Should we let others know about the Permanent Portfolio?

[Indices]

Admittedly, the PP does not have many followers. The PP Mutual Fund has several billion under management and that is quite a few, but I think many of the investors who use it don't really understand why it works, they simply invest in it because it does well in bear markets.

But as the PP gains followers are there problems with getting larger? Will there be repercussions as more and more people flock to this way of investing?

I think I am ok with more people coming on board, but I think most people are absolutely convinced that it is 100 per cent stocks for the long run. If enough people join us, eventually they will offer the PP in ETF form and passively managed, which I think will be great. I can't really see drawbacks yet from popularity. Maybe the rest of you can comment...

[MediumTex]

The PP is a funny thing.  It's more of a way of life than a phase people go through.

To me, most investment strategies are like skirt lengths or tie widths.

The PP, OTOH, is more akin to brushing your teeth.  No matter what happens in the future, I don't see myself no longer brushing my teeth.  That's just a routine I am in from now on.  I look at the PP that way.

This way of thinking is hard for some people to relate to who have come to view everything in life in terms of trends and fads.

The word "permanent" in permanent portfolio is more far-reaching than a lot of people probably realize.

I am certain that many (maybe most) PRPFX investors have no idea how the fund works or why.  Even the analysts on the calls with Cuggino ask questions that make me think they don't have a clue what the fund is all about.

[dualstow]

I agree with both of you. I think that when stocks make a comeback and two other assets fall, plenty of pp'ers will abandon the strategy for tech stocks. An etf would be interesting, but I like the diy method. After that, a mutual fund (prpfx) would be my next choice, because who wants to sell shares of the entire package?

[TripleB]

I'm an atheist. I don't try to spread my religion (or lack thereof) because people just won't listen unless they want to listen. Same with the PP. Unless someone really wants to get into the PP, they won't.

I really wanted to get into the PP but had minor hesitance, so I asked a lot of questions, and about 2 years, I went all in. If I had huge reservations, no amount of discussion would have converted me.

No offense intended to them in any way because I really do enjoy their community, but trying to get a 70 year old boglehead who has been investing in stocks/bonds only for 40 years, to convert to the PP, is the same as trying to get a 70 year old Christian who has gone to church every week for the last 40 years to convert to atheism.

[MarySB]

OMG, you are SO right!

I started PP about 16 months ago, and have been very happy with it, especially now with the stock market's gyrations.

My 68 year old husband is about 70% into stocks. He has been watching his portfolio fall in value almost daily. And I have been watching mine increase in value almost daily.

I have shown him many of the posts on this board, but he has made up his mind.

There are three strikes against me for convincing him:

1. The PP is VERY different,
2. He's been investing the same way for 50 years,and
3. Last, but certainly not least, I'm a woman---what do I know... Lol!

I'm so glad we keep our investments separate, or we'd be getting divorced right now!
Just kidding, of course

[HB Reader]

OMG, you are SO right!

I started PP about 16 months ago, and have been very happy with it, especially now with the stock market's gyrations.

My 68 year old husband is about 70% into stocks. He has been watching his portfolio fall in value almost daily. And I have been watching mine increase in value almost daily.

I have shown him many of the posts on this board, but he has made up his mind.

There are three strikes against me for convincing him:

1. The PP is VERY different,
2. He's been investing the same way for 50 years,and
3. Last, but certainly not least, I'm a woman---what do I know... Lol!

I'm so glad we keep our investments separate, or we'd be getting divorced right now!
Just kidding, of course

MarySB,

I really liked your post.  The PP is very different.  This forum and investment discussions in general would benefit from more female participation.  I will comment more when I return from vacation.   

[stone]

Mary SB, my wife and me also seperately manage savings even though we have a joint current account and had a joint mortgage. I'm 100% in PP whilst my wife is 100% in cash. Neither of us have any investment experience. Part of me thinks that it is good to have a diversity so as to avoid the risk of one person's stupidity causing a calamity. The other part of me thinks I should make an effort to try and explain what convinced me about the PP. The stumbling block I come up against is that the PP is some unorthodox scheme I found on the internet. I say it is "safer than cash" and that is enough to persuade my wife that we should "only" be 82% cash .

I guess if the PP became widely adopted, then that would dampen down volatility of the constituent assets and so make the PP less attractive.

[steve]

I played a couple of archived Harry Browne radio shows in the car when we drove back from somewhere once and my Wife and Son instantanly felt that was the way to invest. Its is really nice to be able to invest with everyone in agreement.

