Gyroscopic Investing

My 401k funds are finally rolled over into IRA and I'm ready to set up a pp but with this mess in Japan should i hold off and see how this all shakes out or go all in now?

rhmetz wrote:My 401k funds are finally rolled over into IRA and I'm ready to set up a pp but with this mess in Japan should i hold off and see how this all shakes out or go all in now?

I won't even try to speculate on the impact of Japan on the four quadrants of the PP.

If you plan to buy treasuries (rather than TLT), you may want to wait until early April so you can participate in a treasury auction, rather than buy on the secondary market.  Most brokers charge a higher fee for secondary market transactions (e.g. Vanguard is $0-$10 for auction vs. $0-$75 for secondary market), although this amount may be proportionally very small - I just hate expenses, so I do whatever I can to avoid them.  I also have heard there is more "spread" for secondary purchases vs. participating in the primary auction, although I'm not sure if that is true or not. If it is, that may actually be a significant hit in terms of expense.

Other than that, the main advice I would offer would be to buy everything all at once, to avoid the pain of buying one thing (e.g. treasuries), seeing it go down, while delaying on buying the other (e.g. gold) and seeing it go up.  If you buy it all at once, you get PP negative correlation benefits immediately (hopefully).  If you are using a mutual fund for any of it, be aware that your transaction most likely won't be priced until the close of business the following day, so you may want to wait to order bullion to that same time (also, for bullion, note that many people have claimed that the price of gold at the close tends to be lower than the price at the open in US time zones).

My opinion is that you should buy all at once.  At the worst, something dramatic will happen, and you'll have to rebalance.  Historically speaking, it's unlikely that you'll lose much, even if something really bad happens. 

If you can control transaction costs, I don't think there is any harm in scaling in over some predetermined period of time, such as 10 weeks, three months, etc., topping off all of the PP assets to 25% x 4 with each new contribution.

I suggest this primarily for psychological reasons.  Many people come to the PP after having been burned by many prior investments by somehow always managing to buy right at the top.  Lest a new PP investor start off on the wrong foot by buying all-in on day one and then seeing the portfolio decline in value by 2-3% or so in the following weeks or months (which does happen occasionally), I like the idea of easing into it both financially and psychologically in order to prevent any unpleasant feelings when just starting out.

From a longer term perspective, historically it really hasn't mattered much when you bought in (incrementally or all at once), though starting a PP at the depths of the 2008 panic would have provided a very nice PP gain for 2008.

MediumTex wrote: ...lest a new PP investor start off on the wrong foot by buying all-in on day one and then seeing the portfolio decline in value by 2-3% or so in the following weeks or months (which does happen occasionally), I like the idea of easing into it both financially and psychologically in order to prevent any unpleasant feelings when just starting out.

I think it depends on your personality as an investor, and how confident you are in PP when you first start out. 

I had enough experience with alternate investing methods (and how badly they can turn out) that the PP provided me with an instant sense of relief, and I had a lot of faith in it from the start.  If something dramatic had happened, I don't think it would have upset me too much.  In fact, I'd have probably welcomed it as an early test.

I'm 1/3 into a phased entry into a PP, no particular rationale for my timescale it's just what made me feel most comfortable at the time. As MT mentions for some people e.g. me, it's important not to take a hit early on and risk losing confidence.

I'd say that none of the things that were worrying me about starting a PP 2 months ago proved to be relevant and I suspect I'll have a whole load of different concerns in a month or so when I phase in the next 1/3. I expect when I've fully invested that I'll wish I just gone all in. 

Do what you feel comfortable with but make it a rational decision, holding/overweighting cash is OK if you feel jittery about events in the short term. Investing after all is supposed to make you feel more secure not less. 

So glad I bought treasuries as part of my transition from an almost-all-stock portfolio to the PP. Most of my friends who have investments kept talking about interest rates and how they're going to move. Sometimes you just have to take the plunge.

dualstow wrote: So glad I bought treasuries as part of my transition from an almost-all-stock portfolio to the PP. Most of my friends who have investments kept talking about interest rates and how they're going to move. Sometimes you just have to take the plunge.

I think you are raising an important issue here.

In the context of the PP, you don't buy the treasurys because you like them, you buy them because of the protection they offer.

It's like car insurance--I don't buy it because I think I am going to have an accident; I buy it because I know that accidents happen all the time and I want to be protected in the event that I am involved in one.

On a day like today it's TLT and SHY that are keeping the bottom from falling out.

It will be interesting to observe how the HBPP (and PRPFX) fare during the Japan crisis.

I'm suprised gold is having such a bad day.

moda0306 wrote: I'm suprised gold is having such a bad day.

I was going to post the same thought...any theories?  (I know it's only one day). 

Adam1226 wrote:

moda0306 wrote: I'm suprised gold is having such a bad day.

I was going to post the same thought...any theories?  (I know it's only one day). 

Flight to safety--i.e., treasurys.

As Harry Browne said, the U.S. dollar is the #1 currency in the world in times of crisis, and gold is #2.

I'm sure some speculative money is exiting the PM markets as well.

Here's one brief article about that flight to cash.
http://online.wsj.com/article/BT-CO-201 ... 08715.html

An excerpt:

Gold, which is typically considered a safe haven amid global uncertainty, proved vulnerable to the global sell-off as investors around the world, including Japan itself, moved to cash in profits.
"We saw not only selling of equities, but also panic-selling of gold, silver, platinum and palladium in Japan today," Walter de Wet, head of commodity strategy at Standard Bank, said in a note to clients.

The flight to cash boosted the dollar, which also pressured gold prices. The greenback, like gold, is considered a safe haven asset and benefitted from fresh demand as traders sold other assets and moved to cash.

longeyes wrote: On a day like today it's TLT and SHY that are keeping the bottom from falling out.

It will be interesting to observe how the HBPP (and PRPFX) fare during the Japan crisis.

I can reassure you that PRPFX will be obliterated today. Gold, Silver and Equities are on the decline.

Yes, but I didn't mean today, I meant the full scope of the current crisis.

MediumTex wrote: Flight to safety--i.e., treasurys.

Couldn't you have made this flight-to-safety argument for the past five years if not past decade (ie, gold should be doing poorly b/c of the financial crisis)?

MediumTex wrote:

Adam1226 wrote:

moda0306 wrote: I'm suprised gold is having such a bad day.

I was going to post the same thought...any theories?  (I know it's only one day). 

Flight to safety--i.e., treasurys.

As Harry Browne said, the U.S. dollar is the #1 currency in the world in times of crisis, and gold is #2.

I'm sure some speculative money is exiting the PM markets as well.

I heard another reason could be investors anticipate the Japanese government might start selling gold in need of cash and hence the gold would drop. This might be just a speculation of course.

foglifter wrote: I heard another reason could be investors anticipate the Japanese government might start selling gold in need of cash and hence the gold would drop. This might be just a speculation of course.

That would make gold a buying opportunity--at least for someone who wants it for their VP.