Gyroscopic Investing

Posted: **Sat Feb 16, 2013 12:47 pm**

Pointedstick wrote: Frugal, it's very hard to interpret the numbers you posted. Could you format them in a more readable way?

Regardless, any portfolio can start to fall as soon as you get in; it's just a sad fact of life. As long as your investment time horizon is a few years or longer, it really doesn't matter what the portfolio does from one week or month to the next.

PS

Sorry find it here http://europeanpermanentportfolio.blogs ... ozone.html

Thanks to marc mesel!

MediumTex wrote: Ironically, when people begin to question a strategy it is often the best times to jump in, and when everyone is jumping in and slapping each other on the back it is often the best time to wait.

In investing, if something feels 100% right, it is probably wrong.

Hi mt

This is a bullet proof portfolio :-) i hope

I am putting 90% on it

I was not used to watch my savings reducing!

Volatility and DDs hurt

Posted: **Sat Feb 16, 2013 1:58 pm**

MediumTex wrote: Ironically, when people begin to question a strategy it is often the best times to jump in, and when everyone is jumping in and slapping each other on the back it is often the best time to wait.

In investing, if something feels 100% right, it is probably wrong.

This is how I feel and I think many people in the coming days/weeks will go running into equities after having missed all or most of this insane run up. It won't end well for these people, IMO.

Posted: **Sat Feb 16, 2013 4:30 pm**

clacy wrote: This is how I feel and I think many people in the coming days/weeks will go running into equities after having missed all or most of this insane run up. It won't end well for these people, IMO.

Well, it probably won't end much differently for these people any more than it would those that get into the PP at the wrong time...assuming this is the wrong time to get into equities, which of course is also unknown. But historically speaking, it should "end" just fine for these people.

Posted: **Sat Feb 16, 2013 4:44 pm**

iwealth wrote:
clacy wrote: This is how I feel and I think many people in the coming days/weeks will go running into equities after having missed all or most of this insane run up. It won't end well for these people, IMO.
Well, it probably won't end much differently for these people any more than it would those that get into the PP at the wrong time...assuming this is the wrong time to get into equities, which of course is also unknown. But historically speaking, it should "end" just fine for these people.

Depends on what part of history you're looking at. If your time horizon is 50 years, then yes, stocks are almost certainly a great buy. 40 years is probably okay, but 30 or less is risky. From 1960 to 1983, for example, stocks were almost totally flat for a buy-and-hold investor. There have been people who earned a 0% nominal return for two decades while inflation eroded their purchasing power. Ouch.

Posted: **Sat Feb 16, 2013 4:54 pm**

iwealth wrote:
clacy wrote: This is how I feel and I think many people in the coming days/weeks will go running into equities after having missed all or most of this insane run up. It won't end well for these people, IMO.
Well, it probably won't end much differently for these people any more than it would those that get into the PP at the wrong time...assuming this is the wrong time to get into equities, which of course is also unknown. But historically speaking, it should "end" just fine for these people.

Yes and no. The volatility in an equity heavy portfolio and the PP are two totally different animals.

In a perfect world, where human emotions are easily controlled I would agree with you that people who invested even at the top before a huge correction would be just fine if they sat tight and rode out the drawdown.

That isn't what happens however. Especially Joe Retail, who is late to switch to equities after being burned by 2008. Do you think that person is going to be fine with a 30-50% DD? Many of those people will panic and hit the sell button near the bottom and then repeat the cycle all over again.

If everyone had the discipline to ride out DD's like the average boglehead, my guess is that there wouldn't be nearly the reward that exists in stocks.

Posted: **Sun Feb 17, 2013 12:35 am**

A Japanese investor who went to a 100% Japanese equity position in 1990 would have a 60-70% loss to show for his 23 year roller coaster ride.

Posted: **Sun Feb 17, 2013 4:15 am**

MediumTex wrote: A Japanese investor who went to a 100% Japanese equity position in 1990 would have a 60-70% loss to show for his 23 year roller coaster ride.

Boss,

that's not the problem.

