PRPFX YTD Returns and EOY Contributions

[buddtholomew]

This is not the first time I find myself facing this investing dilemma. PRPFX is up 17.5% YTD and I have substantial cash holdings to commit to this investment in a taxable account (YE bonus). As of today, I am considering adding 50% of the cash to PRPFX at years end and witholding the remaining 50% to rebalance at a future date. I would prefer to avoid making these types of decisions moving forward. With that said, what rebalancing bands would others recommend using when investing between these two funds - PRPFX and Cash (VMMXX)?

[MediumTex]

If it makes you more comfortable I would scale into PRPFX over a few months.

That's probably what I would do right now.  I wouldn't mind the prospect of losing some gains to know that I was averaging over a period of time.

But that's me.  I'm conservative and cost averaging makes me feel better (even if it isn't necessarily the most efficient approach).

If I was settiing up a pure HB PP, though, I would just put it all in on day one (the HB PP wouldn't get killed the way PRPFX would if we saw another panic like in 2008).

[buddtholomew]

If it makes you more comfortable I would scale into PRPFX over a few months.

That's probably what I would do right now.  I wouldn't mind the prospect of losing some gains to know that I was averaging over a period of time.

But that's me.  I'm conservative and cost averaging makes me feel better (even if it isn't necessarily the most efficient approach).

If I was settiing up a pure HB PP, though, I would just put it all in on day one (the HB PP wouldn't get killed the way PRPFX would if we saw another panic like in 2008).

I appreciate the recommendation to DCA over a period of time. How would you approach establishing tolerance bands (PRPFX and VMMXX) to rebalance more methodically in the future?

"Killed" is a very strong term...would you change to "beaten severely" if I held an additional cash cushion to stabilize the overall portfolio and buy in periods of weakness?

[MediumTex]

I appreciate the recommendation to DCA over a period of time. How would you approach establishing tolerance bands (PRPFX and VMMXX) to rebalance more methodically in the future?

"Killed" is a very strong term...would you change to "beaten severely" if I held an additional cash cushion to stabilize the overall portfolio and buy in periods of weakness?

Add some EDV to PRPFX and now you're talking about safety.

As for PRPFX/VMMFX rebalancing, I like the 90%/10% baseline approach.  Perhaps use 95%/5% and 85%/15% as rebalancing bands.

Look into the 90%/10% PRPFX/EDV approach, though.  EDV complements PRPFX nicely and gives you something very close to a HB PP (though of course not exactly the same).

The two questions I think any investor needs to be able to answer for himself at ALL times with respect to ANY asset are the following:

1. How will I know when to buy?
2. How will I know when to sell?

If you don't know the answer to these questions AT ALL TIMES, you're just another dart throwing monkey.  Part of the appeal of the PP is that it does provide unambiguous (and reliable) answers to these questions at all times.

In my view, part of the problem with PRPFX (in addition to active management and higher fees than a HB PP) is that its light LT bond exposure makes it more volatile than a HB PP, AND creates the problem of trying to pick an entry point after it appears to have had a very strong run.  Since we know that PRPFX is vulnerable to a market panic when investors flee to the long end of the treasury market, you find yourself trying to predict the probability of another 2008-style panic when evaluating PRPFX entry points, which sort of puts you in the foyer of the monkey dart throwing room.

[buddtholomew]

Thanks MediumTex. Do you have any reservations to using VUSTX (VG Long-Term Treasury) over EDV? The effective duration (13.5) is substantially less than EDV (27.4) and closer to that of TLT (15.4, Barclay's LTT ETF). Knowing myself, I would prefer to hold a fund over an ETF to avoid any intra-day buying and selling due to emotions. Assuming VUSTX is an option, would you continue to recommend PRPFX 90%/LTT 10%, or rather increase the LTT holding to 15% or 20%?