[stone]

Steve, I think my problem is that rather than researching, keeping quite, mulling things over and waiting a few months and then making a case for the PP, I instead came to the PP after initially saying we should ask a financial advisor what to do. I assumed a financial advisor would just be like a car mechanic or a dentist- someone you could hand matters over to for a fee. Although neither of us knew anything about finance it was abundantly clear that the speel given and products pushed (recommended 100% in a "kick out fund" that had a fixed 7% upside but a bottomless downside if the FTSE fell >50%) were diabolical and that in finance the only golden rule is never let a sucker keep any money . I guess that makes trusting an unorthodox fringe scheme such as the PP all the more a leap of faith.

[Lone Wolf]

But as the PP gains followers are there problems with getting larger? Will there be repercussions as more and more people flock to this way of investing?

I think that most people will continue to just blow off such a strange-looking strategy.  The (very small) handful of converts that I have all took the time to study it and had to break down some mental barriers along the way.  (Usually barriers involving gold or LT Treasuries.)

I had an especially epic fail recently.  A coworker of mine experiences terrible stress in the markets.  He asked me how I could be so freakishly calm during the debt ceiling standoff and so I took some time explaining the PP strategy and its results to him.  He was impressed and very excited since the stress and periodic losses was getting to him.  (He'd been burned badly by his large holding of Bear Stearns back in the day.)  He decided that he would start transitioning toward the PP "very soon".

The next day, he explained to me that he thought REITs would be a better choice because gold was "too high".  (In the $1600s IIRC.)  I told him that you only know when a price is "too high" in retrospect.

The day after that, he said that long-term Treasuries were about to be destroyed by the debt ceiling situation.  He thought we "might even" get downgraded.  I told him that we're likely to get downgraded no matter what happens... and that even then it likely won't matter very much.

By the day after that he was moving in and out of stocks and shorting Treasuries, making several trades per day.  Lone Wolf fails again. 

[Storm]

By the day after that he was moving in and out of stocks and shorting Treasuries, making several trades per day.  Lone Wolf fails again. 

I have had mixed results.  My younger brother is a huge Ron Paul supporter and voted for Harry Browne back when he ran for President.  When I told him about the PP he instantly "got it" and moved his retirement accounts into an almost true PP last year (he split the gold allocation 12.5% GLD and 12.5% SLV, which actually juiced his returns a bit, but is probably hurting a bit now).

My brother-in-law, on the other hand, doesn't really get it.  When he heard there was gold in the portfolio he said "I wish I had bought some gold but it's too high now (it was 1500 at the time) and it's probably too late."  I gave up trying to explain to him.  Last time we were talking about investments his wife (my sister-in-law) was browsing online and calling out ticker numbers to Chinese startup companies that were sure to triple in the next few months.

My in-laws parents are already retired, and keep their money in very conservative cash like CDs, money market funds, etc.  When I tried to explain the PP to him, he didn't get it and said "gold is in a bubble, you're crazy to put your money there."  I didn't really try to push the issue.

Another friend of mine is 53 and doing pretty well.  He has significant retirement savings, all in cash though.  I loaned him a copy of "Fail safe investing" so we'll see if he takes to it.

It really depends on someone's temperament.  If someone doesn't understand the concept of fiat currency and gold=real money, they are unlikely to understand the PP.

[moda0306]

I got my parents in with some of their funds a while back but into a modified PP cuz my dad would jump off a bridge before putting 25% of his wealth into cash, and a whole lot more (after seeing his other, expensive, underperforming funds falter) about a week before last Monday's crash, which was absolutely great considering what he was in before.

I've tried to mention it to a couple other friends, but they just don't like certain aspects of it, and I don't think the "Modern Portfolio Theory" aspect of it (that you can have higher returns from two (or more) opposing assets that oppose each other than from the higher-performing asset all by itself.

It's tough, because 1) if they don't understand macroeconomics, it's tough to get into the finer points, and 2) if they don't understand bonds, it's tough to get them to like LTT's.

I almost wonder if it's best to try to convince people with no preconceived notions about money.  I bet I could get my sister (knows nothing about money) to put all her stuff in the PP or PRPFX, no problem... simply because she doesn't know any better.

[l82start]

i just recently loaned my father a copy of fail safe investing, i am not sure how he will react to it, or if the pp fits into their situation well enough to adopt it for any of their savings... he has been retired for many years from back in the day when pensions were common, and they seem to be taking care of themselves very well already..  my tendency to be frugal and conservative with money was learned from them so i would be surprised if they are doing anything silly, i am interested in hearing what he thinks though....

[MediumTex]

I have found that as simple as the PP looks, it is actually incredibly subtle and complex in its conception and design.

I only realize how complex it is when I begin discussing it with someone and I realize I am losing them as I go over topic after topic and see that they are only absorbing about half of what I am saying.  It's really a whole cluster of foreign concepts to many people.

