AdamA wrote: ↑Mon Nov 02, 2020 9:42 am
mathjak107 wrote: ↑Sat Oct 31, 2020 12:40 pm
I am no more confident of the pp than I am in any other diversified portfolio of similar equity weighting
At some point you have to pick a reasonable strategy and just stick to it.
So much is bound to change over a 30-40 year investment period that you could justify bailing on any investment plan multiple times each decade.
At some point you just have to buckle your seatbelt and trust the plan.
Just to play devil's advocate for the sake of discussion...
So much is bound to change over the next 30-40 year investment period that it could be dangerous to buckle your seatbelt and trust a specific plan.
Unfortunately, as time goes on, the back-tested data we used to form our conclusions start belonging to an outdated world that could have had very different economic forces at play.
With that said, I do think the largest risk to an investor is letting their emotions (usually greed and fear) guide them. I would also argue that maybe the 2nd biggest risk is to stick your head in the sand about current/emerging long-term trends and blindly trust a strategy you setup many years ago.
I don't think that is a problem for 99% of the people reading this. They probably wouldn't be on here if they didn't think it was at least possible for the PP to break... everyone would be too busy living their life knowing that their investments are 100% bulletproof.
A prudent investor just wants clear and compelling evidence if they are going to change course from their current allocation (which is a pro and a con). In one hand, it keeps us from making poorly informed decisions. On the other hand, it keeps us from changing allocations because the information at hand is never going to be 100% concrete.
It is easy to fall back on the ol' "well, that is why the PP exists... cause you never know... blah blah blah". But again, the PP is (was) based on an outdated world that could have had very different economic forces at play.
IMHO the PP is like a condom kept it in your wallet. It should be okay to use. However, you have to realize that your risk is going to go up the longer it was in there without you ever inspecting it. Besides, there might be alternatives now that are more efficient towards your goal.
However, there is one instance where I think a non-changing strategy could be appropriate... mild dementia. Maybe having an ingrained "system" would be enough to protect myself from myself?