Gyroscopic Investing

MediumTex wrote:

buddtholomew wrote: Yup, that's what I am referring to. Comparable returns with less volatility. I want to be clear, I am invested in the PP and want the portfolio to succeed as much or even more than other investors. I just don't buy into the philosophy that money "must" flow into one of the four asset classes. That is simply a misconception. Another one is that one or more assets will rise more than falling assets to produce a positive return.

Why is the text in bold a misconception?  Has that not been exactly what has happened?

It is a misconception to think that it will happen every single day, but over time the PP theory of gains offsetting losses has held up pretty well in practice.

Poorly written MT. What I intended to say is I do not buy into the philosophy that a rising asset will offset losses in other areas of the portfolio. This is time dependent, and as we have seen, there have been 3 year periods that have produced negative real returns.

iwealth wrote:

Tyler wrote: That in a nutshell is why you're driving yourself crazy.  It's also why you are perfectly happy with the PP when your other portfolio struggles.  At some point you need to let go and just be satisfied with your choices.  Otherwise you're going to be perpetually unhappy one way or another. 

On a side note, I know from other posts you already have a very sizable portfolio.  Small fluctuations should not really affect you at all in real life.  Why does money cause so much stress, and what are all the ways (not simply portfolio choice) you can constructively address that? You don't necessarily need to answer here.  Just take some time to think about it.

Not to speak for Budd here as I'm sure his portfolio is more sizable than mine, not to mention he's still working and replacing lost investment money, but anyway..

Large portfolios + frugality lends itself to an interesting mix of emotions. 1% on a $2 mil portfolio is $20k. Some guys can shrug that off like it's no big deal, just a rounding error. A frugal guy may look at that as having lost an entire year's+ worth of rent. Or groceries for the next 3 years. The family entertainment budget for 5 years, poof, gone with one bad market day. And I'm guessing that only gets worse as the portfolio grows. Or in the case of the PP keeps falling forever 

That's correct. Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

buddtholomew wrote:

MediumTex wrote:

buddtholomew wrote: Yup, that's what I am referring to. Comparable returns with less volatility. I want to be clear, I am invested in the PP and want the portfolio to succeed as much or even more than other investors. I just don't buy into the philosophy that money "must" flow into one of the four asset classes. That is simply a misconception. Another one is that one or more assets will rise more than falling assets to produce a positive return.

Why is the text in bold a misconception?  Has that not been exactly what has happened?

It is a misconception to think that it will happen every single day, but over time the PP theory of gains offsetting losses has held up pretty well in practice.

Poorly written MT. What I intended to say is I do not buy into the philosophy that a rising asset will offset losses in other areas of the portfolio. This is time dependent, and as we have seen, there have been 3 year periods that have produced negative real returns.

Right, but in general haven't those relationships held up pretty well over the last 40+ years?

It's true that the PP hits rough patches, but it has always righted itself and hung pretty close to that long term trendline, which means that the winners have more than compensated for the losers most of the time, and all of the time if you are patient.

buddtholomew wrote: That's correct. Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

But you have to admit that's just a psychological problem. From a normal drawdown perspective, it's not a real problem. It WILL recover. Maybe not today, tomorrow, this month or year, but it WILL come back and then some. Clearly you believe that or you wouldn't be invested in anything.

Did you make the bulk of your fortune after the 2008 crash? I recall you saying it didn't bother you all that much when your portfolio crumbled during the recession. Was it simply because it wasn't nearly as big as it is now?

buddtholomew wrote: Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

Unless you actually run the risk of not making the mortgage payment or sending the kid to college, the risk is purely in your head.  If the risk is real with your level of savings, then there are other issues at play and investments are the least of your worries.

