Gyroscopic Investing

I feel that now I know about the permanent portfolio I know all I need to know about investing. That's probably arrogant, but it took me about three years of research to discover and understand it, and I feel that by understanding how it works I'm ahead of 99 per cent of investors now.

Anyone else feel this way?

Indices wrote: I feel that now I know about the permanent portfolio I know all I need to know about investing. That's probably arrogant, but it took me about three years of research to discover and understand it, and I feel that by understanding how it works I'm ahead of 99 per cent of investors now.

Anyone else feel this way?

Yes. It isn't that deep of a field to understand once you have the basics down:

1) Widely diversify into stocks, bonds, cash and hard assets.
2) Passively invest.
3) Keep costs low.
4) Don't tinker.
5) Ignore the markets.
6) Rebalance when needed.

If you do those things you will be ahead of almost all investors on the planet and can do other things with your time.

It's a shame that people waste so much time using a gambler's mental framework when trying to figure out how to become a successful investor when there are things like the PP out there that can make life SO much easier.

Once you reach the other side of "getting" what the PP is all about and how and why it works, suddenly the PP topic does become less mysterious.  When discussing the PP with people sometimes I almost feel like I have an unfair advantage because I already know virtually any objection they are going to raise and I also know how they are likely to respond to each facet of the overall concept, just because I have told the story so many times.  I still like telling it, though.

Indices wrote: I feel that now I know about the permanent portfolio I know all I need to know about investing. That's probably arrogant, but it took me about three years of research to discover and understand it, and I feel that by understanding how it works I'm ahead of 99 per cent of investors now.

Anyone else feel this way?

Odd to see this post first, as this sums up my own feelings as well. When I first decided to leave my financial advisor, and run my own show, I read voraciously, particularly as I began to discover, and then invest in the permanent portfolio. I could not get enough of it. But with the peace, and eventual freedom it provides, I have been pursuing mastery of other interests ( a new foreign language, and bicycle repair).

MediumTex wrote: It's a shame that people waste so much time using a gambler's mental framework when trying to figure out how to become a successful investor when there are things like the PP out there that can make life SO much easier.

Once you reach the other side of "getting" what the PP is all about and how and why it works, suddenly the PP topic does become less mysterious.  When discussing the PP with people sometimes I almost feel like I have an unfair advantage because I already know virtually any objection they are going to raise and I also know how they are likely to respond to each facet of the overall concept, just because I have told the story so many times.  I still like telling it, though.

Why don't we just put together a super-FAQ and be done with the forum?  
Don't get me wrong: I think the forum is a great resource.  But it's a lot of time and energy for you and Craig, isn't it? Especially for a topic where you can predict pretty much every question?

Coffee wrote:

MediumTex wrote: It's a shame that people waste so much time using a gambler's mental framework when trying to figure out how to become a successful investor when there are things like the PP out there that can make life SO much easier.

Once you reach the other side of "getting" what the PP is all about and how and why it works, suddenly the PP topic does become less mysterious.  When discussing the PP with people sometimes I almost feel like I have an unfair advantage because I already know virtually any objection they are going to raise and I also know how they are likely to respond to each facet of the overall concept, just because I have told the story so many times.  I still like telling it, though.

Why don't we just put together a super-FAQ and be done with the forum?  
Don't get me wrong: I think the forum is a great resource.  But it's a lot of time and energy for you and Craig, isn't it? Especially for a topic where you can predict pretty much every question?

Are you kidding?

This forum is a blast.

In many ways, the PP is simply an organizing principle that leads to all sorts of interesting discussions that flow from a certain basic mental configuration.

There are still good topics that fall out of a forum. I learn about new investment options for the portfolio all the time for instance. I also enjoy getting people out of the clutches of Wall St. In a way, I like to think I'm paying back the people that helped me out early on.

This is something I struggle with too. I try to fight it as much as I can because I think it is healthy to always question things. The PP is just pretty damn good. It is really hard to beat for what it is.

I also think that speculators feel compelled to be as informed as possible to try to have an edge. I don't need information to inform my investment decisions but I try to feign the need because I like to feel part of the huge debate that is the markets.

In some ways the PP makes me feel like an outsider in a subject that I used to feel such passion for.

Regardless, financial security is the top priority for investing. The weird quirks that come with being a PP investor are a small price to pay.

You know, this really gets back to one of the points that Harry Browne made in "Fail Safe Investing" about how you can basically take all the energy you are currently using to worry about your investments and with the PP you can re-direct that worrying energy to making more money which you can then add to your PP and do it all with a lot more peace of mind.

