Gyroscopic Investing

buddtholomew wrote: When viewing the portfolio as a whole, I have 7.5% allocated to GLD and 2.5% to GDX (precious metals and mining). The balance is invested 50/40 (globally diversified equities, fixed income and cash).

The entire gold position is invested in a taxable account (GLD ETF) and periodic fluctuations of 3-4% equate to substantial losses. Perhaps I would feel less anxious holding physical gold (something tangible) as the weight of the coins remains constant as Cortopassi highlights below.

Investors generally have strong opinions on the value of gold in a portfolio asset allocation. I unfortunately am not swayed one way or the other. I question my decision to hold the metal when I hear gold advocates and there catastrophe theories. I am not in the doom and gloom camp and fear that I am holding the metal for invalid reasons. Hope this sheds some light on my thought processes.

iwealth wrote:

buddtholomew wrote: When viewing the portfolio as a whole, I have 7.5% allocated to GLD and 2.5% to GDX (precious metals and mining). The balance is invested 50/40 (globally diversified equities, fixed income and cash).

The entire gold position is invested in a taxable account (GLD ETF) and periodic fluctuations of 3-4% equate to substantial losses. Perhaps I would feel less anxious holding physical gold (something tangible) as the weight of the coins remains constant as Cortopassi highlights below.

Investors generally have strong opinions on the value of gold in a portfolio asset allocation. I unfortunately am not swayed one way or the other. I question my decision to hold the metal when I hear gold advocates and there catastrophe theories. I am not in the doom and gloom camp and fear that I am holding the metal for invalid reasons. Hope this sheds some light on my thought processes.

Assuming I read this correctly and that across all of investments you hold 10% gold, why are you worried about the appropriateness of a 25% allocation? What difference does it make what you hold in taxable/tax-sheltered as long as you are spread out optimally for tax purposes? 3-4% daily fluctuations are very few and far between, but either way, is there a reason that those individual-asset fluctuations bother you more in a taxable account vs. tax-sheltered?

More importantly, is there a reason you think the gold advocate catastrophe theories are any more valid than the hyperinflation catastrophe theories, or the bond bubble bursting catastrophe theories, or the stock overvaluation catastrophe theories, or the "QE ends and -everything- is going to collapse" theories? I'm prone to picking and choosing which catastrophe seems most imminent, but I know it's just a form of mental market timing so I'm trying to stop.

Lately I've been asking myself...knowing what I know now about portfolio diversification, could I stomach a repeat of 2008 while invested in a 60/40 portfolio? Back in 2008 I was OK but only because I didn't know any better. Everyone was suffering so why not me? But today, while my stock/bond portfolio was kissing the dirt, I'd be furiously questioning why I didn't stay invested in the PP.

Pick your poison I guess.

murphy_p_t wrote: budd...how u feel today?

buddtholomew wrote:

murphy_p_t wrote: budd...how u feel today?

The insurance policy paid off and I have a deeper understanding of the role gold is intended to play in the portfolio.

buddtholomew wrote:

murphy_p_t wrote: budd...how u feel today?

The insurance policy paid off and I have a deeper understanding of the role gold is intended to play in the portfolio.

modeljc wrote:

buddtholomew wrote:

murphy_p_t wrote: budd...how u feel today?

The insurance policy paid off and I have a deeper understanding of the role gold is intended to play in the portfolio.

How long is your understanding?  I have followed your posts and I don't ever believe you can be happy with the PP.  Ever body on this board tried to help you with a lot of patience.  They have helded your hand many, many times.  Please believe that I not trying to beat up on a weight lifter for sure.  Either you get it or not.  Are you looking for love or attention?

Please let me off easy as I have had a couple of beers.

goodasgold wrote:

buddtholomew wrote:

murphy_p_t wrote: budd...how u feel today?

The insurance policy paid off and I have a deeper understanding of the role gold is intended to play in the portfolio.

Class dismissed!
...

Reub wrote: Gold actually wasn't up that much today considering the geopolitical events. It still is underwhelming me.

buddtholomew wrote:

modeljc wrote:

buddtholomew wrote: The insurance policy paid off and I have a deeper understanding of the role gold is intended to play in the portfolio.

How long is your understanding?  I have followed your posts and I don't ever believe you can be happy with the PP.  Ever body on this board tried to help you with a lot of patience.  They have helded your hand many, many times.  Please believe that I not trying to beat up on a weight lifter for sure.  Either you get it or not.  Are you looking for love or attention?

Please let me off easy as I have had a couple of beers.

Who isn't looking for a little love and attention especially after drinking a couple of beers...

I'm not responding to this question on a day when gold is up...catch me on a day when it is down :-)

barrett wrote: Dualstow, Looks like everything is cheaper today. Either that or I just got poorer. Gonna have to read the fine print on this PP thing.

barrett wrote: Dualstow, Looks like everything is cheaper today. Either that or I just got poorer. Gonna have to read the fine print on this PP thing.

buddtholomew wrote:

barrett wrote: Dualstow, Looks like everything is cheaper today. Either that or I just got poorer. Gonna have to read the fine print on this PP thing.

Gold is the only asset that I am unable to hedge appropriately. As mentioned in other threads, I hold sufficient cash to dampen the volatility of long-term treasuries so that my daily performance is similar to the total bond market index (5.6 years). Today is no exception, as BND declined -.58% and TLT/Cash -.63% (includes NAV reduction to pay month-end dividend).

Gold is, and always will be, the wildcard when it comes to the success of the permanent portfolio. Unfortunately, I would have been better off financially not investing in the metal as I have been paying premiums over the last few years without collecting on the insurance policy. The dollar was not strong enough to warrant an approximate 2% decline and what about the turmoil in the Middle East and Russia/Ukraine. I'm not asking for a full-blown bull market in gold as HB suggested this only occurs during a bout of unexpected inflation. But come on...

With that said, mortalpawn is correct -  we have definitely seen days like this before and it does not invalidate the PP philosophy.

For those interested:

Globally diversified BH portfolio 65/35/5 equity/fixed income/PM&Mining returned -.14% today (this is with a 3.3% decline in GDX). YTD = 7.26%
HBPP returned -.82% today. YTD = 6.63%

First time this year that the BH portfolio has overtaken the HBPP. I hope we don't have a repeat of last year.

buddtholomew wrote:Unfortunately, I would have been better off financially not investing in the metal as I have been paying premiums over the last few years without collecting on the insurance policy.