I read a decent book recently called "Risk Less and Prosper" by Zvi Bodie and Rachelle Taqqu.  One key takeaway is that the way we often define risk in terms of market volatility is fundamentally disconnected from reality.  In their terms, "risk is uncertainty that matters" and is measured in life events, not max drawdown or standard deviation.  Also they talk at length about how there's a difference between "risk tolerance" that is a purely psychological measure and "risk capacity" which measures your true financial ability to handle inevitable negative events.  You might look for it at the library for a fresh perspective. 

iwealth wrote:

buddtholomew wrote: That's correct. Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

But you have to admit that's just a psychological problem. From a normal drawdown perspective, it's not a real problem. It WILL recover. Maybe not today, tomorrow, this month or year, but it WILL come back and then some. Clearly you believe that or you wouldn't be invested in anything.

Did you make the bulk of your fortune after the 2008 crash? I recall you saying it didn't bother you all that much when your portfolio crumbled during the recession. Was it simply because it wasn't nearly as big as it is now?

I began investing in October 2008 with a conventional allocation to equities, fixed income and PM&M (65/35/5). Over the last +/- 7 years, these retirement assets have never experienced an annual loss. My only negative years have been in taxable, where I am 100% invested in the PP, CD's and Cash. These funds are precious to me and the reason I selected the PP in the first place. Unfortunately, my experience to date has been less than promising. How can a conservative portfolio lose money 50% of the time (2/4 years)? Do you see my frustration?

buddtholomew wrote: I began investing in October 2008 with a conventional allocation to equities, fixed income and PM&M (65/35/5). Over the last +/- 7 years, these retirement assets have never experienced an annual loss. My only negative years have been in taxable, where I am 100% invested in the PP, CD's and Cash. These funds are precious to me and the reason I selected the PP in the first place. Unfortunately, my experience to date has been less than promising. How can a conservative portfolio lose money 50% of the time (2/4 years)? Do you see my frustration?

The past 7 years have featured an enormous equity bull market. That's why you have never lost money with the equity-heavy components of your portfolio. If the rest of our investing lives looks like the past 7 years, the PP is obsolete and we're all idiots. But of course, there's no way to know that. And when the stock market crashes or treads water for years, we'll be the ones who look like geniuses.

So perhaps the real question is: Are you more comfortable feeling stupid when everyone is feeling smart, or feeling stupid when everyone else is too?

iwealth wrote:

Tyler wrote: That in a nutshell is why you're driving yourself crazy.  It's also why you are perfectly happy with the PP when your other portfolio struggles.  At some point you need to let go and just be satisfied with your choices.  Otherwise you're going to be perpetually unhappy one way or another. 

On a side note, I know from other posts you already have a very sizable portfolio.  Small fluctuations should not really affect you at all in real life.  Why does money cause so much stress, and what are all the ways (not simply portfolio choice) you can constructively address that? You don't necessarily need to answer here.  Just take some time to think about it.

Not to speak for Budd here as I'm sure his portfolio is more sizable than mine, not to mention he's still working and replacing lost investment money, but anyway..

Large portfolios + frugality lends itself to an interesting mix of emotions. 1% on a $2 mil portfolio is $20k. Some guys can shrug that off like it's no big deal, just a rounding error. A frugal guy may look at that as having lost an entire year's+ worth of rent. Or groceries for the next 3 years. The family entertainment budget for 5 years, poof, gone with one bad market day. And I'm guessing that only gets worse as the portfolio grows. Or in the case of the PP keeps falling forever 

This is it for me.  I'm trying to retire early... I'm at the grocery store trying to save a few dollars here, a few dollars there.  To, at the same time, shrug off a daily loss in the thousands, instigates a kind of cognitive dissonance and causes me stress.

Tyler wrote:

buddtholomew wrote: Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

Unless you actually run the risk of not making the mortgage payment or sending the kid to college, the risk is purely in your head.  If the risk is real with your level of savings, then there are other issues at play and investments are the least of your worries.

