How long did it take you to adopt the PP after hearing about it?

[Indices]

It took me about a year. I remember visiting this forum awhile back and debating MediumTex about how I wasn't going to get into the PP until the gold bubble popped. Once it went down a little and then went up again I realized I didn't know what I was talking about and I would never predict when gold would be "normally" priced or if it was even in a bubble at all.

[Odysseusa]

It may take us a year to adopt PP. However, I have a feeling that it takes many of us at least 10 years of consistent losses from the market to realize the beauty and rationals of PP.

[l82start]

i kinda fell backasswards into it, i built a Bogle head portfolio and then heard about the PP almost immediately after, when i added up my holdings between the gold i already had and my 6-8 month emergency cash i was "close enough" to the 4x25 split to call it a modified pp (total bonds instead of LT), it took me about one year for enough tax efficient space to open up and new contributions to accumulate, to allow me to make the switch to LT and have a proper PP.....   

[MediumTex]

It took me about a year. 

[FarmerD]

I'm a longtime Boglehead.  A year ago I was concerned the ecomomy could possibly tip over into depression/hyperinflation.  So to hedge myself against either case, I kept my stock funds but started splitting up my cash savings into long term corp bonds and gold.  Then I discovered the PP postings on the Bogleheads forum.  I checked out Craig's blog and could see the PP is a better idea than what I had.  I guess over time I've slowly evolved towards the PP.   

[EdwardjK]

I first learned of the Permanent Portfolio mutual fund (PRPFX).  While researching that, I cam eacross Harry Browne and his Permanent Portfolio.  Took me two years and I just made my first investment in the PP last week - about 6% of my investable assets.  I think a reasonable first step.

[Indices]

I'm beginning to think Boglehead philosophy is like Newtonian physics, and then the Permanent Portfolio is like Einstein's Theory of Relativity. Boglehead philosophy works a lot of the time, but certainly not all of the time, and definitely not during black swan events.

[neil]

Me too. I used to be a Boglehead but now I swith to HBPP.

Started HBPP in my wife's Roth, invested PRPFX in her taxable account. Purchased PRPFX/EDV in my Roth.

Plan to convert my Roth into HBPP in a year.

I listen to Harry Browne radio every morning during commute and always wonder why I didn't find out 10 years ago.

[lazyboy]

I took me about a year or less to move into a HBPP. Interestingly, the way I found out about the PP was on a financial blog talking about PCRIX. I thought investing in commodities would be a good thing. I read that Larry Swedrowe had recommended this fund as a way to diversify. I bought some PCRIX in March of 2008 and watched it sink like a stone over the next year, falling steeper than the market during that phase.  I noticed some very astute posts by Craigr on this blog where he took on Larry Swedrowe and this was before PCRIX had started to lose most of it's value. I was impressed by Craigr and found the link to his site on the PP and then the Boglehead forum on the PP. I started investing with some PRPFX, continued my education about the PP and now I'm 100% in the HBPP. I'm very grateful to all the contributors to this site and especially to  Craigr and Medium Tex. 

[D]

About a year...

[craigr]

About three months (six months to full implementation for tax reasons) after I was inspired by a porn producer.

[Lone Wolf]

About three months for me, IIRC.  My skepticism about the portfolio eroded very quickly.

[Liz L.]

A month or so.

[moda0306]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it.... but I'm a PP masochist, so here goes:

For instance, I have enough respect for what gold can do to think that maybe it belongs at somewhere between 10-15% of a portfolio, even the PP.

Likewise, I think cash in excess of 1 year's living expenses is excessive (though probably rarely obtained, even with some of us PP folk).

Just thoughts... not to rag on the PP, but simply to inspire some discussion on some of the details.

[rickb]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it.... but I'm a PP masochist, so here goes:

For instance, I have enough respect for what gold can do to think that maybe it belongs at somewhere between 10-15% of a portfolio, even the PP.

Likewise, I think cash in excess of 1 year's living expenses is excessive (though probably rarely obtained, even with some of us PP folk).

Just thoughts... not to rag on the PP, but simply to inspire some discussion on some of the details.

Two comments.

1) How about if you move this to a new thread since it really has nothing to do with this thread? 

2) You do know about Clive's volatility adjusted weightings, don't you?  See, for example, this thread.

[Indices]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it.... but I'm a PP masochist, so here goes:

For instance, I have enough respect for what gold can do to think that maybe it belongs at somewhere between 10-15% of a portfolio, even the PP.

Likewise, I think cash in excess of 1 year's living expenses is excessive (though probably rarely obtained, even with some of us PP folk).

Just thoughts... not to rag on the PP, but simply to inspire some discussion on some of the details.

When you overweight an asset you are implicitly saying you expect that asset to outperform the others. Think about it. I had this debate over on another forum and many of them couldn't comprehend it. There's nothing magical about any of the asset classes that make up the portfolio. The magic occurs when you mix them together in equal amounts.

I used to think 1 year's living expenses was excessive until I had friends who were/are unemployed for over two years.

