Gyroscopic Investing

During the period of January 5th, 2005 through today (January 5th, 2015), the PP returned a nominal CAGR of 7.62% with a maximum drawdown of -16.87%

A 100% stock portfolio, by contrast, had a nominal CAGR of 7.66% with a maximum drawdown of -55.20%

A portfolio consisting of 60% stocks and 40% bonds had a nominal CAGR of 6.90% with a maximum drawdown of -34.03%.

In short: everything's fine, the PP is still performing exactly as designed, and the Pope is still Catholic.

All data taken from http://www.etfreplay.com/combine.aspx using a 4 ETF portfolio consisting of equal parts VTI, TLT, GLD, and SHY for the PP, and a 2 ETF portfolio consisting of VTI and AGG held in a 60/40 ratio for the 60/40 portfolio.

Most of that drawdown is due to gold since it is the most volatile and non-normalized asset of the four.

PS, Do you have the start and end dates of that max drawdown on the PP? Also, how long was it from peak to peak? Thanks!

The PP's performance is probably underestimated here, since you probably didn't take rebalancing into account.  That might have helped with the 60/40 portfolio also.

In case it's escaped anyone's attention, today is a good day to keep in mind the next time you're afraid to buy bonds:

VTI down 1.8%
IAU up 1.5%
TLT up 2%

The 30 year bond is now yielding 2.6%...plenty of room below yet.

Go hoss!

Pointedstick,

do you have now a VP?

What are you doing (apart from working and saving but in terms of investments) to arrive faster to ER ?


All the best for 2015!

frugal wrote: Pointedstick,

do you have now a VP?

My wife and I have Roth IRA accounts that I suppose technically constitute a VP, as implementing a PP in them was deemed too costly in transaction costs. They are 50% broad stock market index funds / 50% broad bond market index funds.

frugal wrote: What are you doing (apart from working and saving but in terms of investments) to arrive faster to ER ?

Nothing. Working and saving is how you achieve ER. Investing, as Mark pointed out in another thread, is for preserving your wealth, not expanding it. If I wanted to achieve ERE faster, I would work harder, save more, or start a side business, all of which would give me a far better return on my time expended than fiddling with my investments.

Pointedstick wrote:

frugal wrote: What are you doing (apart from working and saving but in terms of investments) to arrive faster to ER ?

Nothing. Working and saving is how you achieve ER. Investing, as Mark pointed out in another thread, is for preserving your wealth, not expanding it. If I wanted to achieve ERE faster, I would work harder, save more, or start a side business, all of which would give me a far better return on my time expended than fiddling with my investments.

+1!!!!  See Harry Browne's Rule #1, "Your career generates your wealth."  If investing could generate it, then all those investing professionals wouldn't be hawking their services to you.  They'd be sipping martinis in their expensive penthouse apartments and enjoying the fruits of their fabulous returns.  Since you're not a professional, your chances of that happening are even less.

My uncle is an excellent case in point.  He was a Wall Street trader for many years and thought he knew the market.  When he retired, he set himself up with a complete investment monitoring workstation and proceeded to spend most of his time buying & selling - and encouraging us to follow his lead.  He ended up losing everything he owned and having to move out of his house into a cheap rental, then finally passed away a few years ago from lung cancer.  Very sad.  I lost a pile of money following one of his foolproof stock tips as did a couple of other family members, and that's what triggered the search that led me to the Permanent Portfolio.  That stock remains in my Roth IRA complete with loss, just to serve as a constant reminder.

sophie wrote: +1!!!!  See Harry Browne's Rule #1, "Your career generates your wealth."  If investing could generate it, then all those investing professionals wouldn't be hawking their services to you.  They'd be sipping martinis in their expensive penthouse apartments and enjoying the fruits of their fabulous returns.  Since you're not a professional, your chances of that happening are even less.

Actually, many do have a lifestyle like that because they make it happen at your expense.   It is far easier to fleece the lazy or guillible than deal with your own inner demons when it comes to making a buck via investing or trading.

His chance of it happening is actually greater than the so-called professionals because you're comparing him to the marketing fiction professionals.  But if he's a complete neophyte, then his chance is still pretty low!

My uncle is an excellent case in point.  He was a Wall Street trader for many years and thought he knew the market.  When he retired, he set himself up with a complete investment monitoring workstation and proceeded to spend most of his time buying & selling - and encouraging us to follow his lead.  He ended up losing everything he owned and having to move out of his house into a cheap rental, then finally passed away a few years ago from lung cancer.  Very sad.  I lost a pile of money following one of his foolproof stock tips as did a couple of other family members, and that's what triggered the search that led me to the Permanent Portfolio.  That stock remains in my Roth IRA complete with loss, just to serve as a constant reminder.

I love stories like this because it demonstrates that even those "Masters of the Universe" on Wall Street believe their own cooking.  Being a hired employee and being an independent trader are two different realities.  The emotional component of the latter is not even remotely the same as the former.

MachineGhost is right of course...hedge fund managers are the richest people in NYC.  They didn't get that way purely from investments though...they did it by sweeping expenses off the top and playing some pretty shady games that are not available to us amateurs.

The stock in question was (drum roll)...MRNA (formerly NSTK).  Look it up and try not to barf.  They supposedly had a fabulous future marketing a nasal medicine delivery system.  My uncle even said he'd called the company and researched their finances.  When the stock went down he kept telling us they'd recover, just hang on and be patient.  What a fool I was...just call it Dumb, Dumber, and then there was me.  But at least that's a mistake you only make once.

sophie wrote: MachineGhost is right of course...hedge fund managers are the richest people in NYC.  They didn't get that way purely from investments though...they did it by sweeping expenses off the top and playing some pretty shady games that are not available to us amateurs.

The stock in question was (drum roll)...MRNA (formerly NSTK).  Look it up and try not to barf.  They supposedly had a fabulous future marketing a nasal medicine delivery system.  My uncle even said he'd called the company and researched their finances.  When the stock went down he kept telling us they'd recover, just hang on and be patient.  What a fool I was...just call it Dumb, Dumber, and then there was me.  But at least that's a mistake you only make once.

your uncle was stock promoter and it was a pump & dump stock 

Pointedstick wrote: During the period of January 5th, 2005 through today (January 5th, 2015), the PP returned a nominal CAGR of 7.62% ...

It's even better than that, Stick.  The free version of ETFreplay doesn't do re-balancing.  If one re-balanced every year to 25, 25, 25, 25, then the CAGR comes out to an impressive 8.29%

You are correct robtkatz,

With yearly rebalancing, EzBackTest software shows a 8.30% CAGR for the past 10 years.  Here's the screenshot: