PP YTD performance - was it the worst ever?

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Re: PP YTD performance - was it the worst ever?

Post by jason » Thu Sep 15, 2022 11:01 am

Kbg wrote:
Thu Sep 15, 2022 10:52 am
jason wrote:
Thu Sep 15, 2022 9:51 am
Kevin K. wrote:
Thu Sep 15, 2022 9:38 am
If it's any consolation:

https://portfolioslab.com/lazy-portfolios
Makes me feel better until I look at the 10 year returns, where the PP is third to last :(
There should be no surprise there if you did your homework before investing. Things "may" equalize if the bear stock market is bad enough but it will be temporary. The PP is stereotypical of any portfolio...you get better performance or better stability, you don't get both.
When I invested in the PP 9 years ago I was very attracted to the nearly 9% CAGR and incredible stability since 1972. My performance has been close to half of the 9% I was hoping for. If I was an ignorant lemming/sheep, I would have done the traditional 60/40 portfolio and would have had around double the performance I got with the PP. Of course, nobody has a crystal ball, etc. but it's frustrating when you are too smart for your own good.
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Re: PP YTD performance - was it the worst ever?

Post by Kbg » Thu Sep 15, 2022 12:23 pm

jason wrote:
Thu Sep 15, 2022 11:01 am
Kbg wrote:
Thu Sep 15, 2022 10:52 am
jason wrote:
Thu Sep 15, 2022 9:51 am
Kevin K. wrote:
Thu Sep 15, 2022 9:38 am
If it's any consolation:

https://portfolioslab.com/lazy-portfolios
Makes me feel better until I look at the 10 year returns, where the PP is third to last :(
There should be no surprise there if you did your homework before investing. Things "may" equalize if the bear stock market is bad enough but it will be temporary. The PP is stereotypical of any portfolio...you get better performance or better stability, you don't get both.
When I invested in the PP 9 years ago I was very attracted to the nearly 9% CAGR and incredible stability since 1972. My performance has been close to half of the 9% I was hoping for. If I was an ignorant lemming/sheep, I would have done the traditional 60/40 portfolio and would have had around double the performance I got with the PP. Of course, nobody has a crystal ball, etc. but it's frustrating when you are too smart for your own good.
When evaluating portfolios I recommend using https://www.portfoliovisualizer.com and carefully review their "Rolling Returns" tab. Rolling returns will give you a much better sense of comparative portfolio tradeoffs that are more likely to be enduring. The graphs are pretty nifty as well. Using a modified PP by combining cash and LTTs into 50% ITTs and comparing it to 60/40 TSM/ITTs you can take a backtest back to 1972. What you will discover is that over multiple rolling periods you get a around 2% less CAGR than a standard 60/40 and that 60/40 has more extremes in rolling periods whereas the PP is much more steady.

This last sentence is, if history is any guide, why the PP is a fairly good portfolio for the dd phase of life. Conversely, it is also why the PP is not a good portfolio for the growth phase of life.

Finally, on the rolling returns graphs notice the differences in rolling performance starting about 2003...

Prior to 2003 a 60/40 consistently outperformed the PP and roughly tracked it (e.g. all you really got was lower performance with the PP)

Afterward you see a 60/40 swinging around the PP wildly which is almost entirely due to the large allocation to stocks and some very steep DDs in stocks during the early 2000s and 2008-9. A basic fact regarding a PP is that it really only has 25% of its assets dedicated to growth.

If you eyeball the PP's rolling return values they basically swing around 5%, +/- 5%...so your performance is kinda right where it is normally (on average)

Anyway, portfolios aren't good or bad. They just have characteristics. The best portfolio for you is the one that most closely aligns to the characteristics you are seeking and are temperamentally dispositioned to stay with.

And a critical thing to remember that is often forgotten... it's history. Markets have a reality underneath them that were driven by actual world/economic events and will be driven by those to come. We "hope" that the performance history will somewhat resemble the past.
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Re: PP YTD performance - was it the worst ever?

