Oh how it hurts to see no gains

[buddtholomew]

Today was also particularly brutal because of the wicked 180 degree turn the market took after about 10:15am. Can't say I've had many top-10 best performance days reverse into top-10 worst performance days in such short order.

But yeah Budd, at least today 100% stocks is faring worse than the PP.

Please do not continue to make reference to me and a 100% stock portfolio. I have never compared the PP to a 100% stock portfolio (that I recall), but rather a traditional BH 60/40 allocation.

I did not intend to make that reference. Actually I'm quite supportive of your concerns about the PP. Was just stating that at least there was some solace today in that stocks finally underperformed the PP. Albeit not by much.

No problem and thanks for the clarification. I intend to continue investing in the PP as I am drawn to positive inflation adjusted returns (3-4% range) as well as reduced volatility over a conventional portfolio. My main concerns are twofold - 1. that the portfolio will not deliver on these historical returns and, 2. I will be forced to liquidate holdings at an in-opportune time (PP down and job loss).

Thank you for your comment dragoncar. It is comforting to know that I am not the only one thinking along these lines.

[Tyler]

No worries Bud. As mentioned, your angst gives voice to what many are feeling.

[craigr]

There are no guarantees in investing. Stocks are at an all time high. Money flows from other assets into the stock market as investors chase returns. Over the long haul this is a bad idea. But if someone wants to jump on the stock gravy train that's fine. I just wonder why they weren't doing it four years ago when they were much cheaper. There is always going to be someone somewhere somehow posting high returns. After the fact portfolio analysis is easy. It's the future part that's tough.

But if an investor is into watching the markets each day and volatility gets to them then they should be 100% cash and not worry about it any more. Why drive yourself nuts watching the markets constantly? There is no investing strategy that can promise and deliver constant high returns. I rode out several periods of negative returns with the portfolio and it can be stressful, but for me it was less stressful than what I saw others going through. I feel good being widely diversified but again if it's an issue for an individual investor to handle then sitting in cash is a good option and probably a good option for anyone looking to invest but does not like any form of volatility.

[Alanw]

Remember what HB said: Review your portfolio once a year.  Apparently we're all not doing that.

[craigr]

Remember what HB said: Review your portfolio once a year.  Apparently we're all not doing that.

Yep. There are behavioral psychology reasons why checking a portfolio frequently is a bad idea. Checking every day is just begging for problems. That kind of behavior probably means an investor should re-think their risk tolerance and go much more conservative with their assets and a avoid anything with volatility.

[iwealth]

Remember what HB said: Review your portfolio once a year.  Apparently we're all not doing that.

Did he recommend a yearly rebalancing then as opposed to 35/15 bands? I guess one can do both - check once per year, rebalance if those bands are breached.

[craigr]

Remember what HB said: Review your portfolio once a year.  Apparently we're all not doing that.

Did he recommend a yearly rebalancing then as opposed to 35/15 bands? I guess one can do both - check once per year, rebalance if those bands are breached.

Yes. Check once a year. Or perhaps if you hear about something really big going on in the markets that may justify looking sooner. Think 2008 market crash, etc. if a band is hit then rebalance. Otherwise, leave it alone.

Most people would be surprised to know that I check the portfolio only a few times a year myself. And that's primarily due to blog updates. Otherwise I don't track the performance very closely at all and I'm much happier for it. Daily tracking will drive any investor nuts. I'd even say avoid investing forums as well. Again the only reason I post much is because I co-moderate here. But otherwise I read virtually no financial news, commentary, or opinion. I ignore it all. Try taking a news fast as well. The market news is totally inactionable and useless.

And I'd give the same advice for any investing style 60/40 or otherwise. Less checking is best.

https://www.google.com/search?q=jack+bogle+dont+peek

Typing this on a cell phone sorry for typos!

[systemskeptic]

Seems cash is poised to be today's big winner. Good thing I have a quarter of my portfolio in it. 

Your cash just averages with TLT so it's the same as if both experienced a -0.75% loss.  So no winners today in the PP.

