Introduction - Charlie McKelvey, Bethlehem PA

[dualstow]

Everyone posts about how the PP is so simple. The theory behind it is indeed. But in its purest form, I disagree that it is easy to set up and manage. Especially for an investing novice, especially when balancing and rebalancing assets between taxable and tax-deferred accounts, and especially when you get into things like tax loss harvesting, filing form 8621, and doing such things as WiseOne's short term treasury trickery.

It seems like a lot of what you listed are options. Some people here are slaughtering their own pig and cooking different parts to perfection, but all you need to do is know how to make a ham sandwich. It really is that simple if you want it to be.
- You *don't* need to tax loss harvest. There are many threads about this at bogleheads.
- you *don't* need to get into short treasury trickery and in fact, you shouldn't unless you have the time and the gumption.
- you *don't* need to rebalance very often at all.
- you can buy ETFs that don't require the filing of forms. I will admit that I got into a bit of trouble when I bought GTU and my accountant wouldn't listen to the words I passed on from member Steve, but I've got that sorted out. My accountant is tied up in the back room as I type.
Seriously, you can buy SHV (or SHY), IAU, VTI and TLT and you're good.

[rickb]

Seriously, you can buy SHV (or SHY), IAU, VTI and TLT and you're good.

I mostly agree - but I hope anyone who can seriously considers at least buying gold coins for the gold portion.  I think having some portion of your assets not in paper form is a pretty big deal.

Less important (but not unimportant), actual long term bonds are better than TLT (and really not difficult to buy or manage), and a short term treasury ladder or treasury backed MM is somewhat better than SHV/SHY.

I don't view these as optimizations so much as the actual assets that should be used for the portfolio.  The ETFs may be convenient, but they aren't the real thing - and there are definitely circumstances where the real thing is better.  This is not about tweaks for optimizing return - but holding assets in a form that minimizes risk.

[AdamA]

I hope Charlie will feel comfortable making any case he wants to make for active management.

Ditto.  I think most people on this forum enjoy a bit of polite controversy.

[Pointedstick]

Seriously, you can buy SHV (or SHY), IAU, VTI and TLT and you're good.

I mostly agree - but I hope anyone who can seriously considers at least buying gold coins for the gold portion.  I think having some portion of your assets not in paper form is a pretty big deal.

Less important (but not unimportant), actual long term bonds are better than TLT (and really not difficult to buy or manage), and a short term treasury ladder or treasury backed MM is somewhat better than SHV/SHY.

I don't view these as optimizations so much as the actual assets that should be used for the portfolio.  The ETFs may be convenient, but they aren't the real thing - and there are definitely circumstances where the real thing is better.  This is not about tweaks for optimizing return - but holding assets in a form that minimizes risk.

Once you do that, though, the genie's out of the bottle. Your portfolio is no longer as simple as four ETFs purchased in equal proportions. I completely agree with you on the subject of holding assets more directly, but that's where the complications start to emerge.

Where are you going to store those gold coins? Are certificates to gold held abroad safe enough? What kind of bonds should you buy; highest-coupon? Lowest coupon? Longest duration? What about zeroes? And cash... T-bill ladder? What duration? I-Bonds? In what proportion?

[BearBones]

Once you do that, though, the genie's out of the bottle. Your portfolio is no longer as simple as four ETFs purchased in equal proportions. I completely agree with you on the subject of holding assets more directly, but that's where the complications start to emerge.

Where are you going to store those gold coins? Are certificates to gold held abroad safe enough? What kind of bonds should you buy; highest-coupon? Lowest coupon? Longest duration? Wht about zeroes? And cash... T-bill ladder? What duration? I-Bonds? In what proportion?

Totally agree. If you are going for simplicity and willing to give up direct ownership, institutional diversification, international diversification, cost minimization, tax optimization, etc, you are giving up much of the protection and benefit that HB intended. Not that this is a bad thing. But I'd just as well pay a "professional" to manage a more pure HBPP than cut corners with ETFs.

[dualstow]

Once you do that, though, the genie's out of the bottle. Your portfolio is no longer as simple as four ETFs purchased in equal proportions. I completely agree with you on the subject of holding assets more directly, but that's where the complications start to emerge.

Where are you going to store those gold coins? Are certificates to gold held abroad safe enough? What kind of bonds should you buy; highest-coupon? Lowest coupon? Longest duration? Wht about zeroes? And cash... T-bill ladder? What duration? I-Bonds? In what proportion?

But again, those are really just options.
Buying physical gold is probably the most panic-inducing, but between the book and this forum, anyone can get through that first experience, and then it's mostly downhill.

I have never worried about the coupon, but if I did, I see the same consistent answer on this forum: lowest. Done.

Zeroes: totally unnecessary, but again there's an etf. Put it in tax-deferred or avoid. Done.

The pp only gets complicated if you want it to be.

I think the most difficult aspect is setting up a non-U.S.-based one. If you listen to the callers in those radio show archives from the mid-2000s, there weren't all that many practical questions about setting up the portfolio. There were people who ignored the bands and let their percentages lapse, there were people who called to praise Harry's politics, and there were people who missed the old newsletter, now defunct. Not too many people asking about coupons.

I don't understand a lot of the math on bogleheads. I excelled at algebra but then faltered in trig and calculus. I used to think it had to do with an exceedingly beautiful girl with golden hair named Julie sitting in front of me, but I have revisited some of this as an adult and I still ... am not the math star I once was. But, I know how to invest.