Gyroscopic Investing

Ok, so the purest HBPP in today's world might be:

25% Total Stock Market Fund/ETF
25% Long-Term Treasury Bonds
25% Treasury Bills
25% Physical Gold

A less "pure" version might use ETFs for the gold, LTTs, and STTs.

An even less pure version might use PRPFX and EDV.

And an even less pure version might use Vanguard Wellesley + Gold

Any other candidates/combinations?

WildAboutHarry wrote: Ok, so the purest HBPP in today's world might be:

25% Total Stock Market Fund/ETF
25% Long-Term Treasury Bonds
25% Treasury Bills
25% Physical Gold

A less "pure" version might use ETFs for the gold, LTTs, and STTs.

An even less pure version might use PRPFX and EDV.

And an even less pure version might use Vanguard Wellesley + Gold

Any other candidates/combinations?

One could argue that the true essence of the PP is diminished when removed x times (insert option '1', option '2', etc) from the original 4 x 25 composition. Are you looking to replicate the PP as closely as possible while working with limited options?

If you want to be really hardcore:

25% every stock in the S&P500
25% paper long-term treasuries
25% paper T-bills
25% physical bullion

The purer you go, the more of a hassle it is to manage. For me, ETFs + physical bullion is good enough to let me sleep at night.

25% total stock market ETF
25% gold bullion
50% intermediate term treasury fund

Pointedstick wrote: If you want to be really hardcore:

25% every stock in the S&P500
25% paper long-term treasuries
25% paper T-bills
25% physical bullion

I don't know that Harry ever advocated owning the S&P 500 on an individual stock basis   I wonder what the minimum portfolio size would have to be to implement this with whole shares?

On paper bonds and bills, you cannot do that anymore.  Everything is book entry somewhere.  I think all the bearer-type bonds (coupon clipping) are long past mature.

buddtholomew wrote:Are you looking to replicate the PP as closely as possible while working with limited options?

No, just curious about alternatives that achieve approximately the same thing.  I was reading an old post where MediumTex spoke highly of Wellesley and wondered what other, simple alternatives offered an approximation of the HBPP.

craigr wrote:25% total stock market ETF
25% gold bullion
50% intermediate term treasury fund

Or perhaps a 5-year Treasury ladder for the bonds, as Clive (I think) has mentioned.

I would be so bold as to argue that any static allocation that invests in a buy and hold pattern with no speculation made in the underlying asset class is spiritually very similar in execution and ideology (and likely less turbulent than typical return chasing approaches).  I would argue that such an approach with currency diversification is closer still.  Discipline simplicity and serenity are the hallmarks of the PP imho.

Yes, but he won't.

WildAboutHarry wrote: Any other candidates/combinations?

I have Vanguard's S&P 500 Index fund as the bulk of my stock portion, which I know is acceptable, since Harry mentioned it least as often as the total stock market in his radio shows. (I sold off all my VTI/Total Stock).

When I bought gold and treasuries to start a pp, I incorporated some of the small-cap and mid-cap stock that I already owned into the stock portion of the pp. I don't know if that is acceptable but these are low-cost index funds, and it seemed like a better idea than buying even more stock when I'm trying to get close to a four-way split (trying to have less vp and more pp). Perhaps I could rationalize by saying these funds plus the 500 fund = VTI, albeit with different proportions.

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WildAboutHarry wrote:

Pointedstick wrote: If you want to be really hardcore:
25% every stock in the S&P500
...

I don't know that Harry ever advocated owning the S&P 500 on an individual stock basis  I wonder what the minimum portfolio size would have to be to implement this with whole shares?

I guess the dollar amount is more important than having one share of each.
4K per holding would be two million. Then you'd just have to come up with another $6,000,000 for the other assets.

shoestring wrote:I would be so bold as to argue that any static allocation that invests in a buy and hold pattern with no speculation made in the underlying asset class is spiritually very similar in execution and ideology (and likely less turbulent than typical return chasing approaches).  I would argue that such an approach with currency diversification is closer still.  Discipline simplicity and serenity are the hallmarks of the PP imho.

So every buy-hold-rebalance portfolio in an HBPP to some degree, just that in many (perhaps most) cases that degree is 0

I would expand your argument that an HBPP-type portfolio must have gold or some hard asset as a component.

