I broke the golden rule

[portart]

I have to confess. I couldn't stop myself. Last week I reduced my stock exposure to 9%, bonds to 14%, gold up to 30% and the rest in cash. I can't help my thinking...last year stocks up 26.5% in 2013, up 6% this year and gold got beat up. I don't know if stocks will continue to go up, perhaps they will (today down 1% but lets see if they bid back up tomorrow). High consumer confidence, homes being sold, everyone's bullish. I just ain't buying it.

[goodasgold]

Good luck, portart, its your portfolio. Personally, apart from my VP, I wouldn't bet the farm on major alterations of the basic HBPP. (One exception, however, would be when the market is in a major bubble, such as the late 1990s. But the bubble often isn't apparent until after the big bust.  )

Placing a disproportionate allocation in gold is sort of like stacking lots of chips on the red 26 before giving the roulette wheel a spin. Sometimes it pays off, but most of the time it leads to disappointment. But I have to admit it is fascinating trying to figure out which way gold prices will jump.

Another example is bonds. For years now, the Wall St. gurus have been betting that bonds will take a tumble. And tumble they will, one of these days, but in the meantime bonds have been profitable over the long run, so I'm sticking with the 25% HBPP allocation.

[magneto]

Bit of a coincidence.  We reduced our stocks and bonds significantly last week also.  The trigger was my wife expressing interest in a house which we suspect could come on the market.  Thought it prudent to sell stocks/bonds while they were fully valued, rather than maybe be a forced seller when both are more reasonably (=cheaper) priced.
No regrets yet sitting on the sidelines with high cash levels.  Would others have taken the same action?

[barrett]

Portart, you wild man! Magneto, you too are out of control! 

I've only been invested in the PP for about five months and all the components are doing fine. We'll see how I feel when there are big gains or losses in one of the assets. I actually expect stocks to do well just because I feel these low interest rates are pushing people into real estate and equities. But I don't really know anything. LTTs will get killed at some point but in the meantime I like the income they provide.

Just getting to the point now where I don't check the markets every day which is kinda my main goal. Every night my sleep is terrible regardless of my asset allocation so I don't even subscribe to the "whatever helps you sleep better at night" spiel. A friend of mine once quipped "Everyone wants to know how I'm sleeping at night. I'm sleeping fine but I'm losing my ass in the stock market!"

Good luck to both of you.

[Pointedstick]

I'm pretty happy so far. My PPs are up nearly 7% YTD. I only check once a week or so and have no difficulty sleeping.

Portart, are you planning to get back into the 4x25 PP? I'm curious to know what might make you return to a less cash-heavy PP allocation.

[goodasgold]

The problem with portfolio juggling isn't just that your crystal ball has to perform a miracle by telling you the right time to sell and go into cash. The crystal ball also has to tell you the right time to reverse course and turn the cash back into other assets. So a double miracle is needed to emerge in the black.

Speaking for myself, after the horrendous experience of 2000 and the less damaging but still stomach-churning events of 2008 (less damaging for me, thanks to a 50/50 BH portfolio) I am happy to sleep peacefully with my conventional PP of 4x25. (Although I do sow a few wild oats with my VP.) This entails occasional low losses, as in 2013, but on the whole I am a happy camper.

In summary, good luck all you investment re-shufflers, but count me out.

[sophie]

There is nothing wrong with dialing up cash.  It's equivalent to shrinking the PP and having a separate cash reserve.  Harry Browne commented more than once that simply keeping investments in Treasury bills is the best option for many people who might not be willing to deal with fluctuation in portfolio value, or to keep up with portfolio management.

I would be a bit concerned about increasing the gold allocation though.  Gold might indeed jump in price, but take a look at what happened to gold during the 1980s.  That is certainly a possibility also, in which case you'd be sacrificing returns by overweighting what might turn out to be a poorly performing asset.  Bonds and stocks both look overvalued right now, but people have been saying that for years now - especially with bonds.  There's simply no way to know.

[dragoncar]

I'm pretty happy so far. My PPs are up nearly 7% YTD. I only check once a week or so and have no difficulty sleeping.

Portart, are you planning to get back into the 4x25 PP? I'm curious to know what might make you return to a less cash-heavy PP allocation.

Interesting, I just ran the numbers and my 3-year-old PP has returned a 5.8% CAGR, and is flirting with a rebalance out of stocks.    This is better than I expected, but of course a lot of those returns have come in the last few months.

Sometimes it's hard to look at the big picture because I have been adding assets to my portfolio, which makes the returns look worse in Google Finance (because earlier returns are on smaller amounts of money than current investment).... IRR and all that.

[HB Reader]

There is nothing wrong with dialing up cash.  It's equivalent to shrinking the PP and having a separate cash reserve.  Harry Browne commented more than once that simply keeping investments in Treasury bills is the best option for many people who might not be willing to deal with fluctuation in portfolio value, or to keep up with portfolio management.