[buddtholomew]

Perhaps you should check more often so that you can empathize with those of us that are concerned. If you look once or twice per year and the portfolio is down 15-20%, what, if any, action would you take? I am concerned that I would capitulate.

[Ad Orientem]

Perhaps you should check more often so that you can empathize with those of us that are concerned. If you look once or twice per year and the portfolio is down 15-20%, what, if any, action would you take? I am concerned that I would capitulate.

I can't imagine a scenario short of nuclear war where the PP would take a 20% 12 month hit. Worst case I think was 1981 where, if memory has not failed me, it lost about 8-9%, though peak to trough it might have been steeper. But that is exactly why I don't want to know what's going on. I would almost certainly freak out during some short term drawdown and there is nothing to be gained by that.

Others have said, but it bears repeating. If you don't have any stomach for near term volatility then stick to T Bills and ST TIPS. There is nothing wrong with that, if it fits your risk profile. Being honest with yourself about risk tolerances is one of the most important aspects to successful investing.

"If you can't stand the heat, stay out of the kitchen."
-Harry Truman

[melveyr]

Perhaps you should check more often so that you can empathize with those of us that are concerned. If you look once or twice per year and the portfolio is down 15-20%, what, if any, action would you take? I am concerned that I would capitulate.

I can't imagine a scenario short of nuclear war where the PP would take a 20% 12 month hit. Worst case I think was 1981 where, if memory has not failed me, it lost about 8-9%, though peak to trough it might have been steeper. But that is exactly why I don't want to know what's going on. I would almost certainly freak out during some short term drawdown and there is nothing to be gained by that.

Others have said, but it bears repeating. If you don't have any stomach for near term volatility then stick to T Bills and ST TIPS. There is nothing wrong with that, if it fits your risk profile. Being honest with yourself about risk tolerances is one of the most important aspects to successful investing.

"If you can't stand the heat, stay out of the kitchen."
-Harry Truman

The PP has had a couple of -20% drawdowns intra-year when looking at monthly data and adjusting for inflation.

[MediumTex]

I haven't looked at my portfolio in months.

I just stopped doing it one day and never started back up.  I have a rough sense of where I am with each asset (i.e., not close to a rebalancing point), but other than that I hardly ever think about it at all other than in the theoretical topics we discuss here along with others' experiences with their porfolios.

As an investor, I've never been happier.

[craigr]

Perhaps you should check more often so that you can empathize with those of us that are concerned. If you look once or twice per year and the portfolio is down 15-20%, what, if any, action would you take? I am concerned that I would capitulate.

I wouldn't take any action. Just as I didn't in 2008. And I don't check on purpose. It serves no function to me because I can't control the markets. I've been to this rodeo many times. But that's what's best for me.

Again, if the volatility is a problem then the best investment to use is probably cash. No volatility, but there will be unseen inflation losses. All investments have risks. Each investor needs to decide what is best for their own situation. There is no one size fits all solution.

[craigr]

Also I'd just add that in 2008 the portfolio did have a big drawdown in the 20% range at the worst. No portfolio really escaped that if they owned stocks. But I didn't really see the worst of the drawdown because I was checking things infrequently.

A big risk with the permanent portfolio is that the assets are do darn volatile. Watching them in isolation is emotionally trying. I really try to focus on total portfolio value only. In losing times doing this will show smaller losses even though one asset can be doing horribly.

But mostly I find it is best to not look often. If you check constantly your mind is seeing small losses and psychologically it is very tough. There is very good research on behavioral finance that discusses this. It may be worth reading about it and consider if the tips can be useful. I found they were and use knowledge of behavioral finance to help my own personal investing goals.

Otherwise if the stress is too much right now then I would say the investor risk tolerance is not correct for them.

[rocketdog]

Remember what HB said: Review your portfolio once a year.  Apparently we're all not doing that.

Did he recommend a yearly rebalancing then as opposed to 35/15 bands? I guess one can do both - check once per year, rebalance if those bands are breached.

Yes. Check once a year. Or perhaps if you hear about something really big going on in the markets that may justify looking sooner. Think 2008 market crash, etc. if a band is hit then rebalance. Otherwise, leave it alone.