One of the problems lots of investors have is they simply don't save enough and thus are forced to take on more risk than they should to even have a theoretical chance of meeting their financial goals.  What actually tends to happen is that the investor who has taken on too much risk finds out at the worst possible time that he doesn't have the stomach for the risk he has assumed and rather than outsize returns he winds up with outsize losses, even though he thought that an equity heavy portfolio was supposed to always outperform more boring approaches like the PP.

Learning all of this is a humbling process that some people never seem to fully grasp.

MediumTex wrote: ...you can basically take all the energy you are currently using to worry about your investments and with the PP you can re-direct that worrying energy to making more money which you can then add to your PP and do it all with a lot more peace of mind.

Absolutely.  I'm constantly trying to think of things to do with my VP, and in the end I always decide just to keep putting the money into my PP.  It's just to hard to beat.

I love this forum. I'll occasionally continue to post here. This is a great place.

I'm just bored with investing news and information in general. It's mostly based on flawed assumptions.

MediumTex is right. The permanent portfolio is humbling. When you understand why it works, you realize that so much of investing is preserving what you have rather than being rewarded money from the stock market. It's depressing, but that is how the world works. You need to understand history to invest. If you don't, you'll lose everything.

Indices wrote: I love this forum. I'll occasionally continue to post here. This is a great place.

I'm just bored with investing news and information in general. It's mostly based on flawed assumptions.

MediumTex is right. The permanent portfolio is humbling. When you understand why it works, you realize that so much of investing is preserving what you have rather than being rewarded money from the stock market. It's depressing, but that is how the world works. You need to understand history to invest. If you don't, you'll lose everything.

When you begin to fully internalize the ideas above, much of what people think of as "investing" starts to look a lot more like a tourist wandering from table to table in a casino at 3:00am, shocked that all of the foolproof "systems" he had read about somehow let him down.

The typical 401(k) plan:

Before I had any spare money, I hadn't given a thought to how the financial markets work or economics or any of that stuff. I came to all of this with the faith that everything was all set up as a widely understood harmoniously humming machine that was the global economy and that my money was something that would be welcomed and rewarded as a hand on the pump. It came as a profound shock to me that apparently preserving the purchasing power of  savings is more like scrabbling for a hand hold on a life raft, trying to elbow out of the way everyone else who is also trying to do so.

MediumTex wrote: You know, this really gets back to one of the points that Harry Browne made in "Fail Safe Investing" about how you can basically take all the energy you are currently using to worry about your investments and with the PP you can re-direct that worrying energy to making more money which you can then add to your PP and do it all with a lot more peace of mind.

I completely agree.

There's very little unique value that I can bring to the investment world.  Successful speculation requires a talent for detecting mispriced securities.  That's a lot harder to do than it sounds.  Even if this weren't extremely difficult to do, I have very little natural talent for it.

Fortunately, we all have things that we do excel at.  You find the way your unique combination of talents intersects with the needs of the market and you're far more likely to smoothly build your wealth than getting in over your head swimming with the sharks.

Harry Browne always used the example of trying to imagine a layman showing up from our of nowhere and trying to do your job better than you.  For most of us, that's a laughable idea.  Whenever I'm tempted to speculate, I think about the flailing of some poor schlub if he showed up tomorrow to try to do my job.

Lone Wolf wrote: Whenever I'm tempted to speculate, I think about the flailing of some poor schlub if he showed up tomorrow to try to do my job.

Hilarious.

I think I'll use that next time I get the same urge.

What I find hilarious is the trading tools these brokerage houses offer to what they show to be regular people.  They make it seem like you have wall-street at your fingertips, and I feel like I wouldn't have the first idea how to read that information and make educated decisions.  I truly believe that these details should be taught only after some of the macroeconomic foundation is learned.  You could truly be rearranging deck furniture on the titanic if all you know is futures trading as taught by TD Ameritrade but don't know what kind of macroeconomic situations our world has found itself in.

moda0306 wrote:

Lone Wolf wrote: Whenever I'm tempted to speculate, I think about the flailing of some poor schlub if he showed up tomorrow to try to do my job.

Hilarious.

I think I'll use that next time I get the same urge.

What I find hilarious is the trading tools these brokerage houses offer to what they show to be regular people.  They make it seem like you have wall-street at your fingertips, and I feel like I wouldn't have the first idea how to read that information and make educated decisions.  I truly believe that these details should be taught only after some of the macroeconomic foundation is learned.  You could truly be rearranging deck furniture on the titanic if all you know is futures trading as taught by TD Ameritrade but don't know what kind of macroeconomic situations our world has found itself in.

There is also the fact that "professional traders" have access to sources of information that most people don't.  Thus, the "professional" investor has both expertise AND access to information that amateurs do not.

MediumTex wrote: The typical 401(k) plan:

Frankly, that game has better odds than most 401(k)s I've seen.