Post by I Shrugged » Thu Sep 15, 2022 5:12 pm

You pays your money and you takes your chances. In 40 years I've had three different investing plans. Each time I learned and studied and moved on. If you have decided that this one is not going to work out, it's time to figure out the next one.

But, sometimes it's just random.
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Re: PP YTD performance - was it the worst ever?

Post by buddtholomew » Fri Sep 16, 2022 10:36 am

jason wrote:
Thu Sep 15, 2022 11:01 am
Kbg wrote:
Thu Sep 15, 2022 10:52 am
jason wrote:
Thu Sep 15, 2022 9:51 am
Kevin K. wrote:
Thu Sep 15, 2022 9:38 am
If it's any consolation:

https://portfolioslab.com/lazy-portfolios
Makes me feel better until I look at the 10 year returns, where the PP is third to last :(
There should be no surprise there if you did your homework before investing. Things "may" equalize if the bear stock market is bad enough but it will be temporary. The PP is stereotypical of any portfolio...you get better performance or better stability, you don't get both.
When I invested in the PP 9 years ago I was very attracted to the nearly 9% CAGR and incredible stability since 1972. My performance has been close to half of the 9% I was hoping for. If I was an ignorant lemming/sheep, I would have done the traditional 60/40 portfolio and would have had around double the performance I got with the PP. Of course, nobody has a crystal ball, etc. but it's frustrating when you are too smart for your own good.
Yup; luckily I had both a 60/40 and PP to avoid too much regret.
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Re: PP YTD performance - was it the worst ever?

Post by Dieter » Fri Sep 16, 2022 10:47 pm

I’ve stuck with ~50% stocks while incorporating LTT and Gold

Definitely would be better off financially if I had stuck with more the 65/35 ish I back before (TSM/SCV/INTL;TBM)

But, slept a lot better

So, I figure it worked out ok and I learned a thing or two
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Re: PP YTD performance - was it the worst ever?

Post by Kbg » Sat Sep 17, 2022 7:41 am

Something I realized way too late in my investing career was recency bias. Recency bias in the portfolio sphere is when people gravitate to things that have good track records at a given point in time...and because that is the case, shortly thereafter the asset/portfolio normally will often be returning to mean in the not too distant future.
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Sat Sep 17, 2022 8:02 am

Kbg wrote:
Sat Sep 17, 2022 7:41 am

Something I realized way too late in my investing career was recency bias. Recency bias in the portfolio sphere is when people gravitate to things that have good track records at a given point in time...and because that is the case, shortly thereafter the asset/portfolio normally will often be returning to mean in the not too distant future.


Recency bias pervades all of life. Particularly with sports fans. They are forever stuck in the static present with no sense of history or that the future can be any different than the present.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: PP YTD performance - was it the worst ever?

Post by joypog » Sat Sep 17, 2022 8:59 am

Dieter wrote:
Fri Sep 16, 2022 10:47 pm
I’ve stuck with ~50% stocks while incorporating LTT and Gold

Definitely would be better off financially if I had stuck with more the 65/35 ish I back before (TSM/SCV/INTL;TBM)

But, slept a lot better

So, I figure it worked out ok and I learned a thing or two
Way underrated aspect of portfolio construction.

I used to be an amazing sleeper, but as the King Solomon in Ecclesiastes predicted, it's not as good as before.

The last thing I need is my investments to pile on to my symptoms of aging.
I have no clue. Ask me next May.
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Re: PP YTD performance - was it the worst ever?

Post by jason » Tue Sep 20, 2022 3:53 pm

Kbg wrote:
Sat Sep 17, 2022 7:41 am
Something I realized way too late in my investing career was recency bias. Recency bias in the portfolio sphere is when people gravitate to things that have good track records at a given point in time...and because that is the case, shortly thereafter the asset/portfolio normally will often be returning to mean in the not too distant future.
That's what I thought was good about the PP. A strong track record for over 40 years. And it has worked in pretty much every country. And it even worked during the Iceland collapse when the 60/40 did not.
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Re: PP YTD performance - was it the worst ever?

