Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid SORR?

General Discussion on the Permanent Portfolio Strategy

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stpeter
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by stpeter » Fri Feb 04, 2022 8:43 pm

murphy_p_t wrote:
Wed Feb 02, 2022 1:26 pm
Dollar cost average in, twice a year, over the next 2 years, might be a prudent way to go.
When I got started with the PP a while back, I DCA'd quarterly over 2 years. I rested easier that way, and to me the PP is the sleep-well-at-night portfolio so it all fit together.

You have to do what you're comfortable with.
Don
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by Don » Fri Feb 04, 2022 8:43 pm

The GB is not the PP.
Lorddoskias123
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by Lorddoskias123 » Fri Feb 04, 2022 11:17 pm

Speaking for myself, I think that I would just lump it and be done with it. After all, as Harry used to say, “No one can predict the future.” Easier said than done perhaps. The Canadian specific PP looked ok to me on Portfolio Charts at a glance, but I would have to do more research.

That said, more of HB’s wisdom comes into play here.
Whenever you're in doubt about a course of action, it is always better to err on the side of safety.
If you pass up an opportunity to increase your fortune, another one will be along soon enough. But if you lose your life savings just once, you might never get a chance to replace it.

If you wind up losing something, let it be only an opportunity that was lost – not precious capital. People rarely go broke playing it safe. But many go broke taking great risks or making investments they know too little about.

If you’re hesitating, it’s because you don’t yet know enough about the investment or the problem to make a confident decision. That means you shouldn't take the plunge until you know more and you’re sure you understand all the ramifications.
If you are in serious doubt about lumping… play it safe. A lot better safe than sorry.
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by ppnewbie » Sat Feb 05, 2022 12:35 am

GT wrote:
Thu Feb 03, 2022 8:27 am
Since the PP has rebalancing bands in the 35% to 15% range, you can go heavy in cash to start and still be considered "all in".

Example 34x22x22x22 vs 25x25x25x25

Since the portfolio will be overweigh with cash, you will be forced to buy the lagging asset (any asset that drops below 15%) when the time comes to rebalance.
I think this is great advice.
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by ppnewbie » Sat Feb 05, 2022 12:53 am

Another thing to consider is something that generates cash flow. I have a close acquaintance who was a VC, Inventor, Entrepreneur, etc, etc…and in his early fifties he had the opportunity to buy a nice a set of commercial buildings for a bargain, in a small town. I thinking it was during the crash of 08. Anyway out of all of the high flying things he’s done, it’s that one investment that’s a gift that keeps on giving. One of his kids is a hedge fund guy in NYC and works all the time. I was telling him, if he can find another one these buy it for him and he can just stop.

Anyway long story - maybe consider adding something real that generates cash flow that’s reasonably out of the financial system.
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by EdwardjK » Sat Feb 05, 2022 4:32 pm

Congratulations on such an early retirement.

Before I comment on the Permanent Portfolio, I have a few questions for you to consider:

1. Have you factored inflation into your financial projections? Inflation will erode the value of your investment portfolio very quickly. I hope you have modeled a 50-year projection using a reasonable rate of inflation.

2. Assuming you have built such a model, have you accounted for future contingencies or emergency spending? You will purchase quite a few cars over a 50-year period. The roof will leak and need replacing. Your HVAC systems will need to be replaced. And your wife will insist on renovating the kitchen and bathrooms a few times.

3. Did your financial projections take into account the volatility of investment returns? A large negative return in the first 5 years of retirement will really impact your ability to stay retired, especially since you are so young. I built my own "Monte Carlo" model using the Callan Periodic Table of Investment Returns. I accumulated about 35 years of asset returns and estimated the annual returns of a mix of assets that approximates my investment portfolio., I then randomly sorted those 35 years of returns 250 times to determine whether I would outlive my assets. If you have not built such a model, I advise you to do so. At this moment, only 1 out of 250 estimates of spending and inflation fails to have sufficient assets when I am 95 years old.

4. Does your spending projections include the cost of college education for your children? The cost of marrying them off?

5. What are you going to do in retirement? If you are planning for one or two big trips each year, have you accounted for that in your financial projections? Don't think you have worked all this years to take inexpensive day trips as a "vacation". My wife and I went on a cruise to Greece last year that cost $50,000. We worked too hard over too many years to take cheap vacations.

I hope this helps focus your attention on what the future could hold for you.

You are very wise to be cautious about investing in a single strategy, even the Permanent Portfolio. Keep in mind that there is no strategy that "works" all the time. The Permanent Portfolio will lose money in some years. Will the 7% or so average return of the Permanent Portfolio achieve your financial needs?

I have many more thoughts but I'll stop here. Let me know if you have any questions. PM me if you want to talk live.
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by barrett » Sun Feb 06, 2022 7:46 am

To add to EdwardjK's list, do you have the health insurance piece figured out over the next 20 years? Or is that part of the reason you will be living in Canada? Here in the US a family with no income has to be both clever and lucky to be able to get health insurance that is not work related for 20 years.

FWIW, I like GT's advice to start out with a large cash position and gradually ease into the other three assets. Maybe even go 70% cash at the beginning. As at least one other poster has stated, even 100% cash is a choice of an investment portfolio but now seems to be an especially difficult time to enter into this mix of assets. The gold slice may go on a tear that saves the rest of the portfolio but we just don't know. When I bought most of of my gold allocation at the beginning of 2014, it had just gotten pummeled by 33% or so.

Lastly, if you have not done so already, have a look at how the four assets performed from 1980 to 1983. That was the PP's most challenging period when it lost a lot in nominal terms at a time when inflation was high. That would have been a great time to DCA in.
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by jhogue » Mon Feb 07, 2022 9:27 am

1. Do you have a back-up plan to "un-retire" if your primary plan doesn't work out for some unforeseen reason? Part of that might be to go back to work part time, doing some teaching at a local community college, or by keeping skill certifications current for fields like nursing or IT for you and your spouse even if you aren't working full time.

2. I would echo what barrett said about phasing out of a cash heavy portfolio, but I would also be intentional about diversifying away from the banking system in general or a single bank in particular.

Both 1. and 2. can be done without adding risk to your current portfolio.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: Retiring in scary environment of 2022: Invest 100% of capital into PP now, or hold cash and deploy slowly to avoid S

Post by Smith1776 » Wed Feb 09, 2022 6:35 pm

For the record, HB did condone/bless the idea of modifying the PP percentages from the traditional 4x25. As long as no asset is more than 40% or less than 20% I think it still counts as a PP.
I still find the James Rickards portfolio fascinating.
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