Permanent Portfolio Forum
https://www.gyroscopicinvesting.com/forum/
https://www.gyroscopicinvesting.com/forum/viewtopic.php?t=2313
Budd--buddtholomew wrote: Honestly, this completely stinks. I'm sure a few on this board are expecting me to respond in this fashion, but it is really getting way too tiresome...Enough is enough already.
Wow, just a few days ago you were back to complacency, and all it takes is a few words out of Bernanke's mouth, a 2% drop (which, by the way, was mirrored in the stock market), and you're ready to run for the hills.buddtholomew wrote: Honestly, this completely stinks. I'm sure a few on this board are expecting me to respond in this fashion, but it is really getting way too tiresome...Enough is enough already.
If only I could invest in this forecast.MediumTex wrote: I anticipate that today will bring more worry.
As an experiment, I highly suggest seeing how you feel just checking your portfolio once per month. Pick a day, such as the first of the month. Don't look at your portfolio any other time and don't spend any time reading financial news.buddtholomew wrote: Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
Thanks LoneWolf, I appreciate the recommendation. I adopted a similar strategy to wean myself off of CNBC first thing in the morning. Baby steps....Lone Wolf wrote:As an experiment, I highly suggest seeing how you feel just checking your portfolio once per month. Pick a day, such as the first of the month. Don't look at your portfolio any other time and don't spend any time reading financial news.buddtholomew wrote: Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
Try this for 90 days. See whether this improves your state of mind and saves you time. If it does, continue the habit indefinitely. I've certainly never looked back.
IMO you have nothing to lose by trying this. Good luck whatever you decide!
If the possibility of losing your job is causing you this much worry, maybe in addition to an emergency fund, you should learn skills that would make you less dependent on the job. In the extreme, you could learn how to live a good life while spending very little money. This is one of the best insurance policies you can have.buddtholomew wrote: I have lived most of my adult life in fear of losing my job and the inevitable financial burden this event would have on my family. This fear, rational or irrational, has motivated me to build the largest emergency fund possible. 100% of the emergency fund is allocated to CD's, Cash, SPY, GLD and TLT, and at present, comprises approximately 3 years of living expenses.
Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
I DO NOT respond in this fashion to movements (positive or negative) in the portion of my portfolio earmarked for retirement (60/40). I am less emotionally invested and re-balance using 5/25 tolerance bands without any duress.
I hope this sheds some light on my personal circumstances and the reasons why I respond so negatively to losses in the PP.
If this is emergency funds rather than long term savings, you might want to boost the cash allocation to reduce the volatility at the expense of some long term gain. For example at 70/10/10/10 the annual long term return from 1972 to 2008 is reduced by about 1%, but this cuts the volatility by more than half (so a 1% down day becomes a less than .5% down day). Another option might be to use a ladder of 3-5 year treasuries for your emergency funds. I'd imagine this would give you complete peace of mind, at the expense of maybe 2% annual return. In the grand scheme of things the PP is not very risky, but there is definitely some short-term risk. If you really can't tolerate any risk at all it may not be for you. Only you know how much risk you can stand.buddtholomew wrote: I have lived most of my adult life in fear of losing my job and the inevitable financial burden this event would have on my family. This fear, rational or irrational, has motivated me to build the largest emergency fund possible. 100% of the emergency fund is allocated to CD's, Cash, SPY, GLD and TLT, and at present, comprises approximately 3 years of living expenses.
Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
I DO NOT respond in this fashion to movements (positive or negative) in the portion of my portfolio earmarked for retirement (60/40). I am less emotionally invested and re-balance using 5/25 tolerance bands without any duress.
I hope this sheds some light on my personal circumstances and the reasons why I respond so negatively to losses in the PP.
I can certainly see where that would cause you (or any of us) to be nervous.buddtholomew wrote: I have lived most of my adult life in fear of losing my job and the inevitable financial burden this event would have on my family.
Based on how you're using the PP, and given the fact that you also employ a 60/40 portfolio (which would be tilted towards prosperity), I would recommend that you lower the volatility of your PP even more by increasing the amount of short term treasuries.buddtholomew wrote: I have lived most of my adult life in fear of losing my job and the inevitable financial burden this event would have on my family. This fear, rational or irrational, has motivated me to build the largest emergency fund possible. 100% of the emergency fund is allocated to CD's, Cash, SPY, GLD and TLT, and at present, comprises approximately 3 years of living expenses.
Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
I DO NOT respond in this fashion to movements (positive or negative) in the portion of my portfolio earmarked for retirement (60/40). I am less emotionally invested and re-balance using 5/25 tolerance bands without any duress.
I hope this sheds some light on my personal circumstances and the reasons why I respond so negatively to losses in the PP.