PERM ETF

25% Stocks:
(9%) U.S. Large Cap Stocks
(3%) U.S. Small Cap Stocks
(3%) International Stocks
(5%) U.S. Real Estate Stocks
(5%) U.S. and Foreign Natural Resource Stocks

25% U.S. Treasury Bonds (Long-Term)
(remaining maturity greater than 20 years)

25% U.S. Treasury Bills and Bonds (Short-Term)
(remaining maturity of less than three years)

25% Gold & Silver:
(20%) Gold ETFs and ETCs
(5%) Silver ETFs and ETCs

Expense Ratio 0.49%

craigr wrote: 25% total stock market ETF
25% gold bullion
50% intermediate term treasury fund

One more step away:

25% total stock market
25% gold
50% total bond market

***

50% total world stock market
50% intermediate term treasury fund

Note that world stocks are denominated roughly 50/50 USD/everything else, which works as a kind of currency hedge. And like the PP this is a 1/N allocation.

***

Vanguard Target Retirement Income Fund (VTINX)

21% US stock market
9% Int'l stock market
45% total bond market
20% TIPS
5% cash

WildAboutHarry wrote:

shoestring wrote:I would be so bold as to argue that any static allocation that invests in a buy and hold pattern with no speculation made in the underlying asset class is spiritually very similar in execution and ideology (and likely less turbulent than typical return chasing approaches).  I would argue that such an approach with currency diversification is closer still.  Discipline simplicity and serenity are the hallmarks of the PP imho.

So every buy-hold-rebalance portfolio in an HBPP to some degree, just that in many (perhaps most) cases that degree is 0

I would expand your argument that an HBPP-type portfolio must have gold or some hard asset as a component.

It all depends on what you see in the approach.  I personally am convinced there are probably tons of ways to invest that are reasonable and will work.  A strategy for getting good returns is.not hard to come by.

The genius of the HBPP is that it gives a reasonable method directly addresses human behavioral issues.  Most of these "reasonable" methods don't work because people don't or can't ride them out.

With the PP if you can stomach losses for a reasonable amount of time you get enough positive reinforcement often enough to stick to it.  That is the essence of the thing to me not the underlying economic theory etc.

shoestring wrote:With the PP if you can stomach losses for a reasonable amount of time you get enough positive reinforcement often enough to stick to it.  That is the essence of the thing to me not the underlying economic theory etc.

This is another essential of HBPP-style portfolio: relatively low volatility (of the portfolio, not the individual asset classes).

Pointedstick wrote: The purer you go, the more of a hassle it is to manage. For me, ETFs + physical bullion is good enough to let me sleep at night.

I agree. For me one of the great attractions of the PP is its simplicity. I feel quite safe holding the bonds cash and stocks in ETF's. If you are proposing an investment strategy that will require much more than 30 minutes of my time per year you are going to have a steep hill to climb getting me into it. But yea gold should be at least partly physical... just in case.

MangoMan wrote:

craigr wrote: 25% total stock market ETF
25% gold bullion
50% intermediate term treasury fund

If Cuggino dropped the expense ratio to say 0.5% from the current .71%, and dumped the now useless Swiss francs, would PRPFX be a more palatable option?

Hugely. But I agree with Reub. It's about as likely as a blizzard on Miami Beach in July. To be honest, I am strongly attracted to PRPFX because it is slightly weighted towards an inflationary scenario, without betting the farm on it. Only the high ER is holding me back.

WildAboutHarry wrote: Ok, so the purest HBPP in today's world might be:

25% Total Stock Market Fund/ETF
25% Long-Term Treasury Bonds
25% Treasury Bills
25% Physical Gold

A less "pure" version might use ETFs for the gold, LTTs, and STTs.

An even less pure version might use PRPFX and EDV.

And an even less pure version might use Vanguard Wellesley + Gold

Any other candidates/combinations?

I don't think I would be uncomfortable with any of the alternatives that I have seen posted on this thread. But I will offer one more variation that I refer to as a rich man's PP  I will throw out a caveat that this portfolio is only designed for people who are wealthy which I will define as eight figures or more in mostly taxable accounts, and who can stomach a little bit more volatility.

40% Intermediate Munis (VWIUX or a state specific fund if you live in a big high tax state)
20% VTI
20% VEU
20% Gold

While I share Craig's general disdain for municipal bonds I do think they make sense for the very wealthy. The slight increase in risk I believe is justified by eliminating the 35% tax bite on dividends. So assuming you are in the top tax bracket and can handle a bit more volatility than the rest of us I would go with a PP that is geared a bit more towards tax efficiency and capital appreciation.