RSPP

[Clive]

?

[Storm]

This is a very interesting strategy, Clive.  It seems like one disadvantage here would be that annual rebalancing would be required, not optional.  I wonder if it would be possible to model the tax disadvantages to rebalancing more frequently in this scenario.

I suppose you could assume everything was in a non tax-sheltered account and capital gains taxes were paid for every rebalance.  Would it be possible to model such a scenario?

[EuroPP]

Looks very promising, but adds risks since you gamble on what the market will do by overweighting certain assets. Nothing indicates that a growth will continue in the same way and outperform the other assets for years in a row.

Secondly, you're selling cheap and buying expensive by raising the strong performers and lowering the weak ones in your allocation. That's a bit odd. In Harry's PP you rebalance everything to 25%, meaning selling what got expensive and buying what's cheap, this is far more logical.

Of course, the promise of raising return is always tempting...

What do others think? Craig?

[EuroPP]

Clive,

Have you actually implemented this method in your own real PP??

The problem I see is having the guts to stay put when things go wrong. In 2007, stocks were among the two best, making you choose 35% in stocks in 2008, and underweighting in lt bonds. This would have given you for europe (ex uk) a 2008 loss of -8% compared to -2.5% on a standard PP. That is scary. Also in 2009 you'd have underweighted stocks due to their bad performance in 2008. However, stocks revived amazingly and where among the two best giving you again a worse result compared to a standard PP.

My conslusion is, however tempting, it doesn't work in uncertain markets. The last decade, quite some swings from year to year are seen. I'm not convinced, theoretically it's possible to bet wrong year after year, possibly resulting in good losses, making it impossible to maintain your wealth.

[EuroPP]

My PP implementation is totally different from Marc's,

Stocks: german DAX index => better overall performance compared to stoxx50, stoxx600 or msci europe, and good availability as a tracker and germany is still considered economic drivetrain of europe, so it makes sense
bonds ST: 1-3 year euroMTS instead of german bonds (bad volume in available trackers)
bonds LT: 15+ year euroMTS instead of germand 30 year bonds (no volume in available trackers)

=> the result is the dax was very good in 2007 (+20%) which explains why it made it to the top 2 and why 2008 would have given me a bigger loss.
However some day the situation can be different but it shows, however higher returns on average are obtained (i also see it in my PP implementation) it is possible to have worse results and deeper losses over 1 year as a standard PP.

RSPP seems a more long term approach to me.

Did you implement RSPP yourself in your own PP??

[EuroPP]

As you also see in your own 2009 figures, RSPP performance was worse than PP.
This is also the case for europe (marc's implementation as well as my own).

It's still scary, for my own implementation, my 2008 loss is deeper, and my 2009 recovery is lower than standard PP.
That's why I think RSPP needs a longer investment horizon then PP.

[EuroPP]

Canada is a good example.
From 2007 to 2009 RSPP is behind PP.

[EuroPP]

I suppose SCV are short term bonds?

Anyhow, For my PP, with short term bonds, I do see an increase using RSPP compared to PP in a 10 year backtest. It's about 0.6% average.