Gyroscopic Investing

In my opinion, it's easy to be emotional when you see a large 1 day drop and want to sell.  That feeling of stampeding towards the exits is a very human instinct.  As investors, we need to ignore those impulses, because that is the absolute worst time to sell.

For example, I have GDX and SLV in my VP, and it was hit hard yesterday.  I'm not about to sell my GDX and SLV at what could be a temporary low.

Storm wrote: In my opinion, it's easy to be emotional when you see a large 1 day drop and want to sell.  That feeling of stampeding towards the exits is a very human instinct.  As investors, we need to ignore those impulses, because that is the absolute worst time to sell.

For example, I have GDX and SLV in my VP, and it was hit hard yesterday.  I'm not about to sell my GDX and SLV at what could be a temporary low.

I realized this morning that my decision to sell was completely irrational. In lieu of repurchasing back into PRPFX this morning, I decided to but equal shares of GLD, TLT and VTI. I am back on the bandwagon and hope to stay there for sometime...

Thank you all for your support.
Budd

buddtholomew wrote:

Storm wrote: In my opinion, it's easy to be emotional when you see a large 1 day drop and want to sell.  That feeling of stampeding towards the exits is a very human instinct.  As investors, we need to ignore those impulses, because that is the absolute worst time to sell.

For example, I have GDX and SLV in my VP, and it was hit hard yesterday.  I'm not about to sell my GDX and SLV at what could be a temporary low.

I realized this morning that my decision to sell was completely irrational. In lieu of repurchasing back into PRPFX this morning, I decided to but equal shares of GLD, TLT and VTI. I am back on the bandwagon and hope to stay there for sometime...

Thank you all for your support.
Budd

Budd,

The 33% x 3 approach is going to be more volatile than the 25% x 4 approach.

I just don't want to see you get rattled again by unanticipated volatility.

MediumTex wrote:

buddtholomew wrote:

Storm wrote: In my opinion, it's easy to be emotional when you see a large 1 day drop and want to sell.  That feeling of stampeding towards the exits is a very human instinct.  As investors, we need to ignore those impulses, because that is the absolute worst time to sell.

For example, I have GDX and SLV in my VP, and it was hit hard yesterday.  I'm not about to sell my GDX and SLV at what could be a temporary low.

I realized this morning that my decision to sell was completely irrational. In lieu of repurchasing back into PRPFX this morning, I decided to but equal shares of GLD, TLT and VTI. I am back on the bandwagon and hope to stay there for sometime...

Thank you all for your support.
Budd

Budd,

The 33% x 3 approach is going to be more volatile than the 25% x 4 approach.

I just don't want to see you get rattled again by unanticipated volatility.

Typo sorry...4 equal parts (VTI, TLT, GLD and SHY)

buddtholomew wrote:

MediumTex wrote:

buddtholomew wrote: There's your answer MediumTex. I am not comfortable holding an investment in a taxable account with this degree of volatility. I asked myself whether I was committed to holding the fund if GLD had a similar correction to what SLV has experienced lately. The answer was no. I have no plan at this point and feel quite lost.

Budd

Why not just do a HB PP allocation?

Less volatility, less expense, and similar long term return to PRPFX.

I've sort of learned the hard way...PRPFX was fun while it lasted, but the last few days have been agonizing. The good news is that I did profit from the investment.

What you need to realize is that no matter what investment approach you take, there will be days where you get smoked.  If a 5% decline is agonizing, you're only option might be to go to 100% cash.  You won't have the volatile days/weeks, but you'll steadily lose value over time as your portfolio gets destroyed by inflation. 

No one likes to lose money, and the last couple of days have been pretty tough to stomach for me as well. I'm holding a big chunk of my money in commodity ETF's so I've been pummeled too, but without some risk, there is no gain.

The HBPP is without a doubt the best alternative for you (even better than PRPFX), but even the DIY PP can will have drawdowns that cause you a little pain.  You just have to accept the results that it has produced in the past 40 years as proof that it is a solid plan.

HB PP up .32% today, PRPFX up .10%.

The good news is that I have now established a 4x25 HBPP and learned a valuable lesson at minimal cost. Based on my calculations, I lost .1% in PRPFX profit (today's gain), $250 for early withdrawal from the fund (PRPFX) and an additional .13% today as my purchase prices were above today's closing prices (VTI, TLT, GLD and SHY). Not sure how to evaluate the short and long term gain I will have to pay in taxes.

One more positive...I can now participate in the other discussion forums on this site  ;D

My perspective on the permanent portfolio strategy has been completely transformed now that I have had the opportunity to invest in both PRPFX and the traditional HB 4x25 (VTI, TLT, GLD and SHY) vehicles. Today's market action (Dow down 130) allowed me to monitor the performance of the individual ETF components and how they related with one another. I was pleasantly surprised to see that the portfolio lost a paultry .35%, while PRPFX lost 1.17%. I am comfortable with my decision to sell PRPFX and implement the 4x25 model.

All the best-
Budd

Measuring any portfolio by one day or one week or one month seems imprudent to me.  Both PRPFX and HBPP have their strong and weak points.  I'm doing both.  I figure I'll decide in a year or two or three which really makes more sense.

longeyes wrote: Both PRPFX and HBPP have their strong and weak points.  I'm doing both. 

IMO, this a great way to safely diversify a bit. 

Do you really "diversify" by holding PRPFX?  Isn't it like an under-LTT-weighted PP with some silver instead of gold?  The only additional diversification I can really see is the silver, which I used to be  a proponent of using... but now have relegated to possible future VP status.

I just see PRPFX to be the PP geared more towards inflation and less towards deflation... not really a diversifier.

moda0306 wrote: Do you really "diversify" by holding PRPFX? 

Not in terms of assets held, but in terms of who holds the assets for you. 

ie, I think if you own GLD/SHV/TLT/SPY x 25%, or have all your assets with one brokerage, holding PRPFX is a simple way to add a little protection from a problem you might have with your ETFs or your broker. 

Just simple way to to avoid keeping too much of your wealth with just one or two institutions. 

Gotcha Adam... good point.

buddtholomew wrote: My perspective on the permanent portfolio strategy has been completely transformed now that I have had the opportunity to invest in both PRPFX and the traditional HB 4x25 (VTI, TLT, GLD and SHY) vehicles. Today's market action (Dow down 130) allowed me to monitor the performance of the individual ETF components and how they related with one another. I was pleasantly surprised to see that the portfolio lost a paultry .35%, while PRPFX lost 1.17%. I am comfortable with my decision to sell PRPFX and implement the 4x25 model.

All the best-
Budd

Budd,

I'm really happy to hear that.  Finding the right allocation for one's temperament and investment goals is a great feeling.

I think you will enjoy both the lower volatility and lower expenses of your new portfolio.

The Smart Money website has a fabulous portfolio tracker that will allow you to see what the PP package is doing at any point in time without having to even think about the individual components.  It's a great tool (there are others as well, but I like that one).

Both have their advantages.  Over the last three years HBPP has been less volatile; PRPFX has the better performance.  What happens from here on out depends on the economic climate.