Gyroscopic Investing

Harry Browne Permanent Portfolio

http://www.myplaniq.com/LTISystem/jsp/p ... n?ID=17551

Harry Browne Permanent Portfolio Without Cash

http://www.myplaniq.com/LTISystem/jsp/p ... n?ID=38351

Interesting...

Side note: This might perhaps be better placed in the general Permanent Portfolio discussion forum. This forum is usually for posts about PRPFX, PERM and similar mutual funds.

Why do we need to include cash as the 4th component in the Permanent Portfolio?

Can we just use bond, gold, and stock only?

Odysseusa wrote: Why do we need to include cash as the 4th component in the Permanent Portfolio?

Can we just use bond, gold, and stock only?

You can, but the volatility would increase significantly. Also your risk level in the event of a tight money recession would be much higher.

Ad Orientem wrote:

Odysseusa wrote: Why do we need to include cash as the 4th component in the Permanent Portfolio?

Can we just use bond, gold, and stock only?

You can, but the volatility would increase significantly. Also your risk level in the event of a tight money recession would be much higher.

You'll still need a wad of cash stored outside of your portfolio for use in emergencies or just for unexpected expenses ("The roof is leaking!" "The car won't start!"). So in the end, it's not really about "cash or no cash". It's about whether you decide to integrate it into your investment portfolio or not. Personally, I think integrating it was a brilliant and under-appreciated move of Harry Browne's.

My parents were in nothing but cash ($300k) during a period of retirement lasting 35 years (Dad died last year, mom still alive).

I certainly don't think it was the wisest way to handle their money (especially since I'm getting zero inheritance) but given their experience the idea of keeping 25% in cash doesn't strike me as such a bad idea.

Don't forget the magic of cash during the drawdown phase.  It keeps you from selling anything when it's down.  I think PS was the one who discovered the huge difference cash makes during drawdowns.

Xan wrote: Don't forget the magic of cash during the drawdown phase.  It keeps you from selling anything when it's down.  I think PS was the one who discovered the huge difference cash makes during drawdowns.

Actually, the credit goes to Sophie. All I did was start the thread: http://gyroscopicinvesting.com/forum/ot ... tor-a-myth

Looking back over the thread, I see that I started it last July. Everything I wrote back them was tinged with a bit of craziness and misery.

ns3 wrote: My parents were in nothing but cash ($300k) during a period of retirement lasting 35 years (Dad died last year, mom still alive).

I certainly don't think it was the wisest way to handle their money (especially since I'm getting zero inheritance) but given their experience the idea of keeping 25% in cash doesn't strike me as such a bad idea.

Speaking of inheritance, which generation below wants inheritance the most?

Baby boomer
Generation x
Millennial gen

Odysseusa wrote: Speaking of inheritance, which generation below wants inheritance the most?

Baby boomer
Generation x
Millennial gen

Not sure what you are getting at (actually I don't have a clue).

I would think that all generations would like to have an inheritance. Knowing my own parents financial situation I have realized for a long time I wouldn't have one and have planned accordingly. What meager amount is left of my parents estate will be going to my sister who is really going to need it as she hasn't done as well as me and my brother have.

ns3 wrote:

Odysseusa wrote: Speaking of inheritance, which generation below wants inheritance the most?

Baby boomer
Generation x
Millennial gen

Not sure what you are getting at (actually I don't have a clue).

I would think that all generations would like to have an inheritance. Knowing my own parents financial situation I have realized for a long time I wouldn't have one and have planned accordingly. What meager amount is left of my parents estate will be going to my sister who is really going to need it as she hasn't done as well as me and my brother have.

I apologize for my digression. When you mention about inheritance, I wonder which group below wants to inherit the most from their parents and grandparents. As for me, I prefer to earn money by working hard and not expecting any inheritance at all. I do not like retirements, entitlements, inheritance because they do not motivate us to depend on ourselves but others.

Baby boomer
Generation x
Millennial gen

I'm going with 0 cash (and 2x leveraged etfs) with my PP in my IRA..  F--  drawdowns and volatility - I can't get my hands on that money until many decades later anyways.  As for my taxable accounts which I'll draw on in an emergency, I go with the standard HB PP.

Hello,

how are you? 

I want to add 7% to my European HBPP.

Would you go 25%x4 or 33%x3 ?

It is a small amount so...

Or any other strategy to wait and hold?


Thank you!

Harry's portfolio assumes you are investing 100% of your money in pp with no cash elsewhere. It is a brilliant strategy and cash in king. Don't obsess about 0% interest rates. Focus on ttl return. Last year cash surely helped people stay calm

Personally, I keep 6 months emergency cash outside my investment accounts, and very little cash inside my investment accounts (5%-10%).  So I don't view the cash sitting in a checking account as being part of my PP.  I don't go 25% cash in my PP because of its weak long-term performance.  I have 15-20 years before I will begin to tap into my PP, and I would rather ride the volatility of having extra stocks on hand since nothing has outperformed stocks over the long term.  Once I begin tapping my PP, then I will most definitely be shifting to 25% cash. 

If stocks are in the dog house when it comes time to retire, then odds are that gold or bonds will be rallying, so no matter what occurs I should have some profits to take off the table from somewhere.  And if we're in another recession or other SHTF scenario when I'm about to collect my gold watch, then I can always delay retirement for another year or two until things turn around. 

Odysseusa wrote: Harry Browne Permanent Portfolio

http://www.myplaniq.com/LTISystem/jsp/p ... n?ID=17551

Harry Browne Permanent Portfolio Without Cash

http://www.myplaniq.com/LTISystem/jsp/p ... n?ID=38351

That's pretty much what I would have expected to see:  increased returns, but also increased volatility. 

Keep in mind Cash used to pay out very high interest decades ago..  in the 1970s and 80s.  (My dad immigrated to the US in the early 80s and his first impression of American banks were the double digit interest rates they paid to save money there.)  We've been accustomed to low interest rates since the early 2000s and nearly zero interest rates since 2008.  If your bank started paying you 10% interest rates on your savings or a short term CD, you'd probably think of cash differently.

Interest rates could stay this low within the next decade (like in Japan) or they could go as high as 10% but we could only speculate at this point.

I read an article at the link below about long-term capital gain of 0% taxation for earners in the 10% or 15% tax bracket. We can incorporate this into the Permanent Portfolio to increase our returns.

No capital gains due for some investors
By Kay Bell • Bankrate.com

Read more: http://www.bankrate.com/finance/taxes/n ... z2z9av9Fkv
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