You can also set up a portfolio tracker on certain financial web sites (I use Yahoo! Finance out of habit) and have them send you an alert when the price of a fund reaches a certain amount.  That way you would literally never have to check your PP, because the technology is doing it for you. 

[AgAuMoney]

Really it is all just a matter of self control.  Part of that involves knowing yourself.  If you want to look then look but don't make stupid decisions.  If you don't want to look and that helps you, then don't look.  It doesn't really matter.  The only thing that matters is if you can't help making stupid money decisions because you look.

I'm not drawn to tragedy so I check less often the worse it gets or more often when times are good.  But still I tend to check multiple times per day on most days.  I even wrote a simple python script that pulls current quotes and tells me where I stand. 

Right now (using Friday closing numbers) it tells me that overall I am down $11,057 for the year to date.    That includes everything but my checking account and covers VP and PP with about 40% PP.  On a bright note, I used to have about 37% gold and silver (PP+VP) but am now down to only 22.3%.  I didn't sell any.  Or buy any.  (but getting close since the PP C/G/T/S = 26.9/19.9/21.6/31.6)


But really, so much of the complaints I'm seeing are so first world it would be hilarious if it wasn't so sad.  At first I thought it was a joke, but...  A loss of 2% YTD being horrible because it is $20K sounds like nothing so much as having acquired too much money too fast.  That 2% is not an unusual daily move and here we are 20 weeks in.  It happens.

You can either put your money under your mattress or you can put it to work.  Choose invisible losses vs. visible potential loss and potential gain.  You can divide it any way you like, but those are the options.  It's money.  That's the way it is.

If you have so much money that the amount of movement on a bad day really bothers you, you may need perspective gained by taking time off and doing some humanitarian service on skid row or in a 3rd world country.  Or you may be able to gain perspective by simply noticing when your money causes you pain, and each time giving away a chunk of your assets to a worthy charity.  1%-2% may seem significant to you now, but if you pick a good charity it will be even more significant to them and those they help.

[buddtholomew]

Pug, are your PP investments in a taxable account or gold holdings physical? If they are not, I too am interested in the rationale for exceeding the upper bands without rebalancing.

You have a point with respect to a 1-2% decline, but others have an emotional attachment to their finances (healthy or not) whereby a decline in total portfolio size encites a visceral response that it difficult to contain. Charitable donations only serve to worson some of the emotions in my experience.

[AgAuMoney]

... I used to have about 37% gold and silver (PP+VP) but am now down to only 22.3%.  I didn't sell any.  Or buy any.  (but getting close since the PP C/G/T/S = 26.9/19.9/21.6/31.6)

Just trying to get a handle on your thought process here: Why didn't you sell some gold when you were well over the 35% band? I would be bummed that I didn't if the asset took a subsequent dive like gold did. Isn't that the whole point of mechanical rebalancing? And similarly, why would you rebalance now when stocks hit the upper band, if you didn't do so for gold?

My PP is only about 40% of my assets.  The 37% gold and silver was PP + VP.  Currently with 22.3% gold and silver and my PP being 19.9% gold, obviously I have gold outside of my PP.  I know the gold in the PP never hit 35%.  I'm pretty sure it never even hit as high as the 31% stocks are now.

Oh, and just to whine a little bit more...  the "down" I posted is from the value at the first of the year.  Earlier in the year I was up a lot.  Definitely dropping this much does sting.  But you have to expect it and plan for it.  That's why I have a few months expenses in CDs and the like.  "In case of emergency, break CD."

[Libertarian666]

I guess I must be weird. I value my portfolio every week, and am down a lot more than 2% for the year (being very gold-heavy), but that doesn't impel me to do anything stupid.

[rocketdog]

Nobody likes to see their portfolio drop in value.  Before I ever heard of the PP, I used to face the same crisis whenever my retirement accounts dropped in value.  But I always made myself take a very detached, clinical perspective, which usually led to a buying spree to snap up the bargains. 

It goes against human nature to buy when everyone else is selling, but that's how you make money.  You just have to take the long view and learn to embrace patience. 

This topic reminds me of portions of the poem "If" by Rudyard Kipling:

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”?