The fear of job loss is both a terrible fear and an understandable one. However, there might be no portfolio that can cure that. Not even 100% cash, unless you have tons and tons of it, and then there would be no fear in the first place.buddtholomew wrote: I hope this sheds some light on my personal circumstances and the reasons why I respond so negatively to losses in the PP.
What skills are those?jomby wrote:If the possibility of losing your job is causing you this much worry, maybe in addition to an emergency fund, you should learn skills that would make you less dependent on the job. In the extreme, you could learn how to live a good life while spending very little money. This is one of the best insurance policies you can have.buddtholomew wrote: I have lived most of my adult life in fear of losing my job and the inevitable financial burden this event would have on my family. This fear, rational or irrational, has motivated me to build the largest emergency fund possible. 100% of the emergency fund is allocated to CD's, Cash, SPY, GLD and TLT, and at present, comprises approximately 3 years of living expenses.
Daily fluctuations in the PP portion of the EF have either a calming effect (up days) or stimulate this emotional anxiety (down days). Losses reduce the number of months that the portfolio will last in the event of a job loss.
I DO NOT respond in this fashion to movements (positive or negative) in the portion of my portfolio earmarked for retirement (60/40). I am less emotionally invested and re-balance using 5/25 tolerance bands without any duress.
I hope this sheds some light on my personal circumstances and the reasons why I respond so negatively to losses in the PP.
Maybe hunting, fishing and trapping?Coffee wrote:What skills are those?jomby wrote: If the possibility of losing your job is causing you this much worry, maybe in addition to an emergency fund, you should learn skills that would make you less dependent on the job. In the extreme, you could learn how to live a good life while spending very little money. This is one of the best insurance policies you can have.
Just curious, but why wouldn't you choose to live off of your 60/40 portfolio first? If your PP is supposed to be the money you can't afford to lose, it stands to reason that your 60/40 portfolio would be the first set of assets you might sell to cover living expenses in the event of a job loss.buddtholomew wrote: I responded to the latest equity decline in my 60/40 portfolio as previously anticipated. I remained calm and had no intention of abandoning the plan. Declines in the value of my PP (emergency fund) affect me more deeply, as these losses reduce the number of months that I can support the family in the event of a job loss.
Well, then stop looking at the portfolio on a daily basis. Easy solution! Most of the daily volatility is due to the dollar weakening or strengthening. When the dollar strengthens (which is a good thing for your dollar-denominated assets) the PP tends to go down a little bit. When the dollar weakens, the PP tends to go up a little more than it went down from the strengthening. Over time, you tend to have a profit in real terms. Therefore, it really makes no sense to watch the PP so closely. You're just deluding yourself into thinking that the portfolio is moving around, when it's actually impossible to tell how much it's moving in real terms on a daily basis. In other words, nominal daily volatility means very little in terms of how many months you'll be able to support your family for.buddtholomew wrote:It's not the composition of the portfolio or the daily volatility that produces anxiety, but the purpose for the investment (retirement or emergency fund).
Maybe the PP is not the right vehicle for your emergency fund. Why not just use T-bills?buddtholomew wrote: Declines in the value of my PP (emergency fund) affect me more deeply, as these losses reduce the number of months that I can support the family in the event of a job loss.
The 60/40 portfolio earmarked for retirement is invested in tax-deffered accounts that remain inaccessible in the event of a job loss. The PP is entirely taxable and will be the source of income should an emergency arise.Gumby wrote:Just curious, but why wouldn't you choose to live off of your 60/40 portfolio first? If your PP is supposed to be the money you can't afford to lose, it stands to reason that your 60/40 portfolio would be the first set of assets you might sell to cover living expenses in the event of a job loss.buddtholomew wrote: I responded to the latest equity decline in my 60/40 portfolio as previously anticipated. I remained calm and had no intention of abandoning the plan. Declines in the value of my PP (emergency fund) affect me more deeply, as these losses reduce the number of months that I can support the family in the event of a job loss.
Well, then stop looking at the portfolio on a daily basis. Easy solution! Most of the daily volatility is due to the dollar weakening or strengthening. When the dollar strengthens (which is a good thing for your dollar-denominated assets) the PP tends to go down a little bit. When the dollar weakens, the PP tends to go up a little more than it went down from the strengthening. Over time, you tend to have a profit in real terms. Therefore, it really makes no sense to watch the PP so closely. You're just deluding yourself into thinking that the portfolio is moving around, when it's actually impossible to tell how much it's moving in real terms on a daily basis. In other words, nominal daily volatility means very little in terms of how many months you'll be able to support your family for.buddtholomew wrote:It's not the composition of the portfolio or the daily volatility that produces anxiety, but the purpose for the investment (retirement or emergency fund).
Totally understandable.buddtholomew wrote: My point is that there are an entirely different set of emotions in play when the money invested is for retirement or for an emergency.
Using ETF replay I am seeing that the PP is up 2.4% YTD.buddtholomew wrote: Don't look now, bu it's another down day for the PP (as usual).