Gyroscopic Investing

I run a basic 4x ETF PP. Since we can now live on my spouse's paycheck, I am going to put all of my paychecks into the PP when I get paid twice a month. With the advent of brokers like M1 Finance, it is easy to just buy the 4 ETFS in equal $$ amounts each time I get paid. Is there any advantage to doing that vs placing all of my funds in the GBil cash ETF and then rebalancing once a quarter? I am not sure if there has ever been any evidence that doing it one way vs another yields any incremental returns over time.

It would be more work for me since I'd have to put new numbers into my spreadsheet, but it's not that big of a deal. If there are no transaction costs I wouldn't worry about it.

I generally leave new money in cash (T-Bills or Fidelity's short term gov bonds (FUMBX, I think) until the end of the year when I take stock of things and re-balance. When I first started with the PP I thought that was HB's suggestion so I've been following it. With the uncertainty we've been seeing of late it seems like an even better idea instead of trying to predict the future and placing a bet on some other asset.

As for you using your wife's paychecks to pay the bills and putting yours in investments, I think my wife, if she understood anything about investments, which she doesn't, might not be okay with that idea - depending on what you are talking about. My SS check currently pays all of our bills since we aren't spending money on things like travel, eating out, like we normally do. All of her money goes into cash in a taxable investment account at Fidelity but that's only because that's the way I think about it. In reality, her paychecks and my SS check go into the same account and it's the excess that goes into savings.

I only do this after I have maxed out her 401k however. I can't contribute to mine but she is still eligible so it just wouldn't seem right to me to put all of our money into our joint savings instead of her 401k since I've already built mine up over the years. If, God forbid, we should ever have to split I figure we would probably split the joint account and each of us would keep our 401k's.

Can you auto-invest into ETFs? I thought you could only do that into mutual funds.

If you can set up auto-investment and there's no transaction costs, I say have at it. I had done simulations quite a long time ago, and that method of contributions performs the best - ignoring taxes. Something like a full 1% of CAGR compared to putting new money into cash.

Taxes, however, can wipe out this advantage. If this is a concern, you may be better off putting new money into lagging assets, to cut down on rebalancing and also place assets strategically to minimize the tax hit, if you can.

sophie wrote: ↑Thu Jun 04, 2020 5:19 pm Can you auto-invest into ETFs? I thought you could only do that into mutual funds.

If you can set up auto-investment and there's no transaction costs, I say have at it. I had done simulations quite a long time ago, and that method of contributions performs the best - ignoring taxes. Something like a full 1% of CAGR compared to putting new money into cash.

Taxes, however, can wipe out this advantage. If this is a concern, you may be better off putting new money into lagging assets, to cut down on rebalancing and also place assets strategically to minimize the tax hit, if you can.

With M1 Finance I just tell them to buy $1000 of my Permanent Portfolio and it will buy enough to make all 4 ETFs at 25%. So if between my last paycheck and my upcoming paycheck let's say stocks dropped to 22% and gold went up to 28%, my next $1000 purchase would be divided in order to make them all go back to 25% again. M1 is perfect for investing in a static portfolio. I wouldn't necessarily use it to buy individual stocks and time the market.

jalanlong wrote: ↑Thu Jun 04, 2020 5:46 pm With M1 Finance I just tell them to buy $1000 of my Permanent Portfolio and it will buy enough to make all 4 ETFs at 25%. So if between my last paycheck and my upcoming paycheck let's say stocks dropped to 22% and gold went up to 28%, my next $1000 purchase would be divided in order to make them all go back to 25% again.

That's pretty cool. I didn't know M1 Finance did that for free.

You got me interested into looking into M1. I first go to the about page. Not sure if I would feel good or bad that it looks like the average employee age is 22...!

Yikes! Do you suppose that ANY of them remember the subprime mortgage crash of 2008? I don't doubt that they are all well-educated, but forgive me for questioning if they are well-experienced.

jhogue wrote: ↑Fri Jun 05, 2020 5:10 pm Yikes! Do you suppose that ANY of them remember the subprime mortgage crash of 2008? I don't doubt that they are all well-educated, but forgive me for questioning if they are well-experienced.

The financial industry is one of the few industries where looking old and having gray is a positive!

Vinny

jhogue wrote: ↑Fri Jun 05, 2020 5:10 pm Yikes! Do you suppose that ANY of them remember the subprime mortgage crash of 2008? I don't doubt that they are all well-educated, but forgive me for questioning if they are well-experienced.

Why would I care if they have a memory of the subprime crash? I only invest in the PP. So really I only need M1 to do the tech side of the equation and in my 3+ years as a customer there they have done that part very well.

The short answer of why you should care is this: behavioral economics.

Harry Browne himself understood that the assets he enthusiastically supported in the 1970s (gold, silver, Swiss francs) gave way to other assets (stocks and bonds) in the 1980s.

Cortopassi wrote: ↑Fri Jun 05, 2020 11:30 am You got me interested into looking into M1. I first go to the about page. Not sure if I would feel good or bad that it looks like the average employee age is 22...!

M1 is a fintech company. In that case, you want their average age to be 22. They're implementing technology to better utilize the current financial system, they do not sell investments. You can transfer and keep the same ETFs you have now.

jhogue wrote: ↑Tue Jun 09, 2020 9:10 pm The short answer of why you should care is this: behavioral economics.

Harry Browne himself understood that the assets he enthusiastically supported in the 1970s (gold, silver, Swiss francs) gave way to other assets (stocks and bonds) in the 1980s.

Is this not supporting the presupposition? Contributing twice a month would maintain closest to 25% so that when one "gives way" to other assets then you have more there to go up. As opposed to having it at 20% before it goes up. The same would be true if the asset that was going to lose was at 30% then you'd have more downside than if you were maintaining a 25% x 4 all the time.