I read a decent book recently called "Risk Less and Prosper" by Zvi Bodie and Rachelle Taqqu.  One key takeaway is that the way we often define risk in terms of market volatility is fundamentally disconnected from reality.  In their terms, "risk is uncertainty that matters" and is measured in life events, not max drawdown or standard deviation.  Also they talk at length about how there's a difference between "risk tolerance" that is a purely psychological measure and "risk capacity" which measures your true financial ability to handle inevitable negative events.  You might look for it at the library for a fresh perspective.

Thanks for the book recommendation. The losses are inconsequential until you lose your job and are dependent on your savings to cover family expenses.

dragoncar wrote:

iwealth wrote: Not to speak for Budd here as I'm sure his portfolio is more sizable than mine, not to mention he's still working and replacing lost investment money, but anyway..

Large portfolios + frugality lends itself to an interesting mix of emotions. 1% on a $2 mil portfolio is $20k. Some guys can shrug that off like it's no big deal, just a rounding error. A frugal guy may look at that as having lost an entire year's+ worth of rent. Or groceries for the next 3 years. The family entertainment budget for 5 years, poof, gone with one bad market day. And I'm guessing that only gets worse as the portfolio grows. Or in the case of the PP keeps falling forever 

This is it for me.  I'm trying to retire early... I'm at the grocery store trying to save a few dollars here, a few dollars there.  To, at the same time, shrug off a daily loss in the thousands, instigates a kind of cognitive dissonance and causes me stress.

I totally get it.  Those who are best with money are often very conscious about it. 

Speaking personally, when I started saving for early retirement that was also a very stressful time for me.  I looked at my investments all the time -- like every hour.  Eventually I realized that the down days investment-wise didn't upset me because I lost X amount of money.  They upset me because I was unhappy with my career and wanted a way out and every time I lost money my goal felt farther away. 

Once I figured that out, I set out to address the root cause rather than remain stressed by the symptom.  So instead of continuing to drive myself crazy, I set rules about checking my investments and spent that energy finding a new job I would actually enjoy for a few years in a city that was much less expensive.  Basically I accelerated my retirement and improved my life in the meantime.  I still had good and bad days, but things got a lot better overall.  Today I am 8 months into my ER and go most days without thinking about my account balances at all.  That motivation is completely gone. 

Now that's just me.  I'm not saying the same situation or motivation or solution applies to anyone else.  I just offer that as a testimony for people who really struggle with the emotional side of investment losses.  My best advice based on personal experience is to really think about why they bother you and to find creative ways to fix the root cause. 

i have always been an aggressive investor up until now since i am retiring.

but i have to say i look at things now not in percentage up or down but in dollars.
when you have not much money invested yet in comparison to what you will eventually, a 7% drop  is a small percentage in the world of portfolio's being up or down .

but a 7% drop now represents wiping away 10 years of maxing out my 401 at the catch up level.

yep , 10 years of money gone in a minor correction .

so  while percentages down do not feel like a lot the actual dollars down can be very painful..

that is why at this point i elected to give up my 27 years of conventional investing and switch to the pp at this stage.

protecting from devastating downsides is much more important than giving up potential upside.

perhaps if we all bought individual bonds and  gold eagles we would view the portfolio differently since any changes up or down daily would not be staring at you  as big negatives as funds do.

i used to own an untraded reit and we never knew how it was really doing until it was sold since unlike a  public reit prices did not change daily. kind of like your house.

in fact i am thinking of converting 3/4's of tlt to individual bonds as mentally knowing you are not seeing principal change you are more accepting of things .

a mind game for sure but one that can work.


as far as growing money with the pp , i think buddtholomew is correct in the sense markets are usually up 2/3's of the time and down only 1/3 of the time.

in effect counting on those downturns for growing money is betting against the house.  a conventional mix up until now  would win and most of the time win and  by a lot.

i was very surprised to find when i started to learn about safe withdrawal rates that retirees in 100% equities would have  done just fine over all 111 rolling 30 year time frames.


yep , spending down even at losses at times had very few failures , not much different than a 50/50 mix.

the cushions built up during the good times without the weight of bonds and cash dragging performance down covered the spending down in bad times.

