Help a newbie to trust the PP

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seajay
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Re: Help a newbie to trust the PP

Post by seajay » Sat Dec 03, 2022 6:49 pm

belgo wrote:
Thu Dec 01, 2022 8:48 am
I believe US PP has indeed performed worse this year;
UK PP down -1.6% YTD.
Blackrock funds ISF, IGLS, IGLT, SGLN

Inflation is up at 10% though (CPI) and older RPI (retail price index) is running at 14%
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Re: Help a newbie to trust the PP

Post by johnnywitt » Mon Jan 09, 2023 5:06 pm

mathjak107 wrote:
Fri Nov 25, 2022 8:05 am
Well if markets are down where is all the money you spend down from cash coming from to refill for the following year if that is the source of spending cash ?.

Depending how far other assets are hit you may have to buy more of the other assets with any cash left further reducing your cash for spending going forward .

It would be a hell of a way to fund a retirement that way when you have bills to pay and need a certain amount of money to get you through the year .

So spending down that cash at the same time other assets are falling and have to be bought to rebalance can leave you with little cash to live on or certainly a lot less .

You may want to really think trying to live off the cash in the pp if that was the plan.

I am retired and living off my portfolios for over 7 years but I would never try to use the cash that was an integral part of the portfolio as my spending money to live off of.

That is money with two very distinct different purposes
That's not what HB said in his book, "Fail Safe Investing".
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Re: Help a newbie to trust the PP

Post by mathjak107 » Mon Jan 09, 2023 5:18 pm

Harry didn’t live in our world as it exists today.
He may have done things very differently.

You really want to go by. What makes sense and drawing large amounts of cash to live on will unbalance the assets of the pp even if still at the fringes of the bands .

If you rebalance them to get back your protection ,then you may be doing the same thing anyway you wanted not to do , like selling other assets when things are down.

Hey , you all can do as you. Like , but I wouldn’t use the cash portion as a checking account unbalancing everything
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Re: Help a newbie to trust the PP

Post by johnnywitt » Mon Jan 09, 2023 5:31 pm

mathjak107 wrote:
Mon Jan 09, 2023 5:18 pm
Harry didn’t live in our world as it exists today.
He may have done things very differently.

You really want to go by. What makes sense and drawing large amounts of cash to live on will unbalance the assets of the pp even if still at the fringes of the bands .

If you rebalance them to get back your protection ,then you may be doing the same thing anyway you wanted not to do , like selling other assets when things are down.

Hey , you all can do as you. Like , but I wouldn’t use the cash portion as a checking account unbalancing everything
Ok, but what do you do when you retire & start to drawdown the PP. HB says draw down the Cash and Craig & Tex's book says to skim off the asset/s that are above your target allocations. One of the benefits of the HBPP is that your Emer Fund is baked in and as far as rebalancing, you always have dry pow.
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Re: Help a newbie to trust the PP

Post by mathjak107 » Tue Jan 10, 2023 2:17 am

What would I do?

Exactly what I do since I am retired and drawing down and have a cash /short term bond position as part of an active portfolio.

I keep separate cash every year for spending ….

I rebalance and fill in the cash needed for each year every Jan 2 …what I don’t do is unbalance the portfolio .only attacking one asset.
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Re: Help a newbie to trust the PP

Post by seajay » Tue Jan 10, 2023 4:09 am

johnnywitt wrote:
Mon Jan 09, 2023 5:31 pm
mathjak107 wrote:
Mon Jan 09, 2023 5:18 pm
Harry didn’t live in our world as it exists today.
He may have done things very differently.

You really want to go by. What makes sense and drawing large amounts of cash to live on will unbalance the assets of the pp even if still at the fringes of the bands .

If you rebalance them to get back your protection ,then you may be doing the same thing anyway you wanted not to do , like selling other assets when things are down.

Hey , you all can do as you. Like , but I wouldn’t use the cash portion as a checking account unbalancing everything
Ok, but what do you do when you retire & start to drawdown the PP. HB says draw down the Cash and Craig & Tex's book says to skim off the asset/s that are above your target allocations. One of the benefits of the HBPP is that your Emer Fund is baked in and as far as rebalancing, you always have dry pow.
In Harry's time, stocks might have been dropping 4% dividend yield into 'cash', as might cash and bonds been paying 6% interest rates also dropping into 'cash'. Expansion of cash by 16% each year, 25% weighted and drawing 4% as income = basically spending dividends and interest.

In lower interest/dividend times, its more a case of spending dividends/interest and top slicing out of the asset(s) most above target weighting.
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Re: Help a newbie to trust the PP

Post by mathjak107 » Tue Jan 10, 2023 4:14 am

As I previously explained , our dividends , interest and fund distributions can range from 29k to 69k so trying to live hand to mouth with them in real time can have lots of short falls and refilling on the fly .


So we prefer to let them all go into a bucket for next years spending .

Comes Jan 2 we see what we have left along with the buckets of fund distributions and we rebalance and refill any shortfall for the new year .

Then we are done until next year when we wash and repeat and all portfolios maintain their correct allocations.

We found it required too much scrambling when we had shortfalls in distributions to live hand to mouth with them .it was easier to just buffer them for the following year.

Now we have rmds to complicate things as that is variable too each year based on age and balance.

So we find buffering works best for us… most important is we try to maintain the portfolio allocations while creating that spending cash.

Usually the portfolio contributes about 100k a year for its part , it is then combined with ss and pension to complete the years budget .

Spending down the cash side would take big dollars out of the cash / short term bond buckets if they were to be spent down as the spending source , unbalancing the functionality of the portfolio
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