Gyroscopic Investing

Posted: **Wed Dec 31, 2014 9:34 am**

I'm thinking of doing something like this:

33% IJR iShares S&P SmallCap 600 Index Fund ETF
37% TLT iShares Barclays 20 Year Treasury Bond Fund ETF
30% IAU iShares COMEX Gold Trust ETF
0% cash

Is that too risky?

Posted: **Wed Dec 31, 2014 9:35 am**

How will you pay your bills?

What will you do if an unexpected expense comes up?

Posted: **Wed Dec 31, 2014 10:05 am**

LC475 wrote: How will you pay your bills?

What will you do if an unexpected expense comes up?

Right now, I expect to withdraw about ½% per month. TLT is commission free at Fidelity, so I'd sell some of that.

Posted: **Wed Dec 31, 2014 12:57 pm**

Cool, so you'll be drawing down the bonds, and then rebalancing back into them occasionally. You'll be doing with the bonds what is usually done with the cash. Sounds like it would work.

You ask "too risky?" As Harry would say, that's the wrong question. A somewhat meaningless question, in fact. Everything is risky, in different ways. A better question: under what circumstances will this investment plan do poorly?

Answer: in a recession it could do poorly. All three other assets would be expected to decline, and you would have no cash to cushion the blow and even things out.

Posted: **Wed Dec 31, 2014 1:49 pm**

LC475 wrote: Cool, so you'll be drawing down the bonds, and then rebalancing back into them occasionally. You'll be doing with the bonds what is usually done with the cash. Sounds like it would work.

You ask "too risky?" As Harry would say, that's the wrong question. A somewhat meaningless question, in fact. Everything is risky, in different ways. A better question: under what circumstances will this investment plan do poorly?

Answer: in a recession it could do poorly. All three other assets would be expected to decline, and you would have no cash to cushion the blow and even things out.

RyeWhiskey wrote: Why not 30/30/30/10, stock/bond/gold/cash? 10% of your total isn't that much, no matter how rich you are. Furthermore, I have a feeling cash is going to be looking very good soon enough. You can use the 10% as a slush fund, emergency fund, and dry powder.

I like your idea there, Whisk. What do you use for cash? I'm thinking either IEF or SHY, but leaning to IEF

LC, I think all these variations could have draw-downs of 25%, even Harry's. I'm not sure how I'd handle that. I've got to live off what I've saved and my Social Security check. There might be a smaller draw-down with all treasuries: (1, 3, or 5) years, but I'll lose to inflation. In that case, I guess, I'll be financially alright if I don't live too long.

Posted: **Thu Jan 01, 2015 5:25 pm**

robtkatz wrote: LC, I think all these variations could have draw-downs of 25%, even Harry's.

We can't say the exact amounts, but only principles. Cash has no reason to go down in a recession. Cash almost certainly will not go down in a recession. Cash pretty much holds steady. The long-term graph of cash is extremely stable.

There might be a smaller draw-down with all treasuries: (1, 3, or 5) years

Definitely there will be, because cash will not go down, even if everything else is, as it could in a recession.

but I'll lose to inflation.

Right now, yes (slightly). In the future, not necessarily. Sometimes, treasury bills have real return. Usually. They basically almost kept up with inflation in the 1970s, a time of very high inflation.

Posted: **Mon Jan 05, 2015 7:15 pm**

As Sophie said, there are so many threads on (bad attempts at) manipulating cash.

Funny how my spreadsheet changes for the better or worse if I play with how much of my cash is designated as part of my pp holdings. Don't do it.

Gyroscopic Investing

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