Post by Kbg » Tue Sep 20, 2022 5:10 pm

I would start with you…what are your goals? What do you want out of a portfolio? What is your temperament like? Are you still investing or are you in the spend down phase of life? Are you patient or impatient. If the latter, what can you do to incorporate that as a personal reality?
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Re: PP YTD performance - was it the worst ever?

Post by jason » Tue Sep 20, 2022 7:10 pm

Kbg wrote:
Tue Sep 20, 2022 5:10 pm
I would start with you…what are your goals? What do you want out of a portfolio? What is your temperament like? Are you still investing or are you in the spend down phase of life? Are you patient or impatient. If the latter, what can you do to incorporate that as a personal reality?
I am semi-retired. I have a relatively small income from a current business but mostly living off of my investment income from my savings, most of which I got when I sold a business around 15 years ago. My temperament is patient, but I am extremely risk averse. And that's why I chose the PP. But I was really hoping to be closer to 9% than 4.5% for my CAGR. I'm only 50 years old and I have young children so I'm not sure if I'm ready to spend down.
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Tue Sep 20, 2022 7:27 pm

jason wrote:
Tue Sep 20, 2022 7:10 pm

Kbg wrote:
Tue Sep 20, 2022 5:10 pm

I would start with you…what are your goals? What do you want out of a portfolio? What is your temperament like? Are you still investing or are you in the spend down phase of life? Are you patient or impatient. If the latter, what can you do to incorporate that as a personal reality?


I am semi-retired. I have a relatively small income from a current business but mostly living off of my investment income from my savings, most of which I got when I sold a business around 15 years ago. My temperament is patient, but I am extremely risk averse. And that's why I chose the PP. But I was really hoping to be closer to 9% than 4.5% for my CAGR. I'm only 50 years old and I have young children so I'm not sure if I'm ready to spend down.


What were you expecting for a real return?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: PP YTD performance - was it the worst ever?

Post by Hal » Wed Sep 21, 2022 3:19 am

jason wrote:
Tue Sep 20, 2022 7:10 pm
My temperament is patient, but I am extremely risk averse. And that's why I chose the PP. But I was really hoping to be closer to 9% than 4.5% for my CAGR.
The picture says it all....
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Screen Shot 2022-09-21 at 6.16.06 pm.png
Screen Shot 2022-09-21 at 6.16.06 pm.png (161.81 KiB) Viewed 524 times
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Re: PP YTD performance - was it the worst ever?

Post by Tortoise » Wed Sep 21, 2022 11:33 am

Hal wrote:
Wed Sep 21, 2022 3:19 am
The picture says it all....
It actually doesn’t. What time period does the plot represent?
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Re: PP YTD performance - was it the worst ever?

Post by Smith1776 » Wed Sep 21, 2022 11:48 am

Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
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Re: PP YTD performance - was it the worst ever?

Post by jason » Wed Sep 21, 2022 11:54 am

vnatale wrote:
Tue Sep 20, 2022 7:27 pm
jason wrote:
Tue Sep 20, 2022 7:10 pm
Kbg wrote:
Tue Sep 20, 2022 5:10 pm
I would start with you…what are your goals? What do you want out of a portfolio? What is your temperament like? Are you still investing or are you in the spend down phase of life? Are you patient or impatient. If the latter, what can you do to incorporate that as a personal reality?
I am semi-retired. I have a relatively small income from a current business but mostly living off of my investment income from my savings, most of which I got when I sold a business around 15 years ago. My temperament is patient, but I am extremely risk averse. And that's why I chose the PP. But I was really hoping to be closer to 9% than 4.5% for my CAGR. I'm only 50 years old and I have young children so I'm not sure if I'm ready to spend down.
What were you expecting for a real return?
I was hoping to get the historical average PP real return of 4%. Since June 2013, when I started the PP, the CAGR has been around 5%, so there's no way the real return would be close to 4%, right?
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Re: PP YTD performance - was it the worst ever?