such is the power of NOT  betting against the house .

but being human , and the human brain hating losing money more than making it prohibits us from going pedal to the metal  and makes us mentally dwell on the what if things fell aspect.

i will be 63 and have seen only two crashes in my investing lifetime happen , yet we all  worry , use and see that word thrown out there daily.

keep in mind too . 40 years of owning bonds , except for some hicups made owning them profitable.  but if rates have finally reversed than 40 years of what was may go right down the drain as they may spend the same decades of time taking away from the party instead of adding to it.

no one knows  but the future does appear to be quite different from anything in the past.

low rates and high valuations never happened before at the same time..  that is  not good for stocks and the fact we may have reached the end of the bond cycle is not good for bonds and gold.

time can be the only judge here and not back testing .

the pp's success going forward will depend more on black swan events than historical norms.

buddtholomew wrote:

Tyler wrote:

buddtholomew wrote: Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

Unless you actually run the risk of not making the mortgage payment or sending the kid to college, the risk is purely in your head.  If the risk is real with your level of savings, then there are other issues at play and investments are the least of your worries.

I read a decent book recently called "Risk Less and Prosper" by Zvi Bodie and Rachelle Taqqu.  One key takeaway is that the way we often define risk in terms of market volatility is fundamentally disconnected from reality.  In their terms, "risk is uncertainty that matters" and is measured in life events, not max drawdown or standard deviation.  Also they talk at length about how there's a difference between "risk tolerance" that is a purely psychological measure and "risk capacity" which measures your true financial ability to handle inevitable negative events.  You might look for it at the library for a fresh perspective.

Thanks for the book recommendation. The losses are inconsequential until you lose your job and are dependent on your savings to cover family expenses.

the losses can be only a temporarily blip like having a bad year when working a job on commission.

but that is why it is so important to match money to time frames.  investing in long term investments and needing the money shorter term can be a disaster.

dragoncar wrote:

iwealth wrote: Not to speak for Budd here as I'm sure his portfolio is more sizable than mine, not to mention he's still working and replacing lost investment money, but anyway..

Large portfolios + frugality lends itself to an interesting mix of emotions. 1% on a $2 mil portfolio is $20k. Some guys can shrug that off like it's no big deal, just a rounding error. A frugal guy may look at that as having lost an entire year's+ worth of rent. Or groceries for the next 3 years. The family entertainment budget for 5 years, poof, gone with one bad market day. And I'm guessing that only gets worse as the portfolio grows. Or in the case of the PP keeps falling forever 

This is it for me.  I'm trying to retire early... I'm at the grocery store trying to save a few dollars here, a few dollars there.  To, at the same time, shrug off a daily loss in the thousands, instigates a kind of cognitive dissonance and causes me stress.

Dragoncar and iwealth have pretty much nailed it. I am also in this boat more or less. I am trying to retire early and don't have much new money coming in. But I don't have a huge portfolio... just getting close enough so that in a couple or three years my wife and I should be able to pull the plug and live for quite a long time if we don't spend like crazy. So the 5.6% drawdown since the beginning of February has definitely caught my attention. If I were able to earn as much money as I could 10 years ago, I'd just be figuring that I can now buy assets at lower prices than five months ago. Now it's just money that is gone (temporarily in my view, but no longer showing up in my accounts).

So there seems to be a range where some of us are wealthy enough to consider living off of what we have from here on out, but not so wealthy that a 5.6% drop doesn't inflict some pain. On a theoretical $2,000,000 portfolio, that's a drawdown of $112,000. For me I could think of that as three years worth of savings or a couple of years of living expenses that - again, I am thinking temporarily - are no longer there.

buddtholomew wrote:

iwealth wrote:

buddtholomew wrote: That's correct. Emigrated to the U.S. with 8K USD and a family of 6 in 1982. 1 or 2 percentage points appear insignificant, but in dollar terms is a Mercedes, 4 years of college or a years worth of mortgage payments.

