New member setting up HB PP

[SteveGo]

Hello all, I have moved about half my investments into PP recently. I had been doing a Relative Strength Global Rotation strategy using ETF's. While that was working ok, it was one of those deals where you need to look at things multiple times a month, and move things around as necessary. It worked ok, but I found that I was not enjoying all the twiddling around and calculating needed to keep up with it. An obsessive type anyway, I was letting it take up too much of my time.

We are retired, and draw Social Security.

I have the PP set up in two IRA's (my wife's and mine), and a taxable account. Since all three of these are in separate brokerage accounts, I decided to run each one of them as independent portfolios. Since we are looking at re balancing maybe once a year, I did not think it was too wasteful to do that.

For my wife's small IRA, I have SCHB (which is like VTI), TLT, and SGOL. For now the cash is just setting in the sweep account. (at Schwab)

For the PP portion of my IRA, I have VTI, SGOL, and 30 Year Treasuries bought on the secondary market. Cash here is sitting in a Money Market (this is at Vanguard).

For the taxable account, I have VTI, SGOL, and 30 Year Treasuries. (this is at TradeKing). Cash is divided between the sweep account, and a Vanguard Money MarketFund at Vanguard.

I was trading options in 2008, doing covered calls on volatile stocks. When the crash hit, I was down 30% on stocks that did not recover, so I have plenty of realized losses to cover any gains in the taxable account, probably for the rest of my life.

My other money is in the Vanguard Wellesely Income Fund (VWIAX, VWINX).

From an investment point of view, we are in "distribution" mode, withdrawing cash at re-balance time, which I plan for once a year, just when those property tax bills come.

I have not really decided what to do with the Cash part of the portfolio. I saw the material on I Bonds, and the advice to go strictly with Treasuries for short term. Still mulling that over. I will be following the discussion for good ideas. I doubt the Vanguard Money market will blow up in the next several weeks.

Thanks for reading, if you made it this far. Comments welcome.

Steve G

[MediumTex]

Steve,

Welcome to the site.  The PP is a bit like planting a tree (you can waste a lot of time sitting there watching it grow, but it does grow very steadily).

For someone with your investing background, the biggest challenge is probably going to be to just leave it alone and let it do its thing. 

If you haven't read through everything here and in the big BH thread, there is a lot of good PP stuff to cover.

[Lone Wolf]

I have the PP set up in two IRA's (my wife's and mine), and a taxable account. Since all three of these are in separate brokerage accounts, I decided to run each one of them as independent portfolios. Since we are looking at re balancing maybe once a year, I did not think it was too wasteful to do that.

Welcome, Steve!  Looks good.

I do like the symmetry of having separate PPs in different accounts but it may not give you the very best possible tax treatment.  Since long-term bonds radiate the most interest, it's nice having those contained in a tax-deferred account.  If this causes other hassles or worries, though, it's not essential.

All looks good, though.  You can't go wrong with funds like VTI, SCHB, SGOL, and TLT.

If you tend to be a tinkerer, cash can be one of the most interesting slices.  Just going with ETFs like SHV or SHY works well.  At Schwab you should have free Treasury trades so you could simply purchase T-bills or T-notes yourself (if this appeals to you.)  I-bonds are, of course, excellent as well.

[pershing83]

I'm new to the board, so I got out HB's Fail-Safe Investing and thought I would refresh my mind.

Then I came upon his other bit of advice, may have been discussed here previously, I'll bring it up. HB says one should invest some assets overseas. Anyone doing this? PRPFX does hold Swiss francs, but that is not the same.

Comments?

[SteveGo]

Thanks for the words of encouragement. I have decided to go ahead with some 180 day t-bills for some of the cash. That would take me into December, just in time for a January distribution and re-balance.

Steve G

[SteveGo]

I'm new to the board, so I got out HB's Fail-Safe Investing and thought I would refresh my mind.

Then I came upon his other bit of advice, may have been discussed here previously, I'll bring it up. HB says one should invest some assets overseas. Anyone doing this? PRPFX does hold Swiss francs, but that is not the same.

Comments?

My understanding that the SGOL assets are domiciled in Switzerland, which was a consideration for me in choosing it.

Steve G

[AdamA]

My understanding that the SGOL assets are domiciled in Switzerland, which was a consideration for me in choosing it.

When HB spoke about holding some assets overseas, he was referring primarily to gold and felt that it was a good idea to keep a portion of one's gold holdings in a Swiss bank account. 

The reason for this was/is that if the US government suddenly changed any laws it would buy you some time to figure out what to do.

It's much less practical and much more expensive for US citizens to open Swiss bank accounts as of the last decade, and other alternatives have been discussed on this board.  Canada may be a reasonable alternative. 

SGOL probably wouldn't qualify as a true off-shore holding for these purposes. 

 

[MediumTex]

The reason for this was/is that if the US government suddenly changed any laws it would buy you some time to figure out what to do.

It's much less practical and much more expensive for US citizens to open Swiss bank accounts as of the last decade, and other alternatives have been discussed on this board.  Canada may be a reasonable alternative.    

In other words, the U.S. did change its laws, just as Harry Browne feared it might, and investors did have time to figure out alternatives to Swiss bank accounts in the meantime.

Harry's premise that the Swiss wouldn't roll over on their privacy commitments to their clients was proven to be false, but all that means is that investors need to adapt to the new reality, which still has ample opportunities to protect your assets.

[AgAuMoney]

Since all three of these are in separate brokerage accounts, I decided to run each one of them as independent portfolios. Since we are looking at re balancing maybe once a year, I did not think it was too wasteful to do that.
...
From an investment point of view, we are in "distribution" mode, withdrawing cash at re-balance time, which I plan for once a year, just when those property tax bills come.

I like running each account independently, as long as the balance is high enough in each account that it does not cause disproportionate expense.

I used to try and run all my accounts as a total portfolio, but I have come to realize that it can be very hard to rebalance unless you have a mix of assets in each account, and rebalancing is very important to long-term profits.

One thing to watch out for in your plan to rebalance once per year and take out cash...  I much prefer to rebalance based on bands -- too much gain or loss in any one segment triggers a rebalance -- but check it at least once per year.  And when you rebalance, hopefully it will be because of gains in the stock portion so you will be selling stock to replenish cash not only for your withdrawal, but perhaps also because cash did not experience the investment gain.  And I suppose in an ideal world, the gold and LT gov't portion also would not be growing as fast as stocks, so those will also need some funds added.  That's a big load born by the stock (or any) portion, so you might check your accounts as often as quarterly to see if enough gains (or losses) have occurred to sell some winners and supplement the losers, perhaps letting the cash portion accumulate a bit more because you know you will be taking a withdrawal.

And a question for you to consider or answer as you see fit...  Are you counting cash in the bank as part of your cash position?  I waffle...  but currently I'm counting CDs, savings/money-market accounts and iBonds as cash along with my short-term treasuries.  I don't count my checking account, and I do transfer monthly my living expenses from savings to checking.