Post by vnatale » Wed Sep 21, 2022 12:36 pm

jason wrote:
Wed Sep 21, 2022 11:54 am

vnatale wrote:
Tue Sep 20, 2022 7:27 pm



What were you expecting for a real return?


I was hoping to get the historical average PP real return of 4%. Since June 2013, when I started the PP, the CAGR has been around 5%, so there's no way the real return would be close to 4%, right?


From this I get a cumulate rate of inflation of 27.1% over nine years:

Capture.JPG
Capture.JPG (44.15 KiB) Viewed 467 times


Annual inflation would then have been 2.7% on the average for each of those years to achieve a compounded inflation rate of 27.1%.

Therefore, you are correct. Your real return has only been about 2.3%
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Re: PP YTD performance - was it the worst ever?

Post by Hal » Wed Sep 21, 2022 1:05 pm

Smith1776 wrote:
Wed Sep 21, 2022 11:48 am
Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
Touche! Couldn't fit title in with original screenshot :D

Also from Portfolio Charts...
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Start year vs years held Real CAGR.png
Start year vs years held Real CAGR.png (15.57 KiB) Viewed 455 times
Screen Shot 2022-09-22 at 4.00.54 am.png
Screen Shot 2022-09-22 at 4.00.54 am.png (53.54 KiB) Viewed 459 times
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Re: PP YTD performance - was it the worst ever?

Post by jason » Wed Sep 21, 2022 2:11 pm

vnatale wrote:
Wed Sep 21, 2022 12:36 pm
jason wrote:
Wed Sep 21, 2022 11:54 am
vnatale wrote:
Tue Sep 20, 2022 7:27 pm


What were you expecting for a real return?
I was hoping to get the historical average PP real return of 4%. Since June 2013, when I started the PP, the CAGR has been around 5%, so there's no way the real return would be close to 4%, right?
From this I get a cumulate rate of inflation of 27.1% over nine years:

Capture.JPG

Annual inflation would then have been 2.7% on the average for each of those years to achieve a compounded inflation rate of 27.1%.

Therefore, you are correct. Your real return has only been about 2.3%
Thanks. 2.3% is pretty lousy for the PP, right? Did I get into the PP at the worst possible time? Are there other 9 year periods that also have such a low real return?
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Re: PP YTD performance - was it the worst ever?

Post by dockinGA » Wed Sep 21, 2022 2:33 pm

jason wrote:
Wed Sep 21, 2022 2:11 pm
vnatale wrote:
Wed Sep 21, 2022 12:36 pm
jason wrote:
Wed Sep 21, 2022 11:54 am
vnatale wrote:
Tue Sep 20, 2022 7:27 pm


What were you expecting for a real return?
I was hoping to get the historical average PP real return of 4%. Since June 2013, when I started the PP, the CAGR has been around 5%, so there's no way the real return would be close to 4%, right?
From this I get a cumulate rate of inflation of 27.1% over nine years:

Capture.JPG

Annual inflation would then have been 2.7% on the average for each of those years to achieve a compounded inflation rate of 27.1%.

Therefore, you are correct. Your real return has only been about 2.3%
Thanks. 2.3% is pretty lousy for the PP, right? Did I get into the PP at the worst possible time? Are there other 9 year periods that also have such a low real return?
Portfoliocharts shows 1973 as the only other 9 year stretch with a real return this low.

Patience, patience, my friend. There's no telling where the economy is heading in the next few months. We will only know the winners and losers in the future. I, personally, would not be comfortable being 100% invested in any one asset class at this point in time. The fed is going to (I think) rightly be forced to raise rates until something breaks, but I'm not sure what that something will be.
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Re: PP YTD performance - was it the worst ever?

Post by jason » Wed Sep 21, 2022 3:01 pm

Hal wrote:
Wed Sep 21, 2022 1:05 pm
Smith1776 wrote:
Wed Sep 21, 2022 11:48 am
Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
Touche! Couldn't fit title in with original screenshot :D

Also from Portfolio Charts...
Can you please explain how the Portfolio Charts heat map works? If I got to 2013 and go to the 9 year column, it says 4%. But there is no way I got a 4% real CAGR. My nominal CAGR is under 5%. I started the PP in mid-June 2013.
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Re: PP YTD performance - was it the worst ever?

