Gyroscopic Investing

Hi- I'm new to this forum although i've been visiting the site for over a year.  Was all in on the PP late last year and through the first quarter of this year, but nerves  got the best of me, what with the European situation, etc.  Re-read Harry Browne's book, been reading the forum, etc. and decided to go back in as having everything in cash for months was beginning to worry me even more.
My PP funds are all in IRA's, but it is all we will have for retirement as we have no pensions and I certainly don't count on SS.  Of course, any time I decide to buy into anything, things fall apart (for example, I paid top dollar for my home in 2005). And, right on cue, when I decided to buy into all 4 categories Thursday, the market fell apart (again) on Friday.  A very rough calculation puts me at about a 1% loss in just 1 day!  Anyone have any words of wisdom with regard to how you stand being in this market?  I know it would be worse if I were primarily in stocks, so that it is a comfort, but it is simply nerve wracking to me, although intellectually I know I will never make my retirement goal just being in cash or constantly jumping in and out of the market.  Any thoughts on how to protect yourself from yourself?  Thanks.

I just think of all the other brilliant investors whose portfolios have done far worse than the PP… imagine how you'd feel if you'd just done a 60/40 TSM+TBM blend. You'd pray for a measley 1% drop. 

In the coming months, as insecure investors flee to safer assests you'll be profiting having bought in at a lower price.  Then you profit again selling high and buying stocks+gold at a deep discount. Mr. Buffet would be proud.

I am a newbie, too, but ran into the same thing you have run into, byehi.  I have been invested (IRA's) since April 12, and for the entire first week I questioned my sanity in investing in PP.  It kept losing every day  I had read all the information I could find on the PP and had followed the allocation for a year before investing, so thought I was being pretty prudent.  Since investing, my portfolio has wildly fluctuated.  One day I had an increase of $7000, the next day it dropped to $250.  I guess that's why they say not to follow it each day.  Sorry, but with those wild fluctuations, I can't NOT follow it every day

It will be interesting to see what other, more experienced than I, PP investers have to say.  

That is a shame, but you never know what might happen on Monday.  But even if the markets go down on Monday, does that really matter in the long run?  Anything other than cash is going to be volatile.  What is the time horizon before you need the money?  If you have several or even a few years before retirement this will all be forgotten by then.

I think it's best to make your investment decisions and then forget about the markets for a while.  At the moment I am not following my own advice, as I am a relatively new PPer (3 months) and enjoy watching it more closely than I should just to get a feel for how it works.  But during the 2008 meltdown I basically stopped looking at my statements.  I had resigned myself to the fact that I would be working longer than I expected to and just stopped worrying about it.  I am glad I did because at some point I might have sold out at the very bottom.  I know a few people who did just that.  If you feel like you just have to do something, change your VP investments.  You shouldn't mess with the PP because of market events.  The Euro crisis made me glad I was in the PP.

There are no guarantees in life.  The best you can do is put your money to work in the best way you know how, and then get on with life.  IMHO the PP is most reasonable way I have found to invest for an unknowable future.  If it doesn't work out then I am pretty sure few of the other options would have worked any better.

It is really a bad habit to look at your investments too closely. People sometimes ask me to put up more frequent returns data (like weekly and such). I deliberately choose not to do this because it's a bad idea. I recommend checking a portfolio infrequently because it will drive you nuts. Looking at each asset class in isolation makes it worse. You need to consider the total portfolio returns and not how asset X is doing by itself. Some assets in the portfolio will do poorly at any one time. Other assets will be doing well. That's how it works.

Investing is risky and there is no guarantee you will always make money, but my experience in investing and business is that the Permanent Portfolio allocation is a really solid approach to diversification and capturing returns. I think if you hang in for the long run and try to not fret about things it will all work out fine. You can try taking a break from the news for a couple weeks and not reading investing news. Doing these two things helped me immensely earlier on. I don't read any investing news at all any more except on a rare occasion.

The portfolio is up over 6% YTD. Many other portfolios are flat or negative. The portfolio is still working fine and there is no reason to get worried about it. A 1% loss is pigeon feed. In 2008 I knew people with 40% losses following other investment approaches. The Permanent Portfolio has survived MUCH worse than 2010 and came out fine.

Thanks for all of your responses.  Sometimes some reassuring words from others who are coming from the same place helps a great deal.  I was a very inattentive investor during the dot.com bust, with all of my investments among different funds of one co.  so thought I was well diversified.  If any of you are familiar with Janus funds, well, you know how that turned out.  Lost quite a lot. Then decided I needed help and went to Smith Barney.  That guy had me invested in things like Enron and WorldCom.  That turned out just about as well.  The only thing I did do right was pull completely out of the market before the 2008 crash, so at least I preserved what was left. So, anyway, once I discovered the PP approach, I was sold.  Primarily, because of the "hands off" aspect of it.  I guess I am just conditioned  now to "watch and worry".  I also started becoming uncomfortable when I noticed the correlation between stocks and gold beginning to be positive rather than the more negative correlation which one would expect.  This deflationary scenario got me to wondering and worrying a bit more about the PP in a deflationary environment.  I notice a lot of people on financial blogs, etc. jumping on the deflationary bandwagon.  Anyway, you are all right, in that it is best to develop a thicker skin and not watch constantly.  And yes, PkgMan, I do have about 15 years left before retirement (wish it could be sooner, but pray it's not longer), so
I guess I shouldn't whine so much!  Thanks again for all of your responses.

