5 x 5 PP to blend PP and the Ultimate Buy and Hold?

[Bonafede]

Hi,

I've recently adopted and implemented the PP. Prior to this I was following more of a Bogle type allocation model, and I've found myself wavering back and forth between the two. So I've got a question regarding perhaps a 5 x 5 PP model, versus the 4 x 4.

I understand the PP comes as a package, but wanted to get the groups take on this. I ask this, because I recently came across the Ultimate Buy and Hold model, and see a lot of similarities in the philosophies of PP and Bogle, so it spurred my thinking of perhaps a way to blend these two models.

For instance, perhaps a blending of the portfolios may look something like:

20% - US (split among LC and SC)
20% - Intl (Split among LC, SC, and Emerging)
20% - Long Term Treasuries
20% - Gold
20% - Short Term Treasuries

I don't know if this even makes any sense. But as I'm in the accumulation phase of my life, I guess I'm just wavering a bit between not having enough in equity, and perhaps too much in gold and cash in the PP. I know I could do the other in the variable, but wanted to throw this out for comment.

Check my sanity?

-b

[craigr]

I'd just count the extra 20% in stocks as part of the Variable portfolio. There's nothing wrong with what you are doing as long as you are comfortable with the idea that the extra 20% in stocks may or may not perform going forward. If the risk is too much you can always take the 20% back off the table and put it into the core portfolio allocation.

[Pkg Man]

I agree with craigr as well.  Best to consider the international portion as part of the VP and keep the PP pure.  I am doing something similar since I still have some unease about holding so much in USG debt.  Heavily weighting the VP toward foreign stocks and currency makes me sleep better at night.  Just don't use money from the PP to fund the VP, but the reverse is fine. 

[Bonafede]

Thanks for the feedback. Sounds like a plan. Yet I find it hard to separate the PP with the Variable one because most of my assets are in the 401k/Roths.

In light of that, does having a 5x5 PP drastically impact the original PP that Harry Browne advocates? Or does it reduce the 'pop' of the portfolio that much?

Thanks again!

-b

[craigr]

In light of that, does having a 5x5 PP drastically impact the original PP that Harry Browne advocates? Or does it reduce the 'pop' of the portfolio that much?

It just depends which way your stock bet goes going forward. If it's good for stocks, then you get more 'pop'. If it's bad for stocks, well...

[brajalle]

Exactly as craigr said - it depends on stocks going forward.  We've had a great bull market on stocks for 20 years of the PP returns, so when you back-fill with more stocks (including international) it improves historical returns.  However, the more "pop" you add, and returns, are entirely dependent on future stock growth.  Do you think it's likely that we'll see another great long-term bull stock market?  If so, then having part of your VP in intl stock may be great for growth.  On the other hand, if you think that's unlikely, then you may wish to consider another allocation.  The great thing about the PP is that it should cover those situations.  That's why the VP is simply money you can afford to lose, rather than the core part of your portfolio.

[Bonafede]

Thanks for the feedback! Here's to keeping it simple PP style

[Jan Van]

That's the nice thing, as Craigr mentioned above, whatever part of your allocation doesn't conform to the PP, you can just view it as your VP :-)
I'll probably will go that way for a while. 1/3 is PP, 2/3 is VP for now, based on the UB&H. The more comfortable I get with the PP, the more I'll shift into it. But likely I'll always have some part as a VP, also because it's fun. Well, I think it is. But the PP will be there to put a solid foundation underneath it all. That's the plan...