Gyroscopic Investing

I would think that the best way to test a bulletproof vest would be to get shot while wearing it and see how you felt about the experience.  I'll bet it's a lot different than watching the vest being tested at a firing range.

For those who are new to the PP, the market is providing a great test of your new strategy.

How's it feeling so far?

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I suspect that if the PP hadn't required it, a lot of folks would not have had 25% of their money in long term treasuries.  One of the most common tweaks to the PP in recent months seems to have been to lighten up on the long term treasury exposure to reduce the risk in the PP a little bit, since everyone knows rates have nowhere to go but up, right?    (In the past there have also been tweaking campaigns based upon the confident assertion that gold was in a bubble and couldn't go much higher.  As I recall, this was a very popular sentiment when gold was around $1,150 an ounce.)

One of the most common misconceptions about the PP since I have been following it is that the overall risk in the portfolio can be reduced by lightening up on one or more of the assets.  It just doesn't work that way.

I personally think that a better way to test a bullet proof jacket is to: let your ex-wife wear it.  I'll too bet it is a lot different than watching the vest being tested at a firing range. 

I'm loving the PP so far!  After reading about the strategy for a month or so, I finally decided to sell $50k of stock index funds (about half my portfolio) and buy equal amounts of TLT and IAU in late May/early June.  Watching the movements of the funds each day, this is real diversification. 

I started investing in April 2009 and held an equity-heavy portfolio comprised of primarily of TSM, TISM, and TBM.  Oddly enough, what drove me to consider the PP more was the fact that I felt uneasy about all of my gains!  Depending on how the stock market did, I either had an "up" day or a "down" day.  I felt that my whole portfolio was too heavily tied to the performance of equities.  There's a reason that Bogleheads stress again and again to KNOW your risk tolerance.  That's because with an equity-heavy portfolio, you are in for a wild ride and will eventually suffer major losses.  I much prefer the smooth and steady ride that the PP provides. 

MediumTex wrote:
For those who are new to the PP, the market is providing a great test of your new strategy.

How's it feeling so far?

6 months in; sleeping deep and easy (in my chaps) hope that it continues that way.

Regrets:

* Phasing in - should have just gone for it.
* Holding paper gold instead of physical - easily fixed.

Thanks to all for answering my inane PP set up questions.

I'm fairly new if you count 2009 as new.  I'm loving it.  I learned some lessons along the way, mainly be sure to buy all 4 asset classes at once, and about my own investment psychology.  We all have assets that we think are going to do well in the short term and it's tough sometimes not to play favorites based on recent success.  In 2009 I was sure LT treasuries were hot, based on 2008 performance, so I bought them just a few days before stocks - big mistake that cost me a couple points of gains.

I sleep really well at night and it is liberating to be able to go on a 1 month vacation in the middle of a sovereign debt crisis and not worry about what is happening with my portfolio.

MediumTex wrote: As I recall, this was a very popular sentiment when gold was around $1,150 an ounce.)

C'mon MediumTex, there's absolutely NO WAY that gold could ever hit $1200 an ounce.