Gyroscopic Investing

I'm new to this forum.  My existing 401k has a stable value fund in which the bulk of my money is in.  This fund is being withdrawn as an option and was looking at prpfx as an alternative to the stable value fund.  I'm considering going all in with this fund.  I'm looking for preservation and some growth but want to be able to sleep at night.  Is this a good choice?

A stable value fund is a money market-like option (though it's completely different from a money market in design), while PRPFX is a combination of several asset classes that have historically performed well together.

PRPFX is likely to provide a much higher return over time than a stable value fund, but compared to a stable value fund PRPFX is going to be WAY more volatile.

With all that said, PRPFX is still a very stable and conservative fund with a great track record--it's just a whole different animal from a stable value fund.

PRPFX is a good fund, but it's not a good substitute for a stable value fund.  Stable value funds are extremely low risk.  I'm not sure what the max drawdown of a stable value fund might be, but probably somewhere around 0.  PRPFX, in comparison, lost over 8% in 2008.

Perhaps PRPFX is right for you, but it is not a good substitute for a stable value fund, if that's the risk/return profile that you are seeking.

Isn't stable purchasing power the real issue?

I realize prpfx carries more risk than a stable value fund-that being said I no longer have access to a stable value fund and I am looking for a hands off investment that is relatively safe and a potential for some growth.  I'm retired and don't access this money on a regular basis for living expenses and I don't want to be always watching the market and buying and selling funds- just buy and hold for the long term without a lot of risk.  I thought this fund might be worth looking into.

Based on what you described, I would say PRPFX would be perfect.

Clive,

I appreciate you pointing out the 1981-2002 outperformance of the PP by t-bills (I'm stopping at 2002 because that looks like a good stopping point), but I think that is a little misleading.

T-bills returned 9-10% on average during the period you are describing, while the PP returned slightly less.  If you open the backtesting aperture just a bit, though, you see that in 1979 and 1980 t-bills returned around 10% and 14%, while the PP returned 42% and 13%.  Simply starting two years earlier would give you very different long term results.  Similarly, in the post-2002 period, you see t-bills returning 2% and 1% in 2003 and 2004, while the PP returned 14% and 6% in those years.

The data looks a little cherry-picked to me.

In more recent years the PP has obviously smoked t-bills as t-bill returns have hovered near zero and the PP has had several years of double digit returns.

I guess what I am saying is that over some periods any of the PP assets can probably be shown to perform better than the whole portfolio (even cash, as you point out), but over longer periods the overall portfolio provides similar returns to each of the PP's individual volatile assets, but with less volatility.  As far as t-bills go, over the life of the PP the overall portfolio has provided an average return over 200 basis points higher than t-bills provided over that period.

I don't know what conclusion to draw from what you are saying.  Are you suggesting a different allocation?  If so, on what basis would we expect a different allocation to perform better than the PP in the future? 

If you have access to a money market fund or short-term treasury fund, I would recommend 80/20 or 75/25, PRPFX/MM or STT, which would make it a lot more "stable".

PRPFX is a little titled toward inflation or negative interest rates. Therefore a chunk (20 or 25%) going into a cash like vehicle would give you a little more deflationary protection, IMO.

rhmetz wrote: I realize prpfx carries more risk than a stable value fund-that being said I no longer have access to a stable value fund and I am looking for a hands off investment that is relatively safe and a potential for some growth.  I'm retired and don't access this money on a regular basis for living expenses and I don't want to be always watching the market and buying and selling funds- just buy and hold for the long term without a lot of risk.  I thought this fund might be worth looking into.

I am retired and currently use PRPFX as a longer-term parking vehicle for about half of what I consider "near cash" in my VP.  It does fluctuate in price, but is usually pretty safe and tax efficient if you hold it for a year or more.  It did take a bit of a beating in 2008, but it wasn't catastrophic.  I like it, but wouldn't consider it appropriate for money I expect to use during the next 12 months or less.

I did use it as a core holding (supplemented by some other PP investments) in my PP during the 1980's-90s and it worked okay, but in hindsight think I would have been a little better off just following the more agnostic 4x25% strategy HB began encouraging in 1987.  I wouldn't use PRPFX as "cash" within the context of a PP.