But you have to admit that's just a psychological problem. From a normal drawdown perspective, it's not a real problem. It WILL recover. Maybe not today, tomorrow, this month or year, but it WILL come back and then some. Clearly you believe that or you wouldn't be invested in anything.

Did you make the bulk of your fortune after the 2008 crash? I recall you saying it didn't bother you all that much when your portfolio crumbled during the recession. Was it simply because it wasn't nearly as big as it is now?

I began investing in October 2008 with a conventional allocation to equities, fixed income and PM&M (65/35/5). Over the last +/- 7 years, these retirement assets have never experienced an annual loss. My only negative years have been in taxable, where I am 100% invested in the PP, CD's and Cash. These funds are precious to me and the reason I selected the PP in the first place. Unfortunately, my experience to date has been less than promising. How can a conservative portfolio lose money 50% of the time (2/4 years)? Do you see my frustration?

rember though that while tlt took a nice size dip the offset to that has not happened yet which is you will be starting to recieve higher interest payments then you are now as older bonds are replaced .

those higher rates you will get will offset some nav drop as well as rebalancing greatly accelerates that break even point.

reinvesting dividends has no effect on the process but rebalancing sure does.

as i pointed out earlier even if you started the PP  on the worst day in history for gold when it peaked at 900 bucks in the 1980's , just rebalancing it over time had you a head of your S&p 500 investment on the same day prior to gold rolling backward.


that is an important point about the strategy  that bears repeating and repeating. that awful awful timing of the gold purchase turned it in to a winner just by doing nothing but sticking with the plan.

mathjak107 wrote: in fact i am thinking of converting 3/4's of tlt to individual bonds as mentally knowing you are not seeing principal change you are more accepting of things .

But you do see principal change. If you look at your account, you are way down in bonds this year. Not saying one shouldn't own bonds but holding individual bonds doesn't mask anything.

i keep a separate running  tracker for the pp  which will auto update if funds but not auto update if entered manually .  you can enter bonds manually and if buying them for the interest rate  you can carry them as 1k each .


smoke and mirrors ?  sure it is but for someone who prefers to  not see daily changes on investments that have a guaranteed payoff it can be a little less painful  watching it .

if you are holding for a guaranteed payoff why subject yourself to the fluctuations on the trip there.

with funds you have no choice .  to many variables to count on anything guaranteed.

.

mathjak107 wrote: i keep a separate running  tracker for the pp  which will auto update if funds but not auto update if entered manually .  you can enter bonds manually and if buying them for the interest rate  you can carry them as 1k each .


smoke and mirrors ?  sure it is but for someone who prefers to  not see daily changes on investments that have a guaranteed payoff it can be a little less painful  watching it .

if you are holding for a guaranteed payoff why subject yourself to the fluctuations on the trip there.

with funds you have no choice .  to many variables to count on anything guaranteed.

But you are not holding 30-year bonds to maturity, right? Your bond position is always worth more or less the same whether you buy TLT or individual bonds. My guess is that most on here can make quick calculations like "I hold $250,000 in LTTs. The market is down 20%. I am off $50,000 in that asset."

I am not saying that hit in and of itself should bother you. I just don't get how you can successfully pull the wool over your own eyes.

Desert wrote:

mathjak107 wrote: i keep a separate running  tracker for the pp  which will auto update if funds but not auto update if entered manually .  you can enter bonds manually and if buying them for the interest rate  you can carry them as 1k each .


smoke and mirrors ?  sure it is but for someone who prefers to  not see daily changes on investments that have a guaranteed payoff it can be a little less painful  watching it .

if you are holding for a guaranteed payoff why subject yourself to the fluctuations on the trip there.

with funds you have no choice .  to many variables to count on anything guaranteed.

.

