Gyroscopic Investing

buddtholomew wrote:

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.

Pointedstick wrote:

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 die effects that you will not only be able to retire sooner, but your worry about the performance of your investments will evaporate.

buddtholomew wrote:

Pointedstick wrote:

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 die effects that you will not only be able to retire sooner, but your worry about the performance of your investments will evaporate.

Saving more and spending less are a recipe for success. We make a comfortable living by N. California standards, but as others have mentioned, the cost of living is high as well.

Pointedstick wrote:

buddtholomew wrote:

Pointedstick wrote: 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 die effects that you will not only be able to retire sooner, but your worry about the performance of your investments will evaporate.

Saving more and spending less are a recipe for success. We make a comfortable living by N. California standards, but as others have mentioned, the cost of living is high as well.

If you can work from home, you should take your cushy northern California income to Texas or Washington or somewhere else. That is exactly what I did, in fact. I work from my living room, so why choose a living room somewhere where the real estate market is ridiculous? I was able to buy a decent house in New Mexico for five figures in cash. Its property taxes are about $1,000 a year. A friend bought a similar house in San Jose at around the same time I bought mine, only his is smaller, on a smaller lot, and needed a lot more work than mine. He ended up getting a mortgage for close to a million dollars on it. If you have location flexibility, there are a way better options than northern California in terms of financial efficiency.

buddtholomew wrote:

Pointedstick wrote:

buddtholomew wrote: Saving more and spending less are a recipe for success. We make a comfortable living by N. California standards, but as others have mentioned, the cost of living is high as well.

If you can work from home, you should take your cushy northern California income to Texas or Washington or somewhere else. That is exactly what I did, in fact. I work from my living room, so why choose a living room somewhere where the real estate market is ridiculous? I was able to buy a decent house in New Mexico for five figures in cash. Its property taxes are about $1,000 a year. A friend bought a similar house in San Jose at around the same time I bought mine, only his is smaller, on a smaller lot, and needed a lot more work than mine. He ended up getting a mortgage for close to a million dollars on it. If you have location flexibility, there are a way better options than northern California in terms of financial efficiency.

Aah yes, location, location, locaction...
Kids are attached to their grandparents too much to leave the state, let alone our city. Wife is a Dr., 15 years at the same hospital. As for me, I could live anywhere. It's a tradeoff we are not willing to make at this time.

I Shrugged wrote: OK I just checked.  I'm down about $90K give or take from probably a couple of weeks ago or so.  What am I supposed to do about that exactly?  Is there some change I should be thinking about?  Anyway, I've got Subway coupons to clip before the wife throws the Sunday paper out.

Pointedstick wrote: I totally understand. For me, it was a big reason why we wanted to leave California before our family got any bigger (son was 1 when we left). If we'd stayed too long, it would have been much harder to move, and I'd have been stuck working for another 14 years.

buddtholomew wrote:

Pointedstick wrote:

buddtholomew wrote: Saving more and spending less are a recipe for success. We make a comfortable living by N. California standards, but as others have mentioned, the cost of living is high as well.

If you can work from home, you should take your cushy northern California income to Texas or Washington or somewhere else. That is exactly what I did, in fact. I work from my living room, so why choose a living room somewhere where the real estate market is ridiculous? I was able to buy a decent house in New Mexico for five figures in cash. Its property taxes are about $1,000 a year. A friend bought a similar house in San Jose at around the same time I bought mine, only his is smaller, on a smaller lot, and needed a lot more work than mine. He ended up getting a mortgage for close to a million dollars on it. If you have location flexibility, there are a way better options than northern California in terms of financial efficiency.

Aah yes, location, location, locaction...
Kids are attached to their grandparents too much to leave the state, let alone our city. Wife is a Dr., 15 years at the same hospital. As for me, I could live anywhere. It's a tradeoff we are not willing to make at this time.

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.

mathjak107 wrote: This time the big winner may be the us dollar , gold's competitor.  that will likely be the vehicle of choice today. I am not expecting much movement in gold or treasury's because the dollar is so strong by itself.

Libertarian666 wrote:
So much for trying to predict what any given economic event will do...

Libertarian666 wrote:

mathjak107 wrote: This time the big winner may be the us dollar , gold's competitor.  that will likely be the vehicle of choice today. I am not expecting much movement in gold or treasury's because the dollar is so strong by itself.

As I write, the Euro is UP (yes, you read that correctly, UP) about 2.5% against the dollar, and almost 1% against the Swiss Franc! Gold, on the other hand, is up about 1/2% against the dollar, so down against the Euro and Swiss Franc.

So much for trying to predict what any given economic event will do...

buddtholomew wrote: YTD (not including today) -2.23%
The losses just keep on coming day after day after day...