Gyroscopic Investing

mathjak107 wrote: glad you asked .  i am left handed and have diabetic neuropathy in my finger tips and toes . so i type with just one finger . the others are to sensitive to use for as much as i type. so all you see  i post is typed with just one finger.

the good news is i have the diabetes under control with no meds . just diet , weight lifting and running 4 miles every other day non stop .

at 62 this just aint fun  .    lol

Okay, understood. Great one finger typing.

i have been known to have the fastest finger in the east    lol.


lets keep this g-rated  ha ha ha 

gold is up 6.50 in the futures. i would have thought more considering the no vote today. 

mathjak107 wrote: gold is up 6.50 in the futures. i would have thought more considering the no vote today.

Something to consider

http://gata.org/node/15517

Gold isn't going anywhere for as long this is allowed to happen:

http://www.zerohedge.com/news/2015-06-2 ... have-proof


http://www.zerohedge.com/news/2015-07-0 ... -soar-1260

So, what's the consensus - take half of my TLT investment and move it to Wellesley, or build a barbell?  If a barbell is the answer, could someone give me a step by step example and tell me where and how to buy bonds.  To date, I've owned nothing but bond mutual funds or etfs, but like mathjak, I don't know that it makes a lot of sense to have 20-25% of my portfolio in long term treasuries.  Say we have a $400,000 portfolio in a 4x25 distribution.  What bonds and maturities would it make sense to buy and with what distribution.
Thanks

There is no consensus. Your LTTs are already part of a barbell--cash is the other end.

I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble coming up with anything better for the remaining 75% of the portfolio than 1/3 each in stocks, LTTs, and gold. Maybe 1/4 each domestic stocks, foreign stocks, LTTs, and gold. But the difference is not that much. If you really want a kick, take that and swap out total stock market for small-cap value and international stocks for emerging markets. That allocation packs a punch but may result in drawdowns higher than what a typical PP investor can handle. I say stick with the plan. It's been a rough year for portfolios of all flavors. Hang in there.

Pointedstick wrote: There is no consensus. Your LTTs are already part of a barbell--cash is the other end.

I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble coming up with anything better for the remaining 75% of the portfolio than 1/3 each in stocks, LTTs, and gold. Maybe 1/4 each domestic stocks, foreign stocks, LTTs, and gold. But the difference is not that much. If you really want a kick, take that and swap out total stock market for small-cap value and international stocks for emerging markets. That allocation packs a punch but may result in drawdowns higher than what a typical PP investor can handle. I say stick with the plan. It's been a rough year for portfolios of all flavors. Hang in there.

How have you been evaluating PS? Are you doing rolling 20 years and starting the portfolio every year from 1971 to 1995?

This is the most informative 24 hours I've ever read in a forum.  Post after post of good solid information and opinion.  I've never seen this anywhere else - at this level of intelligence and without belligerence.

Mark Leavy wrote: This is the most informative 24 hours I've ever read in a forum.  Post after post of good solid information and opinion.  I've never seen this anywhere else - at this level of intelligence and without belligerence.

I blame PointedStick for most of that hah. Are you talking about this particular thread or multiple threads?

1NV35T0R (Greg) wrote:

Pointedstick wrote: There is no consensus. Your LTTs are already part of a barbell--cash is the other end.

I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble coming up with anything better for the remaining 75% of the portfolio than 1/3 each in stocks, LTTs, and gold. Maybe 1/4 each domestic stocks, foreign stocks, LTTs, and gold. But the difference is not that much. If you really want a kick, take that and swap out total stock market for small-cap value and international stocks for emerging markets. That allocation packs a punch but may result in drawdowns higher than what a typical PP investor can handle. I say stick with the plan. It's been a rough year for portfolios of all flavors. Hang in there.

How have you been evaluating PS? Are you doing rolling 20 years and starting the portfolio every year from 1971 to 1995?

Yeah, 10 and 20-year periods. That said, I will reverse my previous statement because I believe I may have found a new allocation I like better than the PP and that I believe better fits the world as it actually exists, both in the present and the past. More to come after further investigation.

mathjak107 wrote: glad you asked .  i am left handed and have diabetic neuropathy in my finger tips and toes . so i type with just one finger . the others are to sensitive to use for as much as i type. so all you see  i post is typed with just one finger.

You'll find Alpha Lipoic Acid as a supplement very helpful for reversing diabetic neuropathy.

Pointedstick wrote: I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble

I don't know where you keep coming up with 6.5-7 years of expenses in cash.  Everything I read is one month to 2-years.  Anchoring bias???

Great observation though.

MachineGhost wrote:

Pointedstick wrote: I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble

I don't know where you come up with 6 years of expenses in cash.  Everything I read is several months to 2-years.  Anchoring bias????

Everyone sensible, I guess. 6 months to 2 years seems too risky to me. Also, wasn't there some recent thread where it was revealed that people's actual net worth was on average 15-30% cash or something? I remember reading that nobody wants to admit that the typical American's financial picture is way more cash-heavy than anyone wants to admit.

Re cash has holdings...

6+ months emergency fund while accumulating

6-7 years in cash/short term reserves for retirement bucketization is where I've seen that level mentioned.

Mark Leavy wrote: This is the most informative 24 hours I've ever read in a forum.  Post after post of good solid information and opinion.  I've never seen this anywhere else - at this level of intelligence and without belligerence.

i agree , i am amazed at the level of respect and civilness folks have when they disagree . you do not see this anywhere else .

Pointedstick wrote: There is no consensus. Your LTTs are already part of a barbell--cash is the other end.

