PP is once again positive YTD

[mathjak107]

Which is why charts and back testing really mean little. As time goes on and you aquire more and more only what happens in the later years really matter much .
Having a good run say from 2000-2010 is nice but if you still didn't have much invested then it counts very little . and if you were at max dollars from 2010 on then thats where what happens effects you the most .

Looking at a run from 2000-2015 won't mean much to you if you first started to accumulate a lot more dollars after 2010.

[MachineGhost]

If you want to see a period when the PP seemed completely broken, look at the early 1980s--"The PP can't handle staglation!  Run!" is what I can imagine people were saying.  That was horrible for the PP, but in retrospect it was just a blip.

You've been away too long.  It was 1980-1982 "Tight Money" not "Inflation".  The PP benefitted handsomely from "inflation" being that it is so overweight gold in risk contribution terms.

[MachineGhost]

Which is why charts and back testing really mean little. As time goes on and you aquire more and more only what happens in the later years really matter much .
Having a good run say from 2000-2010 is nice but if you still didn't have much invested then it counts very little . and if you were at max dollars from 2010 on then thats where what happens effects you the most .

Looking at a run from 2000-2015 won't mean much to you if you first started to accumulate a lot more dollars after 2010.

A very good argument why I'm still not fully invested.  Lump summing not killing you is very critical on getting the timing right.  That has yet to happen in stocks.  Bonds who the hell knows?  Gold is closer to a bottom than a top.

[ochotona]

Bonds are like Schroedinger's cat. Seems to be losing value and gaining value at the same time.

[MachineGhost]

Bonds are like Schroedinger's cat. Seems to be losing value and gaining value at the same time.

I hope like hell the Fed raises in December so we can get this stupid QEternity drama all out of the way.  It's getting so tiring having a steer (cow with its balls chopped off) market instead of a free.

[mathjak107]

Then the next battle will be the next hike and by how much . Historically rate hikes have not hurt the stock markets as long as the rise is slow..

[MachineGhost]

Then the next battle will be the next hike and by how much . Historically rate hikes have not hurt the stock markets as long as the rise is slow..

That's less important than how investors are gong to react to the first one.  We simply don't know as we haven't been in this situation before historically.  Either its a bear market (which will rally bonds, maybe gold) or its off to the races (which will whack bonds and gold).  Make up your mind, people!!!  The PP is going to get killed even more in the latter.

It's all about the psychology.  The fact that raising the rate on the bank reserves will just induce more reserve parking is besides the point.

[Ugly_Bird]

I'm down about 7% this year

Same thing. I've set up PP in mid Jan of this year. Really bad timing.

[finster869]

I'm down about 7% this year

Same thing. I've set up PP in mid Jan of this year. Really bad timing.

As of 11/9, the PP is down 2.4% for the year.  If you have 7% losses, then it is from continuing to buy lagging gold as opposed to putting new money into the PP equally across all classes, leaving it in cash or buying in proportion to the then existing allocation.  The good thing about buying lagging gold, however, is that when we have a trend change and gold begins to rise, you will have bought it low, resulting in your individual PP securing a better rate of return.  IMO, that is why it is so important to stay the course when investing.

[barrett]

I'm down about 7% this year

Same thing. I've set up PP in mid Jan of this year. Really bad timing.

As of 11/9, the PP is down 2.4% for the year.  If you have 7% losses, then it is from continuing to buy lagging gold as opposed to putting new money into the PP equally across all classes, leaving it in cash or buying in proportion to the then existing allocation.  The good thing about buying lagging gold, however, is that when we have a trend change and gold begins to rise, you will have bought it low, resulting in your individual PP securing a better rate of return.  IMO, that is why it is so important to stay the course when investing.

Buying any asset on its way down is bound to drag down a portfolio for a time, but dragoncar and Ugly Bird have gotten hit largely because of unlucky entry points. Or, in dragoncar's case, he got unlucky with the timing of a large contribution. Hopefully they can both add money in the future when the PP is in a dip.

My wife's PP got hit in the same way because a fairly large percentage went in when the PP as a whole was maybe a bit overpriced (again, January of this year). In her case it doesn't matter too much because she is so oblivious to what her money is doing! She checks her relatively small bank balance online several times each week but I have to force her to look at her (much larger) IRA investments once a year. If she can't use the money for another 10-12 years, she's just not interested.

