Gyroscopic Investing

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Nice story, TennPaGa.   Significant difference that 2.5% between the hybrid and the HBPP.  

When I worked, my 401k allowed a once a year rollover into an IRA.  I believe I needed to be 55 in order to do that, but some 401ks allow once-a-year rollover/withdrawals regardless of age, now, I think.  

That 2.5% would motivate me to move money from the 401k whenever possible.  Over time 2.5% compounded annually matters.

Thanks for the information and the affirmation.  I've known about PP for six months or so, just set one up recently.  Gotta live another 25 years to reap the benefits.  I really need another life, actually.  LOL

TennPaGa wrote: If it had been a good year for stocks and a bad one for treasuries, I bet the hydrid would have done better!

That may very well be correct. Others on this board have said the PP is harder to stick with when equities are doing well, so it may very well balance out over a 25-30 year period.  Right now, of course, it's golden.

The poor performance in the last year is probably because you can't simulate 30 year treasuries in any other fund than one that carries them, which leaves TLT (and possibly EDV) as the only two options.  The Fidelity hybrid may do well (or even outperform) the HBPP in times of prosperity, but it leaves you severely exposed to deflationary events.

0% Physical Gold means your portfolio has 100% counter-party risk.  Paper gold is great for nominal returns, but I do not believe it plays the same role Harry Browne intended.

Time may show you are making a grave mistake, I think.

TennPaGa wrote: 0% Physical Gold means your portfolio has 100% counter-party risk.  Paper gold is great for nominal returns, but I do not believe it plays the same role Harry Browne intended.

I'm in nearly the same situation as TennPaGa and also have not gone the physical gold route yet. I intended to last year when I re-balanced but when it came time to pull the trigger I started to question the premise that holding physical gold is without counter-party risk. I still intend to acquire some when I have more time to work out the logistics to my comfort level but for now I just have the feeling that the digits in the computer are just as safe as anything else I've come up with.

TennPaGa wrote: True.  But I'm doing the best I can considering my constraints.

Fair enough.  If you are here, presumably you have at least an above average perception or aversion to the real risk in the marketplace -- otherwise you'd probably be 80% stocks 20% bonds.  You may, however, find value in further mulling over the risk of zero physical holdings vs. the advantage of tax deferred accounts. 

Remember that if your paper holdings vanish in a black swan event, the tax advantages vanish along with it.

Maybe set aside some future cash from the job to raise your allocation of bullion as soon as possible?  Another (maybe less desirable) option would be a 401k loan. 

Everyone walks their own path, personally, I like the absence of worry that comes with not having 100% of my net worth at the whim of the world's markets/politicians.

jackh wrote: I just have the feeling that the digits in the computer are just as safe as anything else I've come up with.

Better to be a decade too early than a day too late, some might say...

My advice is to drive down to the local coin shop on your lunch break, buy a single 1oz coin, then put it in your pocket and walk out the door.  When you get home, take it out and hold it in your hand where nobody is looking.

Report back on whether or not your perspective changes about counter-party risk

systemskeptic wrote: My advice is to drive down to the local coin shop on your lunch break, buy a single 1oz coin, then put it in your pocket and walk out the door. 

I had intended to start with 20 coins back in January and that's when it started occurring to me that physical thieves vastly outnumber electronic ones and I didn't have a good plan in place to deal with that aspect.

But I actually tried to do exactly what you have suggested a few months ago. I would be the proud owner of that coin right now if the salesperson hadn't made me wait so long I got mad and walked out of the store.

jackh wrote:
I had intended to start with 20 coins back in January and that's when it started occurring to me that physical thieves vastly outnumber electronic ones and I didn't have a good plan in place to deal with that aspect.

Both have their risks.  That's why I think it's a good idea to own both.

systemskeptic wrote:

jackh wrote: I just have the feeling that the digits in the computer are just as safe as anything else I've come up with.

Better to be a decade too early than a day too late, some might say...

My advice is to drive down to the local coin shop on your lunch break, buy a single 1oz coin, then put it in your pocket and walk out the door.  When you get home, take it out and hold it in your hand where nobody is looking.

Report back on whether or not your perspective changes about counter-party risk

Do a one-tenth ounce coin if you can't wrap your mind around a one-ounce coin.  That would cost a couple of dinners-for-two; you probably would not miss it from your wallet.

But once you do it, you'll notice the difference psychologically, as systemskeptic pointed out elsewhere on this board (in the "Gold" section, I think).

I had the same experience as systemskeptic.  It truly is empowering to hold part of your portfolio in your hand, and to know that it's entirely outside the financial system.  Even if it's a small percentage, it feels much safer than having everything in the hands of large banks or brokerages.

The stumbling block, though, might be the idea of have a large percentage of taxable (i.e. immediately accessible) savings tied up (and risked) in physical gold.  Perhaps a generous emergency cash supply and physical gold are all that one should be holding in taxable, although I'm not quite ready for that, yet. 

sophie wrote: I had the same experience as systemskeptic.  It truly is empowering to hold part of your portfolio in your hand, and to know that it's entirely outside the financial system.  Even if it's a small percentage, it feels much safer than having everything in the hands of large banks or brokerages.

The stumbling block, though, might be the idea of have a large percentage of taxable (i.e. immediately accessible) savings tied up (and risked) in physical gold.  Perhaps a generous emergency cash supply and physical gold are all that one should be holding in taxable, although I'm not quite ready for that, yet.  

For me the stumbling block to buying physical gold is that unless you are going to bury it in your back yard or hide it somewhere in your house you are going to need some kind of custodian to keep it safe from thieves - in other words, a "counter party".  The general recommendation here seems to be to store it in a bank safety deposit box but I have a very hard time thinking of a safe deposit box in a bank as being "outside the financial system". To me, that is in the belly of the beast.

I do intend to go the physical route eventually and my current thinking is to store the bulk in the Perth Mint but keep enough on hand that I have plenty of time to get to Australia in a SHTF situation. But then again, how do I know I can trust the keepers of the Perth Mint any more than I can the custodians of IAU or GLD?

jackh wrote: I do intend to go the physical route eventually and my current thinking is to store the bulk in the Perth Mint but keep enough on hand that I have plenty of time to get to Australia in a SHTF situation. But then again, how do I know I can trust the keepers of the Perth Mint any more than I can the custodians of IAU or GLD?

Perhaps storing the "bulk" of one's gold in any single type of location is not a good idea, no matter how safe it might seem.

One thing I particularly like about the PP is its conceptual consistency. Just as the overall portfolio is diversified across four assets, HB encouraged investors to further sub-diversify each of the four assets across multiple institutions.

In the case of the gold allocation, one example of sub-diversification might be to hold 1/4 at home, 1/4 in various bank safety deposit boxes, 1/4 in the Perth Mint, and 1/4 in an ETF that has reasonable auditing practices. Regardless of which of those four storage methods is "best" according to any given set of criteria, an isolated problem with any single one of them would not wipe out more than 1/4 of your gold (1/16 of your portfolio).