I would be a bit concerned about increasing the gold allocation though.  Gold might indeed jump in price, but take a look at what happened to gold during the 1980s.  That is certainly a possibility also, in which case you'd be sacrificing returns by overweighting what might turn out to be a poorly performing asset.  Bonds and stocks both look overvalued right now, but people have been saying that for years now - especially with bonds.  There's simply no way to know.

I agree.  There's certainly nothing wrong with dialing up cash for an anticipated expense, but dramatically altering the balance of the other assets fundamentally turns the PP into a VP.

The move may or may not prove prescient, of course.  FWIW, in my VP I have also just started slowly lightening up on stocks and shortening bond maturites a little bit. 

[portart]

The market went down right after I sold and wrote this post.  I decided to go back in and went back to my 4x25 and I guess I picked up 3/4 of a percent on the equity side. My problem is like to read Marketwatch.com and am susceptible to convincing bear articles. I did get nervous trying to time things and is found myself checking the portfolio every hour. That is a receipe for second guessing yourself.

[dualstow]

Any fees paid on that jump to 30% gold?

[portart]

Is a straight trade, only $8.00 from Schwab

[dualstow]

Is a straight trade, only $8.00 from Schwab

Not bad.
Your concern with with stock market is understandable and I share it.
At the same time, I'm just as nervous about gold.

[dragoncar]

Is a straight trade, only $8.00 from Schwab

Not bad.
Your concern with with stock market is understandable and I share it.
At the same time, I'm just as nervous about gold.

How do you feel about long bonds?

[dualstow]

I guess so many investors hate bonds so much that I have hope every time they move up a bit.
That is, I bought and held them with unfairly low expectations in the first place, but I never worry about them.
It sounds cliche at this point, but it always bears repeating: at least we don't have to worry about the complete package.

[Pointedstick]

How do you feel about long bonds?

Personally, I like 'em. Even when their market value may be decreasing, I'm still getting paid, and it's more than I'm getting from stocks, cash or gold. Even though they're not the primary focus of the PP, you have to admit it's nice to see those payments roll in!

[dualstow]

Also, if the stock market does collapse, perhaps some of that money will fly to quality.

[murphy_p_t]

Placing a disproportionate allocation in gold is sort of like stacking lots of chips on the red 26 before giving the roulette wheel a spin. Sometimes it pays off, but most of the time it leads to disappointment.

Maybe disappointment, but it doesn't go to zero! Just requires patience...

[MediumTex]

Placing a disproportionate allocation in gold is sort of like stacking lots of chips on the red 26 before giving the roulette wheel a spin. Sometimes it pays off, but most of the time it leads to disappointment.

Maybe disappointment, but it doesn't go to zero! Just requires patience...

Over time, it seems like of the four PP assets, gold is actually the one that never leads to disappointment.

It's the currency and the contractual arrangements that stocks and bonds represent that eventually fail as society changes shape.  Gold just sits there and watches the whole thing unfold like a clock in a thunderstorm.

[rocketdog]

I have to confess. I couldn't stop myself. Last week I reduced my stock exposure to 9%, bonds to 14%, gold up to 30% and the rest in cash.

I guess I'll ask the obvious question:  why did you do this with your PP instead of your VP?  This, of course, is assuming you're not already 100% PP. 

The reason I mention that is because I'm only 40% PP myself, with the rest "VP" (although a very moderate VP at that, where 60% of my portfolio (VP) is in a Boglehead-type portfolio, albeit with a somewhat stronger tilt towards equities because of my 10-15 year time horizon).

[portart]

      I am back to the basic PP allocation. I found that I was worried about getting the timing wrong. Not much has happened since. A couple of sell offs and gold jumps then reverted to the norm the next day. Gold continues to hang around, the market is still near highs and bonds continue to hang in there. Something has to give but I don't see when or where it is going to come. No amount of news of issues in the world shakes the bull or pushes up gold.

I now believe that any changes won't occur until the Fed officially stops easing and allows rates to rise. I hate to admit that the Fed controls the financial world but it's true. Real economics doesn't move the needle anywhere close to what the Fed can. We are mere puppets and the rich who make the rules always get it right. They decide when the setup is ready for the carnage, always positioned to make huge gains while the little guy gets the pain. Is it any wonder why HB has instructed us to be in position not the let the winds of change destroy us? Now, that being said, the ants can overcome the the village by sheer numbers and when people lose faith in the paper dollar, gold will have it's day. However, it might not be in our lifetime because over and over, the Fed has a way of coming up with some strategy to ease the pain at just the right time, usually after the washout is over and everyone has sold.

As for my VP, going to stay with GDX and GDXJ which I unbelievably timed at the bottom at Jan 1st.(first time I ever timed anything at a bottom) I sold some to capture gains and repurchased more after an early selloff. The chart is looking good with the odds in favor of continuous growth.