I think that part of the reason "Fail Safe Investing" is written in such a simplistic style is that Harry Browne realized that it was better to convey the message in simplistic terms and make sure the whole message is laid out, rather than trying to explain it the way an engineer would and lose most people who were being exposed to the ideas for the first time.

[AdamA]

I think that part of the reason "Fail Safe Investing" is written in such a simplistic style is that Harry Browne realized that it was better to convey the message in simplistic terms and make sure the whole message is laid out, rather than trying to explain it the way an engineer would and lose most people who were being exposed to the ideas for the first time.

I've gotten two people interested in it recently.

The first I told to read the first three chapters of Bernstein's "The Intelligent Asset Allocator," and then I forwarded him Bernstein's "Wild About Harry" article.  He's very happy with it, although seems to still feel the need to tinker.

The other one just wants to follow advice blindly, so I recommended PRPFX, which she purchased with a very small amount of her overall savings.  I told her to make a Google Finance portfolio and follow PRPFX vs. her other investments for a few months.

[MediumTex]

He's very happy with it, although seems to still feel the need to tinker.

I guess that's just part of what makes us human.

[l82start]

i have never really had the opportunity to explain the PP to another serious investor, the few people i have described it to have all been speculators who are playing with small sums of money buying and selling individual stocks hoping for the big pay out, to them the stock market is more of a gambling game they play and long term investing and the preservation of money is a bit off their radar... so no converts here

i have described it to my parents a bit, but it is more to keep them up to date on what i am up to than with any idea to convince them to switch, they are doing well with whatever plans they made for retirement over 25/30 years ago and taking up DYS investing in their late 80's after all these years seems unlikely and probably unnecessary....

[KevinW]

I guess if the PP became widely adopted, then that would dampen down volatility of the constituent assets and so make the PP less attractive.

This is probably true, but I don't see it ever happening.  It's very difficult to get a critical mass of people to all agree to change their behavior.  Look at how difficult it's been to convince people to avoid smoking and exercise regularly.  And those are uncontroversially healthy behaviors.

I think that helping others understand and use the PP is a worthwhile cause, as it helps them achieve their financial goals and become more self-reliant.

I suppose that recruiting PP investors has a few minor self-serving effects.  It would leave fewer people in a position to whine about financial problems or depend on safety net programs that I pay for through taxes.  And it would create a larger market for PP-compatible investment products.  However convincing one person to switch investments is such a drop in the bucket that these benefits don't motivate me to evangelize.

In the terminology of How I Found Freedom in an Unfree World, IMO evangelizing investing approaches is a "trap." It sucks up time and emotional energy and the upside is practically nil.

So if someone comes to me with a PP question I can answer, I do so.  But I'm ambivalent about whether they end up using the PP.

[l82start]

update.... my father read fail safe investing, his comment was " good common sense advice"

[AdamA]

update.... my father read fail safe investing, his comment was " good common sense advice"

I've had people respond similarly.  The 16 Rules are definitely common sense...not so sure about the PP itself...

[MediumTex]

update.... my father read fail safe investing, his comment was " good common sense advice"

I've people respond similarly.  The 16 Rules are definitely common sense...not so sure about the PP itself...

What I find is that often people can be unpersuaded, even when they are presented with irrefutable evidence (such as 40 years of investment returns) if the ideas you are offering them are too far outside of their own experience.

In the past I have used the example of showing an airplane to a caveman.  Even if he didn't understand the physics and design principles, one might think that by showing the caveman the plane actually flying, he might be persuaded that manned flight was possible.  What seems more likely, however, is that in many cases the caveman would be even more bewildered after being shown the craft flying.  At that point he might be simply thinking to himself: "I have been offered a ridiculous premise, and I have been shown a fantastic demonstration of the ridiculous premise in action.  Since the premise is so absurd, the demonstration obviously used some sort of trickery because I know that people can't fly."

I think that people just have to have minds that are receptive and/or prepared for certain kinds of ideas for those ideas to have any hope of being accepted.

[smurff]

In the past I have used the example of showing an airplane to a caveman.  Even if he didn't understand the physics and design principles, one might think that by showing the caveman the plane actually flying, he might be persuaded that manned flight was possible.  What seems more likely, however, is that in many cases the caveman would be even more bewildered after being shown the craft flying.  At that point he might be simply thinking to himself: "I have been offered a ridiculous premise, and I have been shown a fantastic demonstration of the ridiculous premise in action.  Since the premise is so absurd, the demonstration obviously used some sort of trickery because I know that people can't fly."

This same thought process is used by my grandma to say that humans never landed on the moon.