Gyroscopic Investing

Hello.

That's why PP has gold.
That's why PP is diversified.
It's performance is bad? Why try to find arguments to time the market and change the conception of EUPP?

I do not consider the possibility to be wiser than PP.

Pfanni wrote: European long-term bonds - you get a very low yield in a depreciating currency. Unheard of in decades of financial history.

ECB QE is competetitive devaluation. Exporting deflation. Onshoring jobs. Driving up inflation, devaluing debts.
That's all fine by me - but I wouldn't put my savings into EUR bonds.

That's my PP by now - I had to take into account FX risk as well as duration risk.. I aimed to err on the low risk side, meaning I reduced bond duration. The makeshift solution I could come up with.

A) Stocks, 25% - MSCI World ETF
B) Gold 25% - Physical
C) Bonds 25% - 1/2 US 30yr, 1/2 US 2yr
D) Cash 25% - 1/2 EUR savings account 0.4% yield, 1/2 US 2yr

This might underperform the original PP because of lower bond yields, but I can live with that.

Thanks for starting this thread Pfanni.

As I am getting myself a bit more educated on the bond part of the portfolio I am starting to see why you made some changes to the bond part of the PP.

Questions:
1. If yields on Euro bonds rise again, are you going to remain 100% invested in US 30 year Treasuries? If so why?

2. Ray Dalio's All Weather Portfolio has 40% Long terms treasuries and 15% Intermediate treasuries. Approximately a 3:2 ratio. Do you think you could transplant this ratio to the PP as it operates on the same underlying principles? Divide the 25% bond part in 15% long term bonds (30 years) and 10% intermediate bonds (7-10 years)? One perhaps even could split the intermediate and long term bonds 2/3 domestic and 1/3 US? I would like to find a set up that works for years to come, something I don't have to tinker with every so often. Any thoughts? Thanks!


EDIT: Just checked point two on Portfolio Visualizer and the draw dawn remains the same, CAGR goes down with 0.10% - 0.30% per year but is nearly identical over 40 years. It ends up costing you a little bit. In return you may get better protection in environments like we are experiencing today... correct me if I am wrong.

The last few weeks prove my point that a high exposure to foreign currency is dangerous. Bonds plummeted all over Europe (and in other countries too), stocks fell 5-10% and gold also fell almost 10% (in EUR terms). On the other hand, the Euro has strengthened almost 10% (against the Dollar), so my suggestion to keep a portion of the portfolio long EUR worked pretty well.

By the way, the IMF is warning that low interest rates in the Eurozone threaten the solvency of European life insurance companies, particularly in Germany and Sweden:

http://blog-imfdirect.imf.org/2015/05/0 ... c73ac637e7