General Discussion on the Permanent Portfolio Strategy
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Pointedstick
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by Pointedstick » Sat Oct 31, 2015 9:11 am
barrett wrote:
Being so young, PS, means that you have a lot more unknowns than someone who is already in their 60s. Mathjak and I are trying to figure out a 30-40 year investing horizon. You are looking at more like 70. Err on the side of caution. Besides, you're really good at what you do for money, right? You might stink at retirement!
That is certainly true. I know for a fact that "retirement" for me means "freedom to work on my own money-making projects." If I could't be productive, I'd be one of those people who retires and is dead in a year.
I am definitely considering working a few more years. Somehow I have been able to raise my net worth by $100k a year for the past three years, so if I can keep that up, it might be a no brainer to just work a bit longer and sock away a lot more money.
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mathjak107
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by mathjak107 » Sat Oct 31, 2015 9:28 am
i doubt many enter retirement and don't wish they had even more saved , self included . my want and dream list is far longer then our budget . so eventually everything becomes a balance .
there are rarely days we are not out and about or traveling now . each day is another adventure now that we are retired , especially living in the nyc / long island area . we were already at the gym this morning and at oakland lake shooting the foliage and it is only 10:28 in the morning .
we may head to central park later or tomorrow morning . . yesterday we were out shooting the foliage in the morning which i posted and at the target range in the afternoon sighting in for hunting season ..
for us we have little down time at this point in retirement . i still do consulting 2 days a month and enjoy that interaction with others since it is just my wife and i 24/7 if we are not with the kids and grand kids .
Last edited by
mathjak107 on Sat Oct 31, 2015 10:09 am, edited 1 time in total.
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Tyler
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by Tyler » Sat Oct 31, 2015 12:21 pm
Pointedstick wrote:
barrett wrote:
Being so young, PS, means that you have a lot more unknowns than someone who is already in their 60s. Mathjak and I are trying to figure out a 30-40 year investing horizon. You are looking at more like 70. Err on the side of caution. Besides, you're really good at what you do for money, right? You might stink at retirement!
That is certainly true. I know for a fact that "retirement" for me means "freedom to work on my own money-making projects." If I could't be productive, I'd be one of those people who retires and is dead in a year.
One of the things I've found out quickly as a very early retiree is that interesting work finds you. Let's be honest -- the type of skill, drive, dedication, and thoughtfulness required to become financially independent at a young age is quite rare and that doesn't go away when you stop showing up at the office. New opportunities I never expected show up all the time, and I recently started a fun part time gig where I found myself in a unique situation to name my own terms. It's much more about being mentally free and nimble to pivot on the spot than it is about being mentally retired.
For a very early retiree, financial independence is really not about checking out and living off of investments for 60 years. It's about throwing off the previous constraints on your life and opening up maximum opportunities. With that kind of drive and blank canvas, making money at various points along the way is inevitable. So don't limit yourself to thinking about accumulation purely in terms of your current career before you "stop working", don't fall into the mental trap of pigeon-holing yourself into a single work specialization to maximize income, and don't assume that higher investment returns automatically make your life better. Life is about so much more than money. Start thinking in terms of freedom, flexibility, and sustainability rather than dollars and career path, and IMHO life gets a lot more interesting.
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Tyler on Sat Oct 31, 2015 12:23 pm, edited 1 time in total.
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mathjak107
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by mathjak107 » Sat Oct 31, 2015 1:22 pm
this is very true . in fact the job offers i have been getting from competitors are just insane . if i didn't enjoy retirement so much they are tempting .
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mathjak107
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by mathjak107 » Fri Nov 06, 2015 4:35 pm
no fund swaps .
as of 11/6
growth model up 4.10% ytd
growth and income model up 3.00%
income and capital preservation model up 1.21%
pp - down 1.92%
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mathjak107 on Fri Nov 06, 2015 4:44 pm, edited 1 time in total.
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lazyboy
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by lazyboy » Sat Nov 07, 2015 12:53 am
"as far as annuty's i think immediate annuity's may be playing a part in many of our retirements going forward . if not so much for us but if we have a spouse ,especially a wife who is not in to investing pensionizing a piece of your non discretionary spending in to a check n the mail box can help her a lot ."
When I retired in 2007 I bought an immediate annuity through Vanguard with about half my retirement savings. On reflection, I'm OK with having done that- the annual payout was high at that time -over 8% a year for a lifetime. It created an immediate pension. Since than, payouts are less. Of course the down side is the money's locked up and can't be withdrawn for emergencies or other investments. That's why they recommend using no more than 50% of retirement assets to buy one.
My question MJ: Would you be more in stocks as a % of remaining investment if you bought an immediate annuity? Or would your 40-60% in stocks stay the same ?