I've been there myself. Early in my investing "career" I read a lot of advice that cost me a load of money. The important thing is to learn from your mistakes and move on better educated. A passive and widely diversified portfolio has a better chance of reaching savings goals than one concentrated in any one sector of the market or, even worse, being market timed.

The PP is solid.  I haven't really even noticed what's been going on in the markets lately.

In general:

Stocks are in a secular bear market.  They will trade in range for the next few years at a minimum.

Gold is in a secular bull market.  It will probably drift higher for many years.

LT treasuries are also in a secular bull market, but this bull is probably closer to the end than the beginning (though I think 30 year yields could go below 2% before we are done).

Those are the general trends.  The PP is taking advantage of these trends and just doing its job, as it has for the past 40 years.

Try not to be afraid.  If you are following the PP strategy, you are following a very safe and conservative strategy.  I do, however, understand the fear you are feeling. 

I am bumping this thread from last year because it contains some very interesting and honest reactions to what was apparently a period of mild volatility for the PP (I really don't remember anything about it, but it seems to have shaken up a couple of people).

Note how real the fear seems to have been over something that in retrospect was nothing but market noise as the PP was putting together another very nice year in 2010.

I wonder what happened to byehi.  He started a PP, posted here twice, appeared on the verge of losing his nerve, and that was all we heard.

It's sort of painful to read because with the benefit of hindsight I can say for certain that he had absolutely nothing to be worried about and his own doubts probably did more damage to his investments than if he had just bought the PP and forgot about it.

One of the greatest benefits of the PP is that it doesn't require a babysitter.  By feeling confident enough to just leave it alone, without realizing it most investors are protecting themselves against their greatest enemy, which is normally themselves.

According to www.stockcharts.com Since July 16, 2010 to today (approximate as I'm eyeballing the graph):

Vanguard Total Stock Market (VTI) +26-27%
Gold (GLD): +21-22%
Cash (SHY): +0.1%
Bonds (TLT): -6-7%

These are respectable returns. I always advise checking a portfolio as infrequently as possible. The more you check, the more it will drive you nuts.

craigr wrote: According to www.stockcharts.com Since July 16, 2010 to today (approximate as I'm eyeballing the graph):

Vanguard Total Stock Market (VTI) +26-27%
Gold (GLD): +21-22%
Cash (SHY): +0.1%
Bonds (TLT): -6-7%

These are respectable returns. I always advise checking a portfolio as infrequently as possible. The more you check, the more it will drive you nuts.

I love to see big drops because I know I'm going to get a buying opportunity.  

I have often thought a good VP idea might be to set aside a separate account to buy assets that have dropped enough within my PP to warrant a rebalancing.

For example, if the S&P drops to where it's 15% of my PP, I'd rebalance my PP and then, in a separate account, buy an equal amount of VFINX or SPY...problem is I can't figure out when I'd sell it...

Spending less time looking at your portfolio is the way to go.

This reminds me of Walter Mischel's Stanford Marshmallow Experiment.

The basic idea of the experiment was that a researcher left a child alone in a room with a single marshmallow for a period of time.  The children were instructed that if they did not eat the marshmallow that they would be given a second marshmallow later.  It was a test of self-control (and a tough one, too, as most kids just wound up eating it.)

Check out how the successful kids did it: "Mischel observed as some would "cover their eyes with their hands or turn around so that they can't see the tray, others start kicking the desk, or tug on their pigtails, or stroke the marshmallow as if it were a tiny stuffed animal", while a few would simply eat the marshmallow as soon as the researchers left".

These kids instinctively knew that the less time spent obsessing on something, the less of a drain it would be on their willpower.  So quit looking and go enjoy your life... that second marshmallow will be here before you know it!

I always thought that the kid who ate the marshmellow as soon as the researcher left the room, was on to something.

Just do it, man.

OK. I, for one, gritted  my teeth and stayed in the PP. All I can say, it's the smartest thing I've done with my money in a long time. I still look way too often, but no longer worry

MarySB wrote: OK. I, for one, gritted  my teeth and stayed in the PP. All I can say, it's the smartest thing I've done with my money in a long time. I still look way too often, but no longer worry

I am so happy to hear that.

Congratulations.

I would love to hear anything else you may have learned about the PP or yourself since you got started last year.

We can talk about the PP from every angle, but you have to actually put your own money into it to experience one of the main benefits it offers--which is peace of mind.