[Lone Wolf]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it....

I've turned this over a few times in my head.  My basic conclusion is that it's virtually certain that there's some slight percentage tweak to the allocation that will perform better than 4x25.

The problem is that I've got no way of knowing what that allocation might be without jumping into my time machine and asking the Morlocks and Eloi how it all turned out.  The 4x25 has the advantage of being well understood, well-studied and very effective.  On top of this, it keeps investing neat, simple, and clean.

I would not be comfortable dropping gold to 10%.  If something awful happens to your PP's currency, your exposure with cash, bonds, and stocks is enormous.  A conventional portfolio composed of nothing but stocks, a few high-yield bonds, a wing and a prayer would get great benefits from 10% gold exposure.  The PP has the additional volatile element of LT bonds to worry about.

I also wouldn't want to drop stocks too far down.  You've got to give yourself that chance to cash in during prosperity IMO.

Long-term bonds?  TBH, I will probably always hate the idea behind these things.  Any defense of them I give is likely to ring hollow.    However, the role they play in a world fumbling its way through a deleveraging process is crucial and I'd feel exposed without them.

Cash is by far the most tempting element to screw around with.  I leave everything alone, though.

[Indices]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it....

I've turned this over a few times in my head.  My basic conclusion is that it's virtually certain that there's some slight percentage tweak to the allocation that will perform better than 4x25.

The problem is that I've got no way of knowing what that allocation might be without jumping into my time machine and asking the Morlocks and Eloi how it all turned out.  The 4x25 has the advantage of being well understood, well-studied and very effective.  On top of this, it keeps investing neat, simple, and clean.

I would not be comfortable dropping gold to 10%.  If something awful happens to your PP's currency, your exposure with cash, bonds, and stocks is enormous.  A conventional portfolio composed of nothing but stocks, a few high-yield bonds, a wing and a prayer would get great benefits from 10% gold exposure.  The PP has the additional volatile element of LT bonds to worry about.

I also wouldn't want to drop stocks too far down.  You've got to give yourself that chance to cash in during prosperity IMO.

Long-term bonds?  TBH, I will probably always hate the idea behind these things.  Any defense of them I give is likely to ring hollow.    However, the role they play in a world fumbling its way through a deleveraging process is crucial and I'd feel exposed without them.

Cash is by far the most tempting element to screw around with.  I leave everything alone, though.

+1. There is definitely a better asset allocation than the PP. The problem is no one knows what that is. Will someone stumble over it accidentally and then brag endlessly about it? Absolutely. Should that affect your portfolio. No.

[MediumTex]

Does anyone still have problems with the arbitrary nature of the 4x25 allocation?  I know trying to pick a "better" allocation will be an endless game of self-doubt and Monday-morning quarterbacking, so maybe it's best to not even think about it....

I've turned this over a few times in my head.  My basic conclusion is that it's virtually certain that there's some slight percentage tweak to the allocation that will perform better than 4x25.

The problem is that I've got no way of knowing what that allocation might be without jumping into my time machine and asking the Morlocks and Eloi how it all turned out.  The 4x25 has the advantage of being well understood, well-studied and very effective.  On top of this, it keeps investing neat, simple, and clean.

I would not be comfortable dropping gold to 10%.  If something awful happens to your PP's currency, your exposure with cash, bonds, and stocks is enormous.  A conventional portfolio composed of nothing but stocks, a few high-yield bonds, a wing and a prayer would get great benefits from 10% gold exposure.  The PP has the additional volatile element of LT bonds to worry about.

I also wouldn't want to drop stocks too far down.  You've got to give yourself that chance to cash in during prosperity IMO.

Long-term bonds?  TBH, I will probably always hate the idea behind these things.  Any defense of them I give is likely to ring hollow.    However, the role they play in a world fumbling its way through a deleveraging process is crucial and I'd feel exposed without them.

Cash is by far the most tempting element to screw around with.  I leave everything alone, though.

+1. There is definitely a better asset allocation than the PP. The problem is no one knows what that is. Will someone stumble over it accidentally and then brag endlessly about it? Absolutely. Should that affect your portfolio. No.

Yep.

It's kind of like the perfect fishing spot.  We know one exists, but we have no way of knowing whether the fishing spot we have chosen is going to be the perfect fishing spot when we happen to be fishing there.

It's better, if possible, to have hooks in the water everywhere so that you don't have to guess which spot is going to be the best on any given day.

[moda0306]

Not to drag a side-discussion on too long, but it's not about "deciding which ones are going to perform the best" so much as realizing the size and scope of how each asset is supposed to work.

For instance, if we didn't think the volatility of gold and treasuries would even out stock losses for the most part, then we'd hardly call this portfolio a success by adding cash to the equation.  We like the PP, mostly, for its 3 most volatile assets.  We hold cash as a buffer to the fact that sometimes the three other volatile assets will drop enough in net to leave us with more volatility than we feel comfortable with.