Inside of me there are two dogs. One is mean and evil and the other is good and they fight each other all the time. When asked which one wins I answer, the one I feed the most.�
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mathjak107
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by mathjak107 » Sat Nov 07, 2015 3:18 am
i would simply replace some of the bond portion with the spia and the allocation would still stay the same .
the more conservative the portfolio the bigger the difference an spia can make . i would not use an inflation adjusted spia . that is what your own equity's would be for , the cost of an inflation adjusted spia is just to high .
one other thing you may want to compare is the cost of a joint spia to a single spia with a separate life insurance policy .
that combo has done the best in 70% of the time frames looked at . unlike the taxable spia the insurance is tax free to a spouse .
in fact the best value has turned out to be not buying term insurance and trying to invest the difference when you are younger but permanent life insurance and your own investing .
while 100% of the time term and investing gave you a bigger balance at retirement age the tide shifts right after that point . no one really looked beyond that point before pfau's white paper in great detail .they just accepted what was believed up to retirement age . . .
an integrated strategy using an spia and permanent insurance when coupled with your own investing gave you a higher income 100% of the time and a bigger balance for heirs 70% of the time .
you have the spia which can throw off much higher income early on then bonds and cash , you have your own investing for inflation adjusting and growth and permanent life insurance for a spouse that is never taxed .
new research by kitces and dr pfau today are opening up doors to strategy's that no sane investor would have ever considered as the better choice .
but cheaper simpler single premium immediate annuity's changed all that since they are like buying a cd . if you like the payout that is your deal . no other fees or expenses . vanguard seems to have the cheapest ones , even a bit cheaper than immediateannuity.com
the older you are and the higher rates go the better the spia deals get .
i would start to ladder them in my 70's if i did it .
do not consider variable annuity's . they are to expensive and to complex to even figure out .
Last edited by
mathjak107 on Sat Nov 07, 2015 5:06 am, edited 1 time in total.
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lazyboy
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by lazyboy » Sun Nov 08, 2015 1:08 am
Thanks Mj. Very good information on spia options and also answered my question about about investment balance.
Inside of me there are two dogs. One is mean and evil and the other is good and they fight each other all the time. When asked which one wins I answer, the one I feed the most.�
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mathjak107
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by mathjak107 » Sun Nov 08, 2015 4:09 am
You are welcome.
There are lots of academic study's now on using integrated stratagy's with spia's ,life insurance and your own investing.
You can google the work of dr wade pfau , michael kitces . Moshe milevsky, blanchette and william bernstein for a good education on this stuff.
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lazyboy
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by lazyboy » Wed Nov 11, 2015 12:56 am
Thanks, Mj, good information on strategies. I also found this bogleheads discussion link about spia and balancing a portfolio:
https://www.bogleheads.org/forum/viewtopic.php?t=99684
It seems what strategy you take depends on the consideration of what risk level you are willing to have to meet your goals.
Inside of me there are two dogs. One is mean and evil and the other is good and they fight each other all the time. When asked which one wins I answer, the one I feed the most.�
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mathjak107
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by mathjak107 » Wed Nov 11, 2015 4:58 am
That is all it is about. Matching your pucker factor to realistic goals.
As most find out looking at pretty charts and driving looking in the rear view mirror rarely gives you the results it shows previously.
Your returns and growth are all going to be unique to only you and your time frame.
The fact the pp had a good run when you had little money in it or the fact the stock markets had a great 17 year run when i had little money invested is a moot point.
What hits the hardest is what happens when you have maximum dollars accumulated.
In my case had i missed the last 5 years in equity's it would have had a huge effect on my retirement budget. Like i said earlier , i couldn't care less that returns were weak from 2000 on . The proportion of money invested in 2000 was way way less.
So everything is about what happens to your biggest pile of dollars at any point in time.
There is likely not going to be one strategy or allocation that works all the time and forever .
It is up to you to monitor your own growth and find your own measuring stick to determine if you are on track or not.
Even small ups and downs can have pronounced effects depending on dollars accumulated.
The difference between the pp being down 2.50% and my model being up 2% is 120,000.00 dollars. That is more than most americans even have saved.
So little differences in how you allocate can produce big differences up and down.
Since 2000 volatility has become far greater and swings in allocations have been getting wider for the same allocation..
Perhaps future investing will involve insurance products designed to protect volatility from to much volatility. You can see on some down days even the pp swings more than 1% . That is like a 350 point drop in a 50/50 mix so the pp isn't really isolated either.
Going forward is going to have some pretty tough headwinds no matter what we do.
No matter what the plan you always need a plan B .
My plan B is my allocation allows me quite a few years in cash and bonds to wait out any down turns. The bonds are way less interest rate sensitive than long term bonds so if i have to sell them during rising rates the losses will be slight.
I would hate to have to sell bonds that were as volatile as stocks if i needed to refill cash.
I also have taking social security as part of plan B . By filing it drops withdrawals way down..
Your plan B will vary.
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mathjak107 on Wed Nov 11, 2015 6:53 am, edited 1 time in total.
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ochotona
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by ochotona » Fri Nov 13, 2015 9:14 am
Another "Cash is King" morning!