We have to compare someone that have 100% in CASH and then goes to 100% in HBPP because it is a BULLET PROOF PORTFOLIO, but the volatility and drawdowns will be extremely difficult to accept.

regards

Posted: **Sun Feb 17, 2013 6:33 am**

frugal wrote: We have to compare someone that have 100% in CASH and then goes to 100% in HBPP because it is a BULLET PROOF PORTFOLIO, but the volatility and drawdowns will be extremely difficult to accept.

Only real returns matter. A 100% cash portfolio should not feel safe to you, because inflation will slowly erode your purchasing power. Any portfolio that beats inflation will have some amount of volatility to it. You have to match the volatility with your time horizon. With 50 years ahead of you, even the huge volatility of stocks isn't really a problem... provided that you can guarantee not needing to withdraw anything for a half-century

. The HBPP's much lower volatility allows you to shorten your time horizon down to even 3-5 years. But if you want an easy portfolio with no downside, your only real option is to accept that inflation will slowly make you poor.

Posted: **Sun Feb 17, 2013 7:32 am**

MediumTex wrote: A Japanese investor who went to a 100% Japanese equity position in 1990 would have a 60-70% loss to show for his 23 year roller coaster ride.

Pointedstick wrote: With 50 years ahead of you, even the huge volatility of stocks isn't really a problem... provided that you can guarantee not needing to withdraw anything for a half-century .

Even these statements assume that the 21st century will behave like the last. The Roman who invested in "equities" in the 3rd and 4th century had a lot bumpier ride than that! Afterwards, some have said, "With 900 years ahead of you, even the huge volatility of stocks isn't really a problem..."

Posted: **Sun Feb 17, 2013 7:40 am**

BearBones wrote:
MediumTex wrote: A Japanese investor who went to a 100% Japanese equity position in 1990 would have a 60-70% loss to show for his 23 year roller coaster ride.

Pointedstick wrote: With 50 years ahead of you, even the huge volatility of stocks isn't really a problem... provided that you can guarantee not needing to withdraw anything for a half-century .
Even these statements assume that the 21st century will behave like the last. The Roman who invested in "equities" in the 3rd and 4th century had a lot bumpier ride than that! Afterwards, some have said, "With 900 years ahead of you, even the huge volatility of stocks isn't really a problem..."

LOL! Great point. I think we can all agree that a 100% equities portfolio involves a great deal of luck to produce decent returns.

Posted: **Sun Feb 17, 2013 2:40 pm**

Pointedstick wrote:
frugal wrote: We have to compare someone that have 100% in CASH and then goes to 100% in HBPP because it is a BULLET PROOF PORTFOLIO, but the volatility and drawdowns will be extremely difficult to accept.
Only real returns matter. A 100% cash portfolio should not feel safe to you, because inflation will slowly erode your purchasing power. Any portfolio that beats inflation will have some amount of volatility to it. You have to match the volatility with your time horizon. With 50 years ahead of you, even the huge volatility of stocks isn't really a problem... provided that you can guarantee not needing to withdraw anything for a half-century . The HBPP's much lower volatility allows you to shorten your time horizon down to even 3-5 years. But if you want an easy portfolio with no downside, your only real option is to accept that inflation will slowly make you poor.

In my country the CD's always payed to beat the inflation.

HBPP is just to get a bit more than inflation, maybe the double of the return.

The difficult part for one that starts is not to watch everyday...

Posted: **Sun Feb 17, 2013 2:42 pm**

Pointedstick wrote:
BearBones wrote: Even these statements assume that the 21st century will behave like the last. The Roman who invested in "equities" in the 3rd and 4th century had a lot bumpier ride than that! Afterwards, some have said, "With 900 years ahead of you, even the huge volatility of stocks isn't really a problem..."
LOL! Great point. I think we can all agree that a 100% equities portfolio involves a great deal of luck to produce decent returns.

Completely agree with Pointedstick, great point! Especially since I am on a history book kick and keep finding parallels between Rome and the US right now.

Posted: **Sun Feb 17, 2013 2:52 pm**

frugal wrote: In my country the CD's always payed to beat the inflation.