[Cortopassi]

Appropriate Dilbert:

[bedraggled]

Who will get to 10,000 posts first: Machine Ghost or Mathjak?

[mathjak107]

Of course the question with the lagging asset is will it take so long for the ship to come in the pier collapses.

You can get to the party so early that what you gave up by being in the wrong place for an extended period of time can never be made up even when that asset finally has its day in the sun.

We all invest for one reason , having a bottom line that meets our goals.
If you are lagging and not making the goal line because you joined the party way to early having money dead in the water and not gaining what is out there for the taking  then that is a problem.

Strategy's only are good as long as they meet your objectives. Other wise what charts and backtesting shows  is meaningless.

It means little to anyone that had little money invested pre 2000  and a whole lot of money invested after 2008 that equity's lagged since 2000.

I tripled my assets since 2000 so returns from 2000 do not count anywhere near as much as returns from 2008 on when we sold a lot of real estate and moved alot of money in to bonds and stock.

Not having enough invested in equity's from 2008 on would have had a huge effect on my retirement budget today.

In the end what path you choose has to meet your goals  regardless of whether low volatility or not. Your chances of doing that may become less and less if you tie up to much in assets that show their day in the sun may be to far away.

[Xan]

In the end what path you choose has to meet your goals  regardless of whether low volatility or not.

How do you choose your goals?  What happens if your goals are unrealistic?  What happens if you think your goal is attainable and you go all out for it, but miss?

[MachineGhost]

How do you choose your goals?  What happens if your goals are unrealistic?  What happens if you think your goal is attainable and you go all out for it, but miss?

And what happens when you find out your investment vehicle that you securely ignored by assuming it was working (which is why you outsource your investment management to "professionals" [ahem] in the first place), failed epicly?

[mathjak107]

In my case i know the income level i need to sustain in retirement  , i know what my limits are for volatility , i know historically what allocations failed over and over to provide that income AND LASTLY I KNOW IF A FEW YEARS IN I AM NOT MAINTAINING A 2% REAL RETURN AVERAGE  then i know a red flag says i need to lower my expectations or change what i am doing. Perhaps i need to go from 50% equity's to 60% if valuations are low.

I Have a real time yardstick to judge by.

Each one of us should have an end game in the cards for what they are doing.

You know for as long as gone with the wind took to write. The end of the book was written first .  The rest of the years filled in the rest of the story
getting to the end desired.

The end of that story was decided on first, years before the beginning

[MachineGhost]

In my case i know the income level i need to sustain in retirement  , i know what my limits are for volatility , i know historically what allocations failed over and over to provide that income AND LASTLY I KNOW IF A FEW YEARS IN I AM NOT MAINTAINING A 2% REAL RETURN AVERAGE  then i know a red flag says i need to lower my expectations or change what i am doing. Perhaps i need to go from 50% equity's to 60% if valuations are low.

If 2% real realtime monitoring is all you need for a portfolio health check, why not just design a portfolio that gets exactly that with no excess?  It would be the least risky portfolio possible.  I didn't check if the Volatility PP Jr. accomplishes it consistently, but I wouldn't be surprised if it does with a few tweaks.

[mathjak107]

You can't design a portfolio that will do just that since sequence of return risk will require all different allocations and amounts.

It also has to do this over the first 15 years .

It also would have zero slack for emergency spending that exceeds the years budget and most important nothing for heirs or a longer life then you planned for.
It is only the minimum required to maintain a 4% withdrawal rate inflation adjusted. It represents the worst of times. I am hoping to leave more than we started with to the kids , not just make it through and bounce the check to the funeral home.

So we monitor for worst case but hope and plan for a lot more.

Would you ever put enough gas in your tank on a long trip based on the labs milege ?

[flyingpylon]

In my case i know the income level i need to sustain in retirement

How and at what age did you determine that?  Not having a crystal ball or anything, that's the part I find to be difficult.

[mathjak107]

Good question and my answer reflects me.

I was always goal oriented. If one goal was to have a paid off house then i would invest very aggressively until i had that money no matter when it was.

I couldn't put a time frame on it because i didn't have the money .
Even if i lost some in the process it didn't matter since there was no time frame .
Well once i reached that goal that money came out of the risk pool since i met that goal. Whether i bought at that point or not that money was taken out of play.

All my goals were like that . No time frame but a clear picture of the final chapter
I would step up investing on the goals not hit and go pedal to the metal since a set back did not matter because we had no time frame.

