Are you always taking a bath on at least one asset?

General Discussion on the Permanent Portfolio Strategy

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ppnewbie
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Re: Are you always taking a bath on at least one asset?

Post by ppnewbie »

yankees60 wrote: Sun Jan 05, 2025 9:32 am
ppnewbie wrote: Sun Jan 05, 2025 1:39 am My 2 cents

One reason a portfolio of uncorrelated(ish) volatile assets work is that rebalancing forces you to sell high and buy low. Unfortunately this goes against a lot of our powerful behavioral biases. It feels like you are selling a winner and then trying to catch a falling knife.

One thing to know is that you pay a price for insuring your portfolio in returns. I use a golden butterfly because I am in a glide path to retirement and want to protect my wealth and outpace inflation by a bit.

But for my kids, I have put them in 100 percent stocks (VTI) with dividends reinvested. If I had a 30 to 40 year time horizon I would do all stocks. It’s easy and even during a 30 year downturn (15 years slowly down / 15 years slowly back up) I think you would make around a 7 percent return of dividends are reinvested.

Portfoliocharts.com attempts to answer all these questions.
" I think you would make around a 7 percent return"

Nominal or Real?
Good question Vinny. I need to actually do the backtest on that. I’ve taken it a little bit in faith and some glancing at portfolio charts. I’ll put the results it in this thread.
ppnewbie
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Re: Are you always taking a bath on at least one asset?

Post by ppnewbie »

The other thing to consider for a younger person is the cognitive demand and fighting against behavioral bias caused by rebalancing. It feels like you are jumping off a cliff every rebalance. The feeling gets easier to deal with over time but it has not gone away (at least for me).

Also if you are doing this in a taxable account you have to deal with taxes every rebalance.

I’ve heard the best portfolio for a person is one they can stick to for the long haul.

For my kids I want to make it as easy as possible. There are no guarantees for the future but I hope it turns out well for them.
ppnewbie
Executive Member
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Posts: 929
Joined: Fri May 03, 2019 6:04 pm

Re: Are you always taking a bath on at least one asset?

Post by ppnewbie »

ppnewbie wrote: Sun Jan 05, 2025 12:56 pm
yankees60 wrote: Sun Jan 05, 2025 9:32 am
ppnewbie wrote: Sun Jan 05, 2025 1:39 am My 2 cents

One reason a portfolio of uncorrelated(ish) volatile assets work is that rebalancing forces you to sell high and buy low. Unfortunately this goes against a lot of our powerful behavioral biases. It feels like you are selling a winner and then trying to catch a falling knife.

One thing to know is that you pay a price for insuring your portfolio in returns. I use a golden butterfly because I am in a glide path to retirement and want to protect my wealth and outpace inflation by a bit.

But for my kids, I have put them in 100 percent stocks (VTI) with dividends reinvested. If I had a 30 to 40 year time horizon I would do all stocks. It’s easy and even during a 30 year downturn (15 years slowly down / 15 years slowly back up) I think you would make around a 7 percent return of dividends are reinvested.

Portfoliocharts.com attempts to answer all these questions.
" I think you would make around a 7 percent return"

Nominal or Real?
Good question Vinny. I need to actually do the backtest on that. I’ve taken it a little bit in faith and some glancing at portfolio charts. I’ll put the results it in this thread.
Having trouble finding a place that can backtest to 1966. But I will use 1975 to 1986 tsm 1000 to start 1000 per month added. CAGR is very high on this one 41%. And 1999 to 2014 start with a 1000 add 1000 every month (I think dividends are reinvested). CAGR 45.34%. Trying to find periods where the market ground down over years and came back to the point I started the back test.

https://www.portfoliovisualizer.com/bac ... xTDqAFYeAG

I do see something interesting that the GB did quite well during that time. That may make me rethink the plan. But I have to keep in mind the rebalance tax stuff for them. Keep in mind its a total of 181k invested (start with 1k and then 12k per year for 15 years.
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