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mathjak107
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by mathjak107 » Fri Nov 13, 2015 10:48 am
it will be like this until the rate increase .
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mathjak107
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by mathjak107 » Sat Nov 14, 2015 3:38 am
for the week no changes to the portfolio's but i did add exxon back as my speculation stock . i owned it last month and sold it at a 15% profit 10 days later . so trying again since it is back in to the high 70';s again . i was going to take a speculative short term shot with gld but with exxon coming down i prefer exxon to gld .
all fidelity models still positive fractionally ,
for comparison pp is down 3% assuming at least 1% on cash .
tlt down 3%
gld down 9%
vti down 1%
cash +1%
fidelity insight growth model up .25%- 90% stock allocation
growth and income model up .01 69/31 stocks/bonds
income and capital preservation model up .03 26/ 74% stocks/bonds
the speculative select model for ghost , since he expressed interest is down 2.90%
so far all portfolio models including the pp have fallen below my reference for the year , which is if i did nothing that year but buy a cd is the trouble of investing worth it .
so far the cd wins but i think the models will all end positive in december beating the cd but not by much .
there was a 120k difference between the models and the pp last week based on the amounts i would have had invested , this week there is a 90k difference .
i will post the dollars difference each week as that is what counts at the end of the day .
anyone feel like tracking the IVY YTD ? that would give us the pp , conventional investing models of all volatility levels and risk mgmt models in real time .
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mathjak107 on Sat Nov 14, 2015 9:51 am, edited 1 time in total.
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mathjak107
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by mathjak107 » Tue Nov 17, 2015 6:09 am
nice jump in exxon yesterday . a another couple of days like that and it will be profit taking time in it again . eventually it will go on to be higher after i sell but i really don't care with these quick speculations .
if i can get another 3% on top of yesterdays gain trading in and out the last 5 weeks resulted in a 20% profit .
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Reub
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by Reub » Tue Nov 17, 2015 3:35 pm
Exxon down 1.16% today. You forgot to post it.
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mathjak107
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by mathjak107 » Tue Nov 17, 2015 3:37 pm
once a week i will. It was up 3.50% yesterday.
Gld was down 1.32% today and wasn't up 3.50% yesterday so i am glad i did not go with it.
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mathjak107 on Tue Nov 17, 2015 3:41 pm, edited 1 time in total.
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mathjak107
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by mathjak107 » Sat Nov 21, 2015 12:26 pm
weekly update . no changes
fidelity insight growth model up 3.50% YTD
growth and income model up 2.50% YTD
capital preservation and income model up 1% YTD
exxon i bought last weel flat .
PP is still down - minus 2% YTD
difference between 50/50 portfolio and PP is 110K . just a little less then the 120k we had as a max difference in balance since i have been posting this .
Last edited by
mathjak107 on Sat Nov 21, 2015 2:44 pm, edited 1 time in total.
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mathjak107
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by mathjak107 » Tue Nov 24, 2015 8:58 am
xom sold today . another 2-1/2% profit on top of the 16% . i will likely re-buy when it falls back in to the 70's again . .
a few analysts rated xom under perform so i will see if that drives it lower .
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mathjak107
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by mathjak107 » Tue Nov 24, 2015 9:28 am
i didn't lose anything i sold it this morning at a profit . i went up a bit since i sold this morning but that is okay . i have never caught the top in anything in ny given day nor the bottom . it may even go higher tomorrow . but when you do things by the seat of your pants that is how it goes .
but the profits are usually good regardless and it is only fun money
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mathjak107 on Tue Nov 24, 2015 9:32 am, edited 1 time in total.
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mathjak107
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by mathjak107 » Tue Nov 24, 2015 9:49 am
well yes , if i didn't make it , i lost it , so in wall street thinking you are correct .
but my piggy bank says we are still another 2-1/2 % higher than had we not bought it barely a week ago . .
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Tom
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by Tom » Mon May 09, 2016 1:40 pm
Time for a mathjak update. What's the YTD?
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Tom
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by Tom » Mon Jun 13, 2016 3:41 pm
With the PP up above 10% YTD this year, I'm curious to know where you're at mathjak to see if your strategy is still up ahead or if this year balances out PP's lackluster performance last year.
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Xan
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by Xan » Mon Jun 13, 2016 3:51 pm
Tom wrote:With the PP up above 10% YTD this year, I'm curious to know where you're at mathjak to see if your strategy is still up ahead or if this year balances out PP's lackluster performance last year.
Mathjak has long since been banned.
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barrett
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by barrett » Tue Jun 14, 2016 8:24 am
Xan wrote:Tom wrote:With the PP up above 10% YTD this year, I'm curious to know where you're at mathjak to see if your strategy is still up ahead or if this year balances out PP's lackluster performance last year.
Mathjak has long since been banned.
I don't think that is correct. My understanding is that he left voluntarily because we are a bunch of Kool-Aid drinkers.