Gyroscopic Investing

Dear PP gurus:

I am very interested in allocating based on the PP, but confess to having some reluctance to putting 25% into bonds with the current interest rate situation. Also - in my subjective opinion, gold seems to have had such a runup over the last 5-10 years, that I would expect it to lose steam as well.

I realize this is market timing -a big no-no for the PP. So how's this for a strategy:

Allocate into it according to my current ideas, within the PP bands, e.g. - 34% stocks, 16% bonds, 16% gold, 34% cash. Then start rebalancing back towards 4x25 as conditions change?

Or is it really best to just close my eyes and do the 4x25 right off the bat?

Any suggestions or opinions would be much appreciated.

Thanks!

Your hesitation is understandable. It's best to just jump in, because it rarely looks like a good time to start a portfolio split between stocks and flight-to-safety assets; something always seems to be at its peak. To me stocks are the best candidate…

So here's another idea: split your holdings between a 4x25 PP and a VP with your proposed asset allocation. Then you can observe the difference between the two.

Also, IMHO it's a great time to buy gold due to its recent drop. It looks on sale to me. Can't say the same about bonds, but of course people have been fretting about them for a decade.

I had/have the same reservations so I incrementally moved from a large cash/equity position into to the remaining 2 assets over 2 years. In retrospect, it would have been better to do at once. But, going forward, this could be very different, of course.

I can tell you that, having finally bought a full 25% complement of LTTs last month (my biggest hangup), I feel like a weight has been lifted off of my shoulders. No more agonizing about whether I am buying LTTs at peak. Done, so not looking back.

Like PS is suggesting, I still keep a substantial VP in play. I intend to move $ gradually into PP over time. The VP is not as much to beat the PP over the long haul as it is to make me feel less apprehensive during those times when the traditional portfolios of friends and colleagues are trouncing the stodgy old PP.

meamakim wrote: Dear PP gurus:

I am very interested in allocating based on the PP, but confess to having some reluctance to putting 25% into bonds with the current interest rate situation. Also - in my subjective opinion, gold seems to have had such a runup over the last 5-10 years, that I would expect it to lose steam as well.

Join the club.

If you read enough, you'll find dire predictions about every asset class:  cash is returning less than inflation!  stocks are overvalued and about to take a nosedive!  bonds have nowhere to go but down!  and who in their right mind would buy gold?

In fact, the time to buy any asset is probably when everyone else is saying it's a terrible idea.  If everyone thinks it's a good idea, that means they're all out there buying it and driving up the price.  In which case it's a terrible idea.

There's nothing for it but to buy all four assets in equal proportions.  If you're (quite understandably) hesitant, try allocating a small part of your core savings to the PP, then increase it when you feel comfortable doing so.

sophie wrote: If you read enough, you'll find dire predictions about every asset class:  cash is returning less than inflation!  stocks are overvalued and about to take a nosedive!  bonds have nowhere to go but down!  and who in their right mind would buy gold?

Yep, its enough to drive you bonkers.  Oh wait...

This is why I have never bothered investing much time and effort in understanding markets beyond the nuts and bolts. You listen to enough predictions from experts like this and then watch them play out and you begin to realize what an inexact science it is.

MachineGhost wrote:

sophie wrote: If you read enough, you'll find dire predictions about every asset class:  cash is returning less than inflation!  stocks are overvalued and about to take a nosedive!  bonds have nowhere to go but down!  and who in their right mind would buy gold?

Yep, its enough to drive you bonkers.  Oh wait...