP, my global retirement allocation is now about 50% equity, so you could say that my glidepath formula changed from 120 - AGE to 105 - AGE, but with bigger slices of gold and cash than ever before. In another ten years... 100% PP, or very close to it. Age 70, no way will I not be 100% PP (except for Roths, below).

Why only ~60% PP now, not 100%? I did some scenario testing and worst-case 10 year rolling period CAGR thinking, and for me PP covers me in terms of living expenses until age 70, and if we have a bad event affecting the other portfolio, it will have "healed" by age 70 (15+ years from now), so there is a seamlessness to how the two parts hand-off. It's "buckets of money" thinking applied to PP vs. Conventional. But my family is very long-lived, either my wife or I are likely to reach age 100, so my total planning horizon reaches 45 years into the future. I don't think PP runs hot enough for that, which is why I'm ~40% Conventional at this time.

Also, we want to give our Roth IRAs to my heirs and my Church, so I never plan on eating those, their time horizon is when my kids are retired, which is a long time off considering one is still in High School, so our Roths can be "balls to the wall" risky, swing for the fences. My kids might live until the 2090s. Amazing to think of that.

Yes, I do run an investment fund... it's called my family. We have all kinds of assets, tax and other liabilities, insurance arrangements, present and future obligations. Not all of them have anything to do with PP, nor should they. They all interact in subtle ways that 99% of people don't understand, and PP is not the magic bullet to solve all the challenges we face. It's a tool, but you have to be educated, and have the right mindset most of all.
Last edited by ochotona on Fri Apr 10, 2015 9:44 am, edited 1 time in total.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:50 am

barrett wrote:
ochotona wrote: You need different time horizons and portfolios because PP won't grow enough for a young person's purposes, except it's a better place to keep assets that may have to be spent sooner than at retirement. Then in your 50s 60s you drift more towards PP.
What balance of assets will grow enough going forward? If the world economy becomes even more deflationary in the next 5-10 years, that could be terrible for stocks.
My planning horizons extends 45 years into the future... and beyond. I am not concerned about the next 10 years for the non-PP part of my portfolio.
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Re: PP ....Where Did It Go

Post by ochotona » Fri Apr 10, 2015 9:53 am

sophie wrote: ochotona:  one of the reasons I moved to the PP was the simple act of sitting down with a calculator to figure out the return on my retirement investments over time.  These were mostly target retirement funds which were 90% stocks.  Since the late 1990s, my investment return was PITIFUL, in fact I'd barely managed to break even.  I laugh at the headlines that proclaim "record-breaking" levels for the Dow, because all that means is that the Dow has finally gained enough to make money in the years since the previous high.  I realized that, unlike all the back testing that looks at 30-50 years of the stock market, I personally can't wait that long.  The stock market's 9%+ returns do me little good if they don't happen on my schedule.  So it's not just about CAGR averaged over 50 years...volatility is important too, and I don't think it matters which decade you're in.  No one has a long enough working life to ride out the stock market without relying on a good bit of luck.
Agreed! Sequence of returns risk! PP for all of the money you plan to eat in the next 15 years!
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Re: PP ....Where Did It Go

Post by Cortopassi » Fri Apr 10, 2015 9:54 am

Well said.  It is all a personal decision and comfort level.  It is unfortunate, for me, that it took nearly 25 years to figure it out!  The only saving grace from all this is my wife and I are fiscally conservative.  All the other pieces were in place -- house paid off, girl's college funds in great shape, no debt.  I only wish I followed that conservative path (PP or otherwise) with my retirement investments.
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