Gyroscopic Investing

The American Association of Individual Investors has published your article on the Permanent Portfolio.  Congrats!  Let me take some credit as I recommended the Editor write such an article about a year ago.

http://www.aaii.com/journal/article/the ... ealth#fig1

EdwardjK wrote: The American Association of Individual Investors has published your article on the Permanent Portfolio.  Congrats!  Let me take some credit as I recommended the Editor write such an article about a year ago.

http://www.aaii.com/journal/article/the ... ealth#fig1

The credit is all yours!

MangoMan wrote: Is there a way to access the article without joining AAII?

Yes, is there a way to access the article without joining AAII?  (Nothing against the association, I was a member for a brief period many years ago.)

I have no idea. I'm not a member so I don't even have access to it!

I've read  the whole article, and it's an excellent introduction and the reason I became interested in the HBPP. It doesn't contain anything new which isn't found early in the book.

Nice that the AAII published the PP article. The AAII has a dizzying assortment of investment strategies. They brag about their "shadow stocks" portfolio producing terrific returns. What they don't say is how it lost over 50% (-50.8%) in 2008. Very few investors would have had what it takes to hold on there. I ignore their periodic mailings to make me a member. I'm quite content being elected to "full member" status here! 

Here are some comments on the AAII article about the PP, as posted on their blog

Discussion


I became aware of the Permanent Portfolio concept while researching the Permanent Portfolio mutual fund (PRPFX).

Over the next two years, I monitored the performance of the Harry Browne's Permanent Portfolio and observed that it does appear to deliver a good annual return, with reduced volatility.

In late 2011, I dipped my toe into the Portfolio by moving about 2% of my investment inbto four mutual funds. So far so good.

The concept may not be for everyone, but so far I am satisfied with the results.

posted about 1 month ago by ED from New Jersey


Have used PRPFX for number of years with better than anticipated results. Also have coupled the underlying core allocations with other stocks, funds and assets with similar results.

Not a panacea, but as part of overall strategy of diversifying, rebalancing when situation warrants leads to positive returns.

Whole-heartedly agree that tinkering with basics can have serious consequences.

posted about 1 month ago by Charlie Troell from Texas


some foreign currency in the cash portion might be suitable.

posted about 1 month ago by Edward Spitzer from Pennsylvania


The concept is almost foolproof.As stated holding Gold Bullion is important,and tinkering with basics will!!! have serious consequences.

posted about 1 month ago by Robert Gilleski from Georgia


Why, with interest rates at historic lows, is this a good time to have 25% of one's portfolio in long bonds?

posted about 1 month ago by Edward Reifsnyder from Colorado


Following up on Edward's question - with interest rates at historic lows, is it a good time to have 25% in long bonds and another 25% in cash yielding -0-?

Take a look at where interest rates stood at the beginning of the study period. Gold was also dead and stocks went on a mighty bull run. Those factors may have more to do with the performance of this portfolio.


posted about 1 month ago by John from Texas


although I could not see the figure one graph clearly with all the lables the yellow line seems to be better over a very long term over the permanent portfolio line (blue). If that seems to be true would it not be a better investment? (provided one can stomach the ups and downs)

posted about 1 month ago by Hemendra Parikh from Indiana


Sticking to a dogmatic purist position on exact instruments for the four asset classes is foolhardy. The concept as a whole is sound but it is marred by the authors' dogmatic purism. VTI, IAU, TLT and SHY seem to be an excellent simple set of four ETFs that would be convenient as well as in keeping with the broad concept of permanent portfolio.
One can certainly experiment even with leveraged ETFs for enhanced effect. And don't call it "tinkering with the basics." What matters is the idea and its effective implementation in consideration of the individual's risk profile. Sticking to a preconceived structure of so-called basics as sacrosanct is dogmatic and thoughtless. Anything that can possibly enhance the concept should be practiced by an investor who alone is the arbiter of what risk he or she wants to take.
At any rate, stop patronizing, in the name of preconceived basics.

posted about 1 month ago by Ramesh Patel from Ohio


If you take time to actually read the book, you'll find there are variations including ETF portfolio suggestions and additions (like adding international exposure -- VEU, for example). Just take this as a framework. Like everything else, you have to figure out how to apply this to your personal style and strategy.