HBPP is just to get a bit more than inflation, maybe the double of the return.

The difficult part for one that starts is not to watch everyday...

The HBPP is also about resilience and safety, even in the face of non-traditional risks such as systemic financial catastrophes, war, capital controls, cooked inflation figures, and personal disasters. A high-yield, inflation-beating CD can't protect you from any of those.

Posted: **Sun Feb 17, 2013 3:04 pm**

Pointedstick wrote:
frugal wrote: In my country the CD's always payed to beat the inflation.

HBPP is just to get a bit more than inflation, maybe the double of the return.

The difficult part for one that starts is not to watch everyday...
The HBPP is also about resilience and safety, even in the face of non-traditional risks such as systemic financial catastrophes, war, capital controls, cooked inflation figures, and personal disasters. A high-yield, inflation-beating CD can't protect you from any of those.

I have to read PP book.

I am in LEVEL 1 of security.

I don't know if HB or Craig+MT speak about LEVELS... I learnt it with a spanish follower.

Posted: **Mon Feb 18, 2013 10:19 am**

frugal wrote: I have to read PP book.

I am in LEVEL 1 of security.

I don't know if HB or Craig+MT speak about LEVELS... I learnt it with a spanish follower.

Yes, the book discusses different PP levels, mainly in reference to how safe each level is ("safe" in regards to how well protected your assets are at that level).

I'm on my 2nd read-through of the book. I recommend it -- these guys have pretty much thought of everything.

Posted: **Mon Feb 25, 2013 5:11 am**

today for PP

Posted: **Mon Feb 25, 2013 3:50 pm**

lol. my sentiments exactly.

Posted: **Mon Feb 25, 2013 8:17 pm**

I can definitely do without that rollercoaster ride!

Posted: **Wed Feb 27, 2013 2:02 pm**

Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming.

Posted: **Wed Feb 27, 2013 2:16 pm**

buddtholomew wrote: Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming. I, on the other hand am content as I maintain both a 60/40 and PP. It must be difficult for those who only invest in the PP.

Posted: **Wed Feb 27, 2013 2:38 pm**

buddtholomew wrote: It must be difficult for those who only invest in the PP.

I guess it depends on the timespan. There's that recent ten-year stretch during which the S&P gained zilch. The pp did better. For that, I wouldn't mind a few days of rising s&p or nasdaq stocks.

Posted: **Wed Feb 27, 2013 3:18 pm**

buddtholomew wrote:
buddtholomew wrote: Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming. I, on the other hand am content as I maintain both a 60/40 and PP. It must be difficult for those who only invest in the PP.

I've run both. And I have to disagree. It's much much more painful to watch the effects of a 200 point DOW drop on a 60/40 portfolio (assuming your 40 is ITT and not LTT) than it is to lag the gains of a 200 point DOW up day with a PP.

Purely psychological. The emotional magnitude of pain is greater than that of joy...for me at least. Too bad, it's a rough way to live.

That said, at 33 years old I've decided to run a 50/40/10 with the 40 being ITT. And the past few days have been excruciating for me. My only solution is not to watch. Which is virtually impossible when you work on the internet all day.

Posted: **Wed Feb 27, 2013 4:44 pm**

buddtholomew wrote: Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming.

Doesn't it depend on what's in your VP?

Posted: **Wed Feb 27, 2013 4:50 pm**

AdamA wrote:
buddtholomew wrote: Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming.
Doesn't it depend on what's in your VP?

Absolutely. However; I would expect the equity portion of the VP to rise along with the markets.

Posted: **Thu Feb 28, 2013 3:48 pm**

buddtholomew wrote:
AdamA wrote:
buddtholomew wrote: Bogle and Browne both advocate a variable portfolio for a reason - on days like today, when co-workers are watching CNBC and counting down the points to an all time DOW high and their model portfolio is underperforming.
Doesn't it depend on what's in your VP?
Absolutely. However; I would expect the equity portion of the VP to rise along with the markets.

I assume you mean the equity markets when you say "the markets."

Gyroscopic Investing

Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times

Re: Difficult Times