If you can talk with crowds and keep your virtue,
Or walk with Kings—nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And—which is more—you’ll be a man, my son!

[portart]

It's interesting that this thread I started has grown to 161 replies! My guess is that the title has hit a chord with lots of us PP strategists. We are all kind of spoiled from years of upward growth and smug about dodging the tornado of 2008. Now were the poor boys as PPRFX went from the No. 1 fund to near the bottom and Morningstar dropped it from 5 stars to 4. The stock market has kicked out butts and not rewarded us with even marginal growth to balance out the losses in other sectors.

The leading cheerleader for this fund has mainly been commodities and gold which have been plummeted as of late. It's a matter of opinion if this drop has been overdone or is the fate of us all, for perhaps a long drought, as gold has exhibited in the past of sitting dead and hated. If PPRFX keeps rebalancing gold and if it keeps dropping, it might be years before this fund gets to $50 a share which it briefly touched. I am personally using that random number as the point where things are beginning to work my way again as I am still using the fund for my PP.

Still, if your lucky enough, as I have been to hit your retirement goals number, it hurts less to miss gains compared to losing 15% of your portfolio. I sleep better knowing that any coming storm will not put me back to square one. I have to admit though, with stocks growing as much as they have been with no gain in my portfolio, it is hard to imagine where a 10% YTD gain will come about in the future. We would need the market to continue to charge ahead with gold chasing it on the way up, an unlikely scenario. But as they say, better to be safe then sorry.

[craigr]

These threads come up on the forum from time to time. In fact, I was going to write more about it, but then realized I already did back in 2011 when people were worked up about a down month.

https://web.archive.org/web/20160324133 ... requently/

You will go nuts checking portfolio values frequently. If you don’t go nuts because you think you are losing money, then just wait until your neighbors are bragging about their +20% gains some year at the company Christmas Party. That will drive you insane with jealousy if you maintain a short-term attitude (but of course they never brag about the negative years they have, do they?).

It is not a big surprise that now everyone wants to dive into stocks and is envious of their performance. But why weren't they loading up on stocks 3-4 years ago as they were much cheaper? Why now at an all-time market high?

And the portfolio really is doing what it always has done. Investor capital flows from a disliked asset (gold) and into a liked one (stocks). Same thing happened in 2008 (disliked stocks liked bonds). Also in 2009 (disliked bonds, liked gold and stocks). Etc. This happens all the time but investor memories are really short. Total portfolio value matters most, not individual assets. I say this over and over again. A 0% year for me is much better than potential huge losses from taking concentrated risks as many like to do in whatever their pet asset is.

Investor psychology is strange that they will always look at the losses as hurting more than the gains (loss aversion). The more they see those losses, the more they feel them despite the fact that total portfolio value is negligibly affected. This is a big reason why a fund is a good idea for some investors because the individual price movements are concealed from their eyes. It's also a very good reason to just stop looking at your investments so often. Whether it's stocks, bonds, gold, etc. Looking at prices constantly is a very bad idea.

[Alanw]

The voice of reason.

[AgAuMoney]

I just turned on an automatic weekly investment into gold, that at today's market prices will take about 18 weeks to bring my gold allocation in my PP back to 25%.  That will encompass about all of gold's typical summer doldrums.

My PP gold allocation is slightly below my PP LTT allocation.  I'm debating adding LTTs.  No decision (which means "no") as yet.

I plan to next week reduce my stock allocation in my PP by about 2.5% (bringing it under 30%) and reduce in my VP by about 1/2 that dollar amount.  For the VP the change is primarily just housekeeping.  It is one company I want to sell (30 May was 1 year) but I also own 2x that same company in my PP and will keep it there.  There are three companies on my shopping list that I would like to own in my VP should a value opportunity appear in any or all of them.  I expect I'll own some of one or more by the end of the year.

It looks to me like a good time to sell stock and an opportunity to buy gold better than we've seen for a couple of years.  But still, this is going to hurt my dividend income.  I expect natural increases will make it up before the end of the year and any other stock buys will only help.

[portart]

I just bought the Permanent Portfolio book and I am enjoying reading it.