Given the high correlations we've seen across ETFs, having a broad-based portfolio that doesn't take much analysis time is attractive.

posted about 1 month ago by Bob from Massachusetts


A question more than a comment: Is there a valid reason for putting 25% in long bonds at this point in the interest rate cycle?

posted about 1 month ago by Thomas Pruitt from California


IMO, we are going to face a serious devaluation of the dollar resulting from our government's overspending (both parties are to blame so I'm not trying to turn this into a political discussion).

Does anyone want to comment on what devaluation might do to this portfolio concept?

Ramesh, thanks for your comment. I ordered the book as a result of reading your post.

posted about 1 month ago by William from Florida


Oops, actually I should have thanked Bob.

posted about 1 month ago by William from Florida


I would think a more balanced bond portfolio portion would be prudent at this stage of the interest rate cycle.

posted 29 days ago by John from Texas


I thought interest rates were going to rise 2-3 years ago but stayed with intermediate and short term investment grade bonds, Tips, and high yield bonds. All pretty good. Also GLD ETF and good dividend equities. My motivation was the most uncertainty I have seen in my 78 years. I agree with most of the repondents that L.T.Bonds do not look prudent at this time but what do I know. Explain to me why TIPS have done so well with low inflation.

posted 28 days ago by Patrick Roszel from Kansas


At almost any point on the curve, even though stocks have wide swings, they are worth more than the total portfolio .

posted 27 days ago by Carmen Putrino from California


There are two very important considerations in the use of this approach. The portfolio must be rebalanced whenever it deviates significantly from equal weighting and the approach is a long term approach. It is this latter element that makes bonds appropriate regardless of the level of current interest rates. What is lost by the bonds as interest rates increase are made back when interest rates come back down. This is proven by the behavior of bonds fron 1977 to 1990, a period of first risen and then falling interest rates. This is not a portfolio approach that encourages market timing which has never been proven to be effective.

posted 25 days ago by Richard Paul from Connecticut


Hemendra, click on the graph to enlarge. It will then have a tab to click that will give a full page graph. You and Carmen are right about the stocks. Bonds did not do a lot worse than the permanent line at the end altho it was about 5 years behind most of the time. Cash was the big drag; growth to 80000 over 40 years with everything else north of 300000. I have a hard time understanding the program when gold bullion is specified but an ETF is suggested.

Interesting comments.

I love being a dogmatic purist.

Be careful, MT. As Leo Durocher once said:

"Dogmatic purists finish last."

Yeah, shame on you MT.  Maybe you should be an "undogmatic" or maybe a "catmatic" purist.   

HB Reader wrote: Yeah, shame on you MT.  Maybe you should be an "undogmatic" or maybe a "catmatic" purist. 

Perhaps a catmatic purrist.

I like the sound of that.

Simonjester wrote: do we have some discordians here

Discordians don't have dogmas, which are absolute beliefs; we have catmas which are relative meta-beliefs. And the central discordian catma is, any affirmation is true in some sense, false in some sense, meaningless in some sense, true and false in some sense, true and meaningless in some sense, false and meaningless in some sense, and true and false and meaningless in some sense.

Perfect example of "government"!

Simonjester wrote: do we have some discordians here

Discordians don't have dogmas, which are absolute beliefs; we have catmas which are relative meta-beliefs. And the central discordian catma is,  any affirmation is true in some sense, false in some sense, meaningless in some sense, true and false in some sense, true and meaningless in some sense, false and meaningless in some sense, and true and false and meaningless in some sense.

Rather than the term "discordian", I like the term "accordion", since an accordion expands and contracts in a way that captures a near-infinite number of sounds, while tacitly acknowledging that there are a finite number of notes to work with.

Maybe I'm just an accordion catmatist with purr-ist tendencies.

MangoMan wrote: Is there a way to access the article without joining AAII?

first go to:

http://seekingalpha.com/article/1088961 ... urce=yahoo

in the third paragraph the word "article" is highlighted, so click on that and it will take you to the full article.

I don't know how long this page will be free.

smurff wrote:

MangoMan wrote: Is there a way to access the article without joining AAII?

first go to:

http://seekingalpha.com/article/1088961 ... urce=yahoo

in the third paragraph the word "article" is highlighted, so click on that and it will take you to the full article.

I don't know how long this page will be free.

Thanks smurff!

frugal wrote:

smurff wrote:

MangoMan wrote: Is there a way to access the article without joining AAII?

first go to:

http://seekingalpha.com/article/1088961 ... urce=yahoo

in the third paragraph the word "article" is highlighted, so click on that and it will take you to the full article.

I don't know how long this page will be free.

Thanks smurff!

Thanks from me too.  That's the first time I have seen the article in print.