Further, I think gold has shown to do enough at a less-than 25% amount.  I'll be the first to say that cutting back gold with very likely be something that will make you poorer, not richer, 5 years from now, but I think the nature of the asset... namely, a yellow metal that sits in a safe while the people you "hired" through your stocks are trying to make a better mousetrap every single day, lends it to being something that should hold a smaller part of the portfolio... maybe 10% was too little, but 15-20% seems completely reasonable.

I guess I look at these assets as different baskets of risk-adjusted return that, when put together, become more than a sum of their parts, and when I see the way cash and gold behave in their respective economic conditions along with their volatility and expected return (I know I know... it's a bs term in some ways), I think the 4x25 allocation tends to serve as little-more than a preventative tool to tinkering.

A part of me wonders how one person could have bought an ounce of a yellow metal in 1972, and another person bought a share of a productive company at the same price, and the two of them would be sitting on about the same amount of wealth today. 

[Indices]

Most investors who hate the PP start criticizing each of the asset classes in isolation. "Well LTs don't work because they're too volatile, gold doesn't work because it gives no interest or dividends etc.," so I think most people think in terms of buying an asset class that will give them the best returns over time. Look at Bogleheads who look at their portfolios from the perspective that stocks will give them guaranteed returns if they wait long enough and the bonds are just a little side protection.

There are scenarios where bonds will be wealth generators, as we have seen in Japan and other countries. There will be countries where gold is the wealth generator like Argentina where stocks fell and hyperinflation ensued. Or maybe cash will save the day. The PP covers all the bets at the same time.

[stone]

Moda, "A part of me wonders how one person could have bought an ounce of a yellow metal in 1972, and another person bought a share of a productive company at the same price, and the two of them would be sitting on about the same amount of wealth today"

I think the way to understand that is to take on board that  we are buying stocks in the secondary market. We are not being venture capitalists starting up companies. By the time we buy a stock it has already past the risk and return hurdle. If you act as a venture capitalist and succeed in fostering a successful company out of nothing, then you might get massive returns. Passively investing in established companies offers no problems over and above buying gold, so the price of such stocks naturally is already sufficiently high by the time we get to it for it to offer no more prospect of returns than gold does.

[moda0306]

stone,

Never really thought of it that way... the efficiency of the market bringing returns down because you're getting them second hand as the market has injected efficiency but already extracted return.

Thanks for helping my cognitive picture on this.

[FarmerD]

Moda, "A part of me wonders how one person could have bought an ounce of a yellow metal in 1972, and another person bought a share of a productive company at the same price, and the two of them would be sitting on about the same amount of wealth today"

I think the way to understand that is to take on board that  we are buying stocks in the secondary market. We are not being venture capitalists starting up companies. By the time we buy a stock it has already past the risk and return hurdle. If you act as a venture capitalist and succeed in fostering a successful company out of nothing, then you might get massive returns. Passively investing in established companies offers no problems over and above buying gold, so the price of such stocks naturally is already sufficiently high by the time we get to it for it to offer no more prospect of returns than gold does.

Refreshing way to look at it. 

As an investor, I've always looked at cash, bonds, stocks, and gold as just different forms of "money"

[Tortoise]

My basic conclusion is that it's virtually certain that there's some slight percentage tweak to the allocation that will perform better than 4x25.

The problem is that I've got no way of knowing what that allocation might be without jumping into my time machine and asking the Morlocks and Eloi how it all turned out.  The 4x25 has the advantage of being well understood, well-studied and very effective.  On top of this, it keeps investing neat, simple, and clean.

Agreed. I also like to think of the even four-way split as a fundamentally defensive asset allocation, and any uneven split as a fundamentally offensive (speculative) asset allocation.

Evenly splitting the assets is defensive because, in the absence of knowledge about the future (i.e., in the absence of any assumptions about the future return or volatility of any of the assets), the even split minimizes your maximum possible loss in comparison to all possible portfolios containing those same four PP assets. Any so-called "optimum" asset allocation for the PP that is unevenly split must necessarily be based on either past performance (speculation, since past performance is not guaranteed to persist) or assumptions about future performance (again, speculation, since the future is unknowable).

Regarding how long it took me to adopt the PP after hearing about it: I stumbled on a PP blog entry on LewRockwell.com last October. That led me to a plot showing the PP's unbelievably stable returns since the early 1970s, which astounded me. I subsequently learned about Harry Browne's theory of the four basic economic environments by reading Fail-Safe Investing. That hooked me. About one month after reading that first blog, I was fully invested in the PP.

The transition wasn't too radical of a change for me since I was already heavily into gold. Initially, the hardest part for me psychologically was the 25% cash. But then I realized that I already had emergency savings consisting of about 25% of my liquid assets, so my cash allocation was already taken care of. Buying the long-term Treasuries made my palms a little sweaty, but in a good way. Like the way buying a 12-gauge shotgun makes your palms a little sweaty: it's explosive and dangerous, and you hope your life never relies on it. But if it does... it just feels damn good to know it's there.