Interesting.  I bet if we had a repeat of 2007/2008, you'd want to turn your bond tracker back on! 

you got that right !!!!  ha ha ha

barrett wrote:

mathjak107 wrote: i keep a separate running  tracker for the pp  which will auto update if funds but not auto update if entered manually .  you can enter bonds manually and if buying them for the interest rate  you can carry them as 1k each .


smoke and mirrors ?  sure it is but for someone who prefers to  not see daily changes on investments that have a guaranteed payoff it can be a little less painful  watching it .

if you are holding for a guaranteed payoff why subject yourself to the fluctuations on the trip there.

with funds you have no choice .  to many variables to count on anything guaranteed.

But you are not holding 30-year bonds to maturity, right? Your bond position is always worth more or less the same whether you buy TLT or individual bonds. My guess is that most on here can make quick calculations like "I hold $250,000 in LTTs. The market is down 20%. I am off $50,000 in that asset."

I am not saying that hit in and of itself should bother you. I just don't get how you can successfully pull the wool over your own eyes.

i wasn't talking about me doing it for that purpose.  if i do it it is because i can cut costs even lower by  buying individual bonds as well have more control.

you have no control over effective duration in a fund. you do have control over what you have.

the fidelity watch list cannot track fixed  income investments like bonds which is where i do my tracking. so  if i use individual bonds they don't show those losses  ha ha ha ...

but if someone was interested in just the income of the bonds ,except for yearly rebalancing they really wouldn't care to much.

kind of like whether your house is worth  500k or 200k is irrelevant if you are going to live in it and not sell it,

Thank you all for your comments and suggestions.

In my experience, the PP treads water or produces minimal returns until a major crisis is unleashed and either gold and/or treasuries benefit from an influx of investor contributions. In 2011, I realized this approach to investing would not produce adequate returns and consequently increased my allocation to equities in retirement assets. I would have abandoned the PP entirely, but was already down double digits in gold. I now feel obligated to continue investing in the portfolio in the hopes of recovering these losses and benefiting from the next equity downturn.

I bought more gold in 2012, 2013 and 2014 to maintain as close to a 4x25 allocation as possible. I also reduced fixed income duration to mitigate losses in LTT investments. There is really nothing left for me to do but hold the portfolio and hope for the best. We will see if I am rewarded for my patience.

@Tyler, ironically you have hit the nail on the head. I too am dissatisfied with my current job, but the flexible hours and working from home preclude me from searching for other opportunities. I can be laid off on a whim (many others already have) and will be required to draw down from an EF and ultimately the PP as a last resort. I feel trapped in my career as well and incurring losses in the 6-digits results in additional anxiety and ultimately delays my pursuit of an early retirement.

I apologize for the lengthy post, but this thread has prompted me to put all the pieces together in the hopes of righting the ship.

one of the best ways to screw yourself up is to make changes you think are better by reducing volatility.

but stop and think for one second about this .  once rates are actually raised on the short end the thinking then can become that raising rates is deflationary as it starts to choke an already weak economy.  as fas as rates went up on the long term stuff they can plunge again once  investors digest the effects of raising rates.

by cutting your LT  bonds down and going less volatile you may miss the run up back up and beyond.

mathjak107 wrote: one of the best ways to screw yourself up is to make changes you think are better by reducing volatility.

but stop and think for one second about this .  once rates are actually raised on the short end the thinking then can become that raising rates is deflationary as it starts to choke an already weak economy.  as fas as rates went up on the long term stuff they can plunge again once  investors digest the effects of raising rates.

by cutting your LT  bonds down and going less volatile you may miss the run up back up and beyond.

I don't disturb the 4x25 allocation, but rather hold additional cash to lower overall FI duration. Percentage losses are less, but absolute dollar losses are the same.

buddtholomew wrote: Thank you all for your comments and suggestions.

In my experience, the PP treads water or produces minimal returns until a major crisis is unleashed and either gold and/or treasuries benefit from an influx of investor contributions. In 2011, I realized this approach to investing would not produce adequate returns and consequently increased my allocation to equities in retirement assets. I would have abandoned the PP entirely, but was already down double digits in gold. I now feel obligated to continue investing in the portfolio in the hopes of recovering these losses and benefiting from the next equity downturn.

