Question on drawdowns

General Discussion on the Permanent Portfolio Strategy

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Jeffreyalan
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Question on drawdowns

Post by Jeffreyalan » Mon Jan 28, 2019 8:42 pm

I have a question on drawdowns. I see a lot of concern about drawdowns. Pardon my ignorance but unless the drawdown happens in the first year or so then is it as much of a concern?

I started doing a Desert Portfolio about 3-4 years ago. I am averaging about 4.5% a year, much better than the return on a savings account or Treasury bills. So at this point, even if a drawdown of 5-7% were to occur next month and I were to have to withdraw some funds at that tine, I would still be ahead of the alternate safe route.

Am I looking at this the wrong way?
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drumminj
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Re: Question on drawdowns

Post by drumminj » Mon Jan 28, 2019 10:31 pm

I think the issue here is draw downs test your commitment to your asset allocation, and big drawdowns cause people to do stupid things like buy high and sell low.

For folks who don't have the stomach to weather a 50% drawdown and are likely to panic sell, an asset allocation that minimizes drawdowns is to their advantage/will help them stay the course
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