Losing a piece of the money is no big deal when you don't have the money.

As i pointed out above losing a piece now that i do have the money represents a lot of money.

So i am always evaluating goals and adjusting to reach them .  I think a 50/50 allocation may do the trick.  But if not i may have to go  60/40 or even consider an spia which is an annuity  if markets suck.

The bottom line is i change the road to the goals as the  times change nudging the ship back on course to reach the end of the story which i wrote first.

[Tyler]

All my goals were like that . No time frame but a clear picture of the final chapter
I would step up investing on the goals not hit and go pedal to the metal since a set back did not matter because we had no time frame.

I appreciate your perspective.  Personally, I have a different personality and attacked my own goals from another direction.

Many of my biggest goals had timeframes -- like setting a goal of retiring before 40 to free up my life for other things.  The volatility of the stock market presented too great a risk to my goal, and I knew I could reach it just as quickly and with more certainty by reducing my spending and saving 80% of my income.  In that context the PP was the more appropriate choice for my own financial strategy.  Investment returns were always a distant second to new contributions in accumulation each year, and I chose an investment method with the best risk-adjusted returns that met my needs and (just as importantly) shielded my goal from market risk.  Now FI, the PP still more than covers my expenses and is a nice experience as well.  Perhaps I could earn more with a different portfolio, but I'm already more than happy with my current spending level so I feel no need to change a good thing I'm already comfortable with.  My life goals are not about maximizing my net worth. 

I guess I see investing not so much as a distance race where speed is king but as just one component of a larger system.  Sorta like how some investors get tripped up by trying to maximize the returns of every individual asset in a portfolio and missing the big picture, I personally think that a singular focus on maximizing investment returns misses the big picture when it comes to financial goals.  But we all have different goals and personalities, and I have no problem with others taking a different approach.

[mathjak107]

Raising a family in nyc with our incomes would never allowed us to hit goal without aggressive investing and the wind at our backs.

Anything we did to accomplish meeting our retirement goals had to be from compounding our investments.
Volatility was fine  as long as we were rewarded for it which we were.

[Pointedstick]

Raising a family in nyc with our incomes would never allowed us to hit goal without aggressive investing and the wind at our backs.

Anything we did to accomplish meeting our retirement goals had to be from compounding our investments.
Volatility was fine  as long as we were rewarded for it which we were.

The extreme difficulty of saving a high fraction of one's income while raising a family is precisely why I choose not to live in a place like NYC.

[Xan]

Raising a family in nyc with our incomes would never allowed us to hit goal without aggressive investing and the wind at our backs.

Anything we did to accomplish meeting our retirement goals had to be from compounding our investments.
Volatility was fine  as long as we were rewarded for it which we were.

Suppose your goal had been to live on your own personal ocean liner, complete with chefs, maids, butlers, and a helicopter.  You COULD do it by investing aggressively enough.  But it would involve being extremely lucky.  Aiming for it, you're very likely to miss.

You did exactly that, but dialed back slightly.  The principle of what you're espousing is the same.  "Make up some goal, then invest aggressively enough to get there!"  It's not actually very helpful, because your goal might not be realistic, and it might lead you to losing everything.

[mathjak107]

[quote author=Pointedstick link=topic=7778.msg134624#msg134624 date

=1447180578]

Raising a family in nyc with our incomes would never allowed us to hit goal without aggressive investing and the wind at our backs.

Anything we did to accomplish meeting our retirement goals had to be from compounding our investments.
Volatility was fine  as long as we were rewarded for it which we were.

The extreme difficulty of saving a high fraction of one's income while raising a family is precisely why I choose not to live in a place like NYC
[/quote]

There can be lots of benefits from high cost areas.
pay can be quite a lot higher as well as real estate values will be higher.

We had a house in the pocono's in pa and while we could make do with 1/3 less income salary's were half.

What we saw was the math that comes from living in high cost areas at work.

Loads of folks sold their now paid off homes for 600k or more from the tristate area and relocated to cheaper areas like kings.
Those local  folks living in pa had 150-200k homes when all was said and
done and  little savings .  they couldn't sell ,relocate and have a few
hundred k left to live on.
That is huge benefit from living in a high cost area.

The high real estate values are a double edge sword. Cost of living is higher but the high cost of living usually gives you greater home equity when you sell.