Post by Hal » Wed Sep 21, 2022 3:03 pm

dockinGA wrote:
Wed Sep 21, 2022 2:33 pm
Patience, patience, my friend. There's no telling where the economy is heading in the next few months. We will only know the winners and losers in the future. I, personally, would not be comfortable being 100% invested in any one asset class at this point in time. The fed is going to (I think) rightly be forced to raise rates until something breaks, but I'm not sure what that something will be.
+1 on dockinGA's insight. Compare the other outcomes over on Portfolio Charts before you feel too down. You did pick the portfolio with the best start date sensitivity ;)
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Re: PP YTD performance - was it the worst ever?

Post by Hal » Wed Sep 21, 2022 3:08 pm

jason wrote:
Wed Sep 21, 2022 3:01 pm
Hal wrote:
Wed Sep 21, 2022 1:05 pm
Smith1776 wrote:
Wed Sep 21, 2022 11:48 am
Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
Touche! Couldn't fit title in with original screenshot :D

Also from Portfolio Charts...
Can you please explain how the Portfolio Charts heat map works? If I got to 2013 and go to the 9 year column, it says 4%. But there is no way I got a 4% real CAGR. My nominal CAGR is under 5%. I started the PP in mid-June 2013.
The 9th year had a 4% growth, not to be read as 4% over 9 years.
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Re: PP YTD performance - was it the worst ever?

Post by jason » Wed Sep 21, 2022 3:18 pm

Hal wrote:
Wed Sep 21, 2022 3:08 pm
jason wrote:
Wed Sep 21, 2022 3:01 pm
Hal wrote:
Wed Sep 21, 2022 1:05 pm
Smith1776 wrote:
Wed Sep 21, 2022 11:48 am
Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
Touche! Couldn't fit title in with original screenshot :D

Also from Portfolio Charts...
Can you please explain how the Portfolio Charts heat map works? If I got to 2013 and go to the 9 year column, it says 4%. But there is no way I got a 4% real CAGR. My nominal CAGR is under 5%. I started the PP in mid-June 2013.
The 9th year had a 4% growth, not to be read as 4% over 9 years.
Really? I thought it was the real CAGR for someone who has held the PP for 9 years. I thought that is why there are a lot of negative years in the one and two column, but none when you go far out. Because if you hold the PP for a long time, historically, you always get in the 4-5% real CAGR range. If you look at the 20 year column, it's all 4s and 5s.
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Re: PP YTD performance - was it the worst ever?

Post by dockinGA » Wed Sep 21, 2022 3:42 pm

jason wrote:
Wed Sep 21, 2022 3:18 pm
Hal wrote:
Wed Sep 21, 2022 3:08 pm
jason wrote:
Wed Sep 21, 2022 3:01 pm
Hal wrote:
Wed Sep 21, 2022 1:05 pm
Smith1776 wrote:
Wed Sep 21, 2022 11:48 am
Given that that’s portfolio charts, I’d imagine it’s from the early 1970s to present.
Touche! Couldn't fit title in with original screenshot :D

Also from Portfolio Charts...
Can you please explain how the Portfolio Charts heat map works? If I got to 2013 and go to the 9 year column, it says 4%. But there is no way I got a 4% real CAGR. My nominal CAGR is under 5%. I started the PP in mid-June 2013.
The 9th year had a 4% growth, not to be read as 4% over 9 years.
Really? I thought it was the real CAGR for someone who has held the PP for 9 years. I thought that is why there are a lot of negative years in the one and two column, but none when you go far out. Because if you hold the PP for a long time, historically, you always get in the 4-5% real CAGR range. If you look at the 20 year column, it's all 4s and 5s.
You're interpreting the dataset correctly. Your actual CAGR may be a little bit different due to slightly different start dates. Also, much of the damage has been done in 2022, which I don't think is reflected anywhere in the portfoliocharts data.
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