I bought more gold in 2012, 2013 and 2014 to maintain as close to a 4x25 allocation as possible. I also reduced fixed income duration to mitigate losses in LTT investments. There is really nothing left for me to do but hold the portfolio and hope for the best. We will see if I am rewarded for my patience.

@Tyler, ironically you have hit the nail on the head. I too am dissatisfied with my current job, but the flexible hours and working from home preclude me from searching for other opportunities. I can be laid off on a whim (many others already have) and will be required to draw down from an EF and ultimately the PP as a last resort. I feel trapped in my career as well and incurring losses in the 6-digits results in additional anxiety and ultimately delays my pursuit of an early retirement.

I apologize for the lengthy post, but this thread has prompted me to put all the pieces together in the hopes of righting the ship.

I know how you feel. I'm actually in largely the same situation, believe it or not. Eyes on the prize. How long do you have to go before financial independence? That's your date. If it's not 10 years away, the return is irrelevant; you don't have enough time for it to really compound. Focus on low volatility. You won't get rich in the PP, but you won't get poor either. You'll get rich with your career, and then retire from it and life off your investments, which you want to have a very low volatility.

Pointedstick wrote:

buddtholomew wrote: Thank you all for your comments and suggestions.

In my experience, the PP treads water or produces minimal returns until a major crisis is unleashed and either gold and/or treasuries benefit from an influx of investor contributions. In 2011, I realized this approach to investing would not produce adequate returns and consequently increased my allocation to equities in retirement assets. I would have abandoned the PP entirely, but was already down double digits in gold. I now feel obligated to continue investing in the portfolio in the hopes of recovering these losses and benefiting from the next equity downturn.

I bought more gold in 2012, 2013 and 2014 to maintain as close to a 4x25 allocation as possible. I also reduced fixed income duration to mitigate losses in LTT investments. There is really nothing left for me to do but hold the portfolio and hope for the best. We will see if I am rewarded for my patience.

@Tyler, ironically you have hit the nail on the head. I too am dissatisfied with my current job, but the flexible hours and working from home preclude me from searching for other opportunities. I can be laid off on a whim (many others already have) and will be required to draw down from an EF and ultimately the PP as a last resort. I feel trapped in my career as well and incurring losses in the 6-digits results in additional anxiety and ultimately delays my pursuit of an early retirement.

I apologize for the lengthy post, but this thread has prompted me to put all the pieces together in the hopes of righting the ship.

I know how you feel. I'm actually in largely the same situation, believe it or not. Eyes on the prize. How long do you have to go before financial independence? That's your date. If it's not 10 years away, the return is irrelevant; you don't have enough time for it to really compound. Focus on low volatility. You won't get rich in the PP, but you won't get poor either. You'll get rich with your career, and then retire from it and life off your investments, which you want to have a very low volatility.

Nice to know I am in such great company, PS 
Financial independence and an early retirement in 10-12 years is the goal.

buddtholomew wrote: Nice to know I am in such great company, PS 
Financial independence and an early retirement in 10-12 years is the goal.

Awesome. I was there too, worried about my investment performance, knowing that every drop represented more time in my job that I wanted to quit. This was before I found the PP, BTW. I decided that if I didn't feel like I could take more control of my job, I could take more control of my spending. My wife and I cut our spending down so far than suddenly we were saving 50% of every paycheck. Now it's 76% of my post-tax income. That is something you have control over, and you can crank it as high as you want. It's so much more productive than agonizing about your investment portfolio's performance--something you have zero control over. If I recall, you make a shitload of money, right? I bet there are a lot of optimization opportunities there that will make a big difference. Sell a car -> retire a year earlier, that kind of thing. See spending reductions in that way and you'll quickly become addicted to the thrill, with the happy sire effects that you will not only be able to retire sooner, but your worry about the performance of your investments will evaporate.