Why do you use the PP?

[buddtholomew]

If there was ever a good time to underweight gold, it was 2 or 3 years ago, not right now. As icky as this drop is, I'm not selling because that would be buying high and selling low. Same reason I'm not loading up on more stocks. I'm just letting the PP do its thing. If the stock market flames out and gold surges, that will be the time to transition into a portfolio with more stocks and less gold if that's what you want.

Trapped in the PP...it's funny how ridiculed I was when I saw this playing out. Stuck in gold until it eventually restores my losses which are now approaching 25%

The thing is… this is just how the PP is. Something is always gonna be a stinker. It stinks the worst when the stinker is the thing you hate most, and when it starts to stink when you're just starting out.

So true...

[Cortopassi]

Why do I use the PP...  1 month chart below.  Gold is not $650 yet, bonds are still kicking and stocks have dropped.  And I don't care!

Boy, it's been nice to be diversified for the past year and a half.

[blackomen]

IMO, the PP is the closest allocation I've seen to casting a completely neutral view on the economy. 

It sounds counter-intuitive but even going 100%, which seems like the default state for many people, is NOT a neutral view.  In that case, you're betting that your cash will outperform all assets and inflation.  Next time you panic sell a stock or index, ask yourself if you honestly believe cash will outperform what you just sold at the bottom.

Whether or not you choose to consciously invest, you're participating in the financial markets by virtue of earning money, depositing it in a bank, and using it to put a roof over your head and food on the table.

No matter how great you are at economic forecasting, there will always be times when your forecasts will be off.  And with the way the markets work, you're very likely to lose a ton of money if you made the wrong bet (i.e. stocks in 2008, gold in 2013, etc.)  It's hard to explain why in a short post but assets tend to exacerbate its losses when tons of investors end up fleeing it in a short period of time like in those two years.  And it only takes a bad year or two to effectively erase all of the gains you've worked so hard for and spent so many sleepless nights hoping for in the past.  So why not do it the easy way and take a neutral position instead of speculating?

[vnatale]

I have mathjak on the ropes! Almost ten minutes have passed since my last post. I can smell victory!

you already know my feeling . the pp will not be a pleasant place to be if rates continue to rise  as that leveraged bond position will always be behind the curve by a lot no matter how much you rebalance for years after rates stop rising.    that can easily over power the rest unless a strong trend develops and even then it can be painful.

you are playing with fire but time will tell.  personally I think the bond position carry's to much weight at these levels along with to much dead money in gold .

can we make this prediction a sticky ?

4 1/2 years later.....the VERDICT on this prediction?

Vinny

[vnatale]

Having a PP and a VP is like being a devout Christian with a mistress on the side!!! 

FYI, the fall in long term bonds and risk of further declines, and the astounding deadness of gold, has stopped me out of the HBPP totally. When gold was non-responsive to Grexit, I knew all of the goldbuggery was false and a lie. I'm in the same camp as mathjak107.  I'm now in a 60% / 20% intermediate bonds / 20% cash portfolio with 11 years left to go to retirement. I am waiting until this old bull runs out of steam and falls over, then I will redeploy the piles of cash, like I did in the 2009 slump. Also will put aside some funds to buy gold when it's 20-50% off from where it is now.

I put a reminder event to remind myself to look on 1/1/2020 to see how the past five years have been for the HBPP. I'll be that much closer to retiring, I will re-consider it as a distribution-stage allocation.

your best bet is to do exactly what pointed stick did if you run a variable.

no matter how you try to disguise your re-weighting things with a vp and calling it a separate portfolio your money has no memory as to  which gang it belongs too.

it is like buying a target fund then buying all kinds of other investments  un-doing what the target fund is trying to do .

if you have a vp look at it all together or you are fooling yourself but not your money .

as a true pp'er you have to live with the thought any moment can be the moment you have been waiting for , ( otherwise why hold so much gold  when conditions are so far off for it ?) and to be weighted the wrong way can undo years of waiting for this moment .

so you should look at your total portfolio as just that instead of a part time pp'er with a side bet . . .

And??????????????????

Vinny

[ochotona]

And... I'm glad not to have been in the PP over the last five years. On the other hand, I have missed out on the pure US market buy-and-hold gains because I've been doing momentum investing, first GEM then Investingforaliving.us, but I'm glad I did what I did. I managed my downside risk, and captured a large part of the upside. What more could you want?

Having said that, the PP looms large in my future as a retirement allocation. I've said that many times, and I still believe it. I expect to inherit some money within the next decade, and it will go as a lump into the PP. I for sure don't want to be trading in a taxable account.

I am quite glad the discussions motivated me to put 10% of the portfolio into gold when it was priced low, it's now 13%.

[mathjak107]

taxes are taxes and one way or another we get taxed unless we die with equities in a taxable account . so i never let the tax tail wag the tax dog .

i do what is best financially and never not because i may be taxed.

[Smith1776]

I know the discussion has veered off from the OP, but I never answered this question. This thread was started before I became a member.

Tex enunciated it best in the original BH HBPP thread: the PP is designed to allow you to read the newspaper with total equanimity and without stress. That's why I use it.

There's really no other portfolio approach that gives me the same degree of peace of mind.

And if you want to goose up the potential return profile you can still maintain 4x25 by tilting. SCV Emerging markets anyone?

[boglerdude]

> maintain 4x25 by tilting

Are the assets supposed to be volatility matched? If gov issues 1,000 year bond with huge volatility, should you only hold enough of that to offset the volatility of the other assets?

[Smith1776]

> maintain 4x25 by tilting

Are the assets supposed to be volatility matched? If gov issues 1,000 year bond with huge volatility, should you only hold enough of that to offset the volatility of the other assets?

Personally, I'm less concerned about that than I used to be. The volatility of the underlying assets doesn't even stay constant. After I realized that, I just shrugged and said "good enough".

For instance, as interest rates go down the duration of the LT bonds goes up. I believe there are some funds out there with "dynamic" asset allocation strategies that account for this and have constantly shifting proportions. I'm not smart enough for that. I'll just keep 4x25.