How much risk are you willing to accept and why?

[steve]

I will start by saying I only use Vanguard and the reason is I trust them, low cost etc but a main point is keeping things simple.
For Gold I have core bullion under my own control but I have GTU also, the reason for GTU again is trust after doing research and I like the structure of a closed end fund and the possible tax advantages and the ease of rebalancing. The risk I accept is if something terrible happened  GTU is less then 25% of my total portfolio so how much could I be hurt? Could I lose access to all my holding because something happens to Vandguard?  Maybe but I feel that it would only be temporary and I can wait. Other risks I take to keep things simple are my bond allocation. I use TLT in IRA and VGLT/EDV in taxable, Even though VGLT may have a percent that is not treasuries (other government obligations) it is still a very small percent of my total overall portfolio.  The percent I have in EDV gives my total bond volatility closer to 25 years. I feel that holding bonds directly is not worth it for me, so maybe I pay a little more for the professional management of Bond ETFs but I accept it. I use Vanguard Treasury Money Market for cash which is invested 100% in US treasuries even though the prospectus says that may invest a portion in other government obligations but again that would be a very small percent of my total portfolio. I have my total portfolio in my way of doing the permanent portfolio which I call my Perfect Portfolio and I accept the risks. I do not want to worry about a comet hitting the earth or every little thing that can go wrong. I am definitely risk adverse but I feel that sometimes you may add more risk then reduce it by trying to reduce it.

[craigr]

I am definitely risk adverse but I feel that sometimes you may add more risk then reduce it by trying to reduce it.

Yes. I am fond of telling people: "Don't outsmart yourself."

I think you are better served by buying an asset from a well-established player in the simplest way possible than going out and dealing with companies or people where the risks are opaque.

For instance, I'd rather see someone 100% in iShares (or Vanguard + bullion fund) for the Permanent Portfolio than going out and doing stuff they don't understand in order to reach some idealized implementation.

There are easy ways to buy bonds and gold and people can do them if they want. But if you have a fund doing it most of the way and are comfortable with that, then that is great.

[shoestring]

But if you have a fund doing it most of the way and are comfortable with that, then that is great.

I resemble that remark.

There's a concept I live by, in most but not all areas of life, called the 85% solution.

The 85% solution is this:  try only to solve 85% of a given problem.  Cover the biggest, ugliest most likely contingencies first.

Big problems I see:

-Other investment strategies rely on false diversification.  "I got me some diversification, I got me Growth AND Value stocks, a-huck!"

-Information overload, trying to trade against the market is difficult at best.  I'm sure someone can do it it's just not me.

-Inflation risk.

-Currency risk.

- Ease and cost of implementation.  Expense ratios that aren't the absolute minimum are not the end of the world but I like to be a good consumer.

If I address these, I've solved the things I'm most worried about.

Now yes there's other problems which could be.  The government will at some point collapse for example.  Fiat currencies inevitably devalue.  Aliens invade, dogs and cats live together, mass hysteria ensues.

If other people want to try to solve these problems, I don't blame them.  Have at it.  I just choose not to and accept that if I'm wrong it's going to suck.

I remember reading as a child:

“Bunkum and tummyrot! You’ll never get anywhere if you go about what-iffing like that. Would Columbus have discovered America if he’d said ‘What if I sink on the way over? What if I meet pirates? What if I never come back?’ He wouldn’t even have started.”?

I took it to heart.

[KevinW]

There's a concept I live by, in most but not all areas of life, called the 85% solution.

Sounds like the Pareto principle: http://en.wikipedia.org/wiki/Pareto_principle