PP On Top of My Existing Portfolio?

[teramesher]

I built a portfolio several months ago consisting of US, International, and bond that are popular at bogleheads.  I've been reading up on PP and interested in it.  Rather than converting my portfolio, I am considering having 2nd portfolio for PP.  Does anybody have this?  Or for those that originally had non PP portfolio, did you convert lump sum or over time into PP?

Also, is this a good/bad time to build PP?  (I realize I may get chewed up for asking this question)

[Indices]

Harry Browne took this into consideration and created the idea of a variable portfolio. The permanent portfolio is savings for retirement, the variable portfolio is money you can afford to lose (gamble). That is why there is a variable portfolio section on this forum.

[teramesher]

Harry Browne took this into consideration and created the idea of a variable portfolio. The permanent portfolio is savings for retirement, the variable portfolio is money you can afford to lose (gamble). That is why there is a variable portfolio section on this forum.

I don't mean to be sarcastic.  Are you saying the bunch of people over at bogleheads are gambling with their money?  You make it sound like PP is only way to go for the retirement.

[herbgoat]

Each individual has to make up their own mind. I'm sure none of the bogleheads would say they're gambling with their money and most likely they will do well. However, those of us who believe in the PP simply believe that we have much more protection in cases of deflation, inflation, or recession.

Who knows, a typical boglehead portfolio could very likely outperform the PP over the next decade or two. Then again, if there are rough waters ahead, I feel much more confident by having my money in the PP. I have learned that it is very rare that something goes as planned. That's why I switched to the PP. I just wish I had learned these life lessons earlier in life. Nothing like the school of hard knocks.

[Indices]

Harry Browne took this into consideration and created the idea of a variable portfolio. The permanent portfolio is savings for retirement, the variable portfolio is money you can afford to lose (gamble). That is why there is a variable portfolio section on this forum.

I don't mean to be sarcastic.  Are you saying the bunch of people over at bogleheads are gambling with their money?  You make it sound like PP is only way to go for the retirement.

If we have a secular bear market lasting decades, then yes, the bogleheads with their stock heavy portfolios just gambled away their savings. You do realize stocks don't go up recessions or in periods of low economic growth (which is happening as we speak).

[longeyes]

So what do you suggest as the parallel universe PP?  What would your four components be?

[clacy]

Harry Browne took this into consideration and created the idea of a variable portfolio. The permanent portfolio is savings for retirement, the variable portfolio is money you can afford to lose (gamble). That is why there is a variable portfolio section on this forum.

I don't mean to be sarcastic.  Are you saying the bunch of people over at bogleheads are gambling with their money?  You make it sound like PP is only way to go for the retirement.

teramesher,

Certainly not everyone on this board believes that ANYTHING outside of a 4x25 split that Harry Browne advocated is gambling.  However, that 4-way split is the cornerstone of the philosophy.  I happen to believe that there is more than one way to skin a cat.  You could almost certainly stick fairly close to the overall philosophy of Harry Browne and still add in some additional asset classes.  For instance a portfolio consisting of the following would probably get you much of what the HBPP offers and could even be better:

10% VTI- Total Stock Market
10% VEU- Total Stock Market ex-US
5% VNQ- REIT
15% GLD- Gold
10% DBC- Commodity Basket
15% TLT- Long Term Treasuries
10% EDV- Zeros
10% SHY- 1-3 yr treasuries
5% FXY- Japanese Yen
5% FXF- Swiss Franc
5% FXC- Canadian Dollar

(that isn't a portfolio I use, just throwing it out there as an example)

In fact there are more ways to achieve PP-type portfolio protection beyond the HBPP.  Look through the forum and you'll find that there are many people that run the HBPP for a portion of their assets, and other allocations/strategies additionally.

To your question on whether now is a good time to start a PP..... That will only be answered after the fact.  If you're looking for additional protection to help you sleep at night, I would urge you to strongly consider the HBPP for at least a nice chunk of your total assets.

[teramesher]

Just keep in mind that the 5% real rewards achieved by the PP historically, could swing the other way over a period of time, such that the longer term real rewards might average out closer to perhaps 1% or maybe less.

Does that 1% return factor in the inflation?

[teramesher]

I would urge you to strongly consider the HBPP for at least a nice chunk of your total assets.

Thanks for your suggestion.  Below is what I currently have.  How would you go about taking a portion and setting up HBPP?
100k into:
VINIX (Inst Index): 39%
VXUS (Vanguard International): 25%
VXF (Extended market index):15%
DODIX (Dodge & Cox Income): 21%

Emergency cash: 30K

Take a portion out of emergency cash and built HBPP?

[clacy]

Your portfolio seems to be very heavily invested in stocks so the HBPP might help you sleep better at night.  You might chop each of the funds you currently have in half and then you'll have $50k invested in your current portfolio.  You may just reinvest that other $50k split evenly between VTI/TLT/GLD ($16,650 x 3).  That along with the $30k emergency fund would mean you are about 23% cash overall.

The two portfolios combined would give you:

43% stocks
21% bonds
13% gold
23% cash

Most bogleheads would find that portfolio to hold too much gold/cash and most PP'ers would say you're too heavy in stocks. Overall, it sounds like you're not 100% comfortable with your current allocation, but not ready to jump completely into the HBPP, so meeting in the middle might be the way to go.