I've spent the afternoon trying to come up with a portfolio superior to the PP, but with the realization that every portfolio should include the roughly 7 years of cash for expenses that everyone says you should have around anyway, I'm just having trouble coming up with anything better for the remaining 75% of the portfolio than 1/3 each in stocks, LTTs, and gold. Maybe 1/4 each domestic stocks, foreign stocks, LTTs, and gold. But the difference is not that much. If you really want a kick, take that and swap out total stock market for small-cap value and international stocks for emerging markets. That allocation packs a punch but may result in drawdowns higher than what a typical PP investor can handle. I say stick with the plan. It's been a rough year for portfolios of all flavors. Hang in there.

you are aware that the 6-7 years cash apply's only to a decumulation portfolio and not an accumulation stage portfolio ? 

that 7 years came about because because we never had a 15 year period no matter how bad things ever were where you couldn't  sell  equities at a profit to refill your buckets 1 and 2 . one being safe money to live on and 2 being bonds ,and income funds .

personally i find  7 years way to much cash to hold and prefer 2 years cash at a time.

studies show even holding no cash  would not influence things much even selling equities at a loss at times.

the excessivve cash and bonds act as drags in up markets  weighing down gains . the extra gains in the up cycles which typically happen more than down cycles compensates for any losses you might have selling equities when they are down.

buckets of cash add no value as far as performance , they just comfort the mind when markets are down.

Pointedstick wrote:

mathjak107 wrote: did gold rise ?  the long bond just went from 2.30% in january to 3.25% now .

And long bonds did not go down 30%. During that timeframe, TLT (long govt bond ETF) is down 7.8%, not 30%. YTD, gold is down 1.5% and stocks are up 1.5%; basically both flat. Hence, "Nowhere to hide." 

Or perhaps a better way to put it: nothing to hide from!  Nothing really went down.  Nothing bad is happening.  No blood in the streets.  All four assets are just humming along boringly in 2015, so far.

mathjak, I feel like you may be overemphasizing stocks because you had the good fortune to have your prime earning and investing years during the largest stock bull market in US history, and are assuming that the future will look like the past. Maybe it will, but I would argue that for the past 15 years, it already hasn't. Stocks have had a CAGR of under nominal 5% over the past 15 years, accompanies by her high volatility. Add bonds to get a 50/50 portfolio and you get about 6% but don't reduce the volatility much. The PP beat this during the same time period!

You had the good fortune to invest very aggressively during a time that turned out to be ideal for it. But what does your crystal ball tell you about the current set of market conditions? Aggressive investing would have produced disappointing results with a lot of emotional heartache for the last 15 years.

not over emphasizing at all . with few long term exceptions a conventional portfolio has returned pretty decent returns.  my current crystal ball says  rates will rise , gold will meander and stocks will return below average returns at least for the next 5 years.

that is what i will plan for . if stocks do better and rates do not rise , even better , it will be a nice upside surprise  for my plan.

Referencing an earlier post on bond duration mathjak107.

TLT: 1.85%
SHY: .02%

Days like today reinforce why I am comfortable with a barbell approach to FI investing.

I only produce the totals below to demonstrate that we can reduce interest rate exposure AND retain the benefits of long-term treasuries.

SPY down .28%, TLT up 1.85% and a combination of TLT/SHY (AVG duration 5.6 yrs) up .62%

the  good thing is about  the pp is it  shines on the big down days .  the bad thing is there usyually is not enough of those days over the long term to match conventional investing.

mathjak107 wrote: not over emphasizing at all . with few long term exceptions a conventional portfolio has returned pretty decent returns.  my current crystal ball says  rates will rise , gold will meander and stocks will return below average returns at least for the next 5 years.

that is what i will plan for . if stocks do better and rates do not rise , even better , it will be a nice upside surprise  for my plan.

If you predict below-average returns for stocks over the next 5 years, that would mark 20 years of poor stock performance and low interest rates to make up the difference. That is the kind of time period that I would describe as "long-term". If I am going to pile into volatile assets for the promise of returns superior to my conservative portfolio, I don't want them to be in the toilet for two decades. That would be the worst of both worlds! I think you said yourself that the success of a 30-year retirement portfolio is determined by the first 15 years. Well, if we had 15 years like this, the last 15 might not be in good shape. I am planning to retire in 4 years. I don't have decades to wait out underperformance or make up the losses with new contributions.

well lets see where the pp ends up .  we can't speculate in advance at all.  we had 15 years of crappy market returns but my diversified portfolio did fine . not great but in the 6% return area  for the time frame.

here is how the model  did vs the s&p 500 . just a diversified mix of fidelity funds .  nothing special except the discipline to stay the course.  you can see any period of time you like .

Pointedstick wrote:

mathjak107 wrote: not over emphasizing at all . with few long term exceptions a conventional portfolio has returned pretty decent returns.  my current crystal ball says  rates will rise , gold will meander and stocks will return below average returns at least for the next 5 years.

that is what i will plan for . if stocks do better and rates do not rise , even better , it will be a nice upside surprise  for my plan.

If you predict below-average returns for stocks over the next 5 years, that would mark 20 years of poor stock performance and low interest rates to make up the difference. That is the kind of time period that I would describe as "long-term". If I am going to pile into volatile assets for the promise of returns superior to my conservative portfolio, I don't want them to be in the toilet for two decades. That would be the worst of both worlds! I think you said yourself that the success of a 30-year retirement portfolio is determined by the first 15 years. Well, if we had 15 years like this, the last 15 might not be in good shape. I am planning to retire in 4 years. I don't have decades to wait out underperformance or make up the losses with new contributions.

if you have 4 years to go then if you remember what i said , the pp is perfect.

i would do that at least 5 years out and maybe more . by that point you pretty much made  the bulk of your nest egg  short of the remaining few years.

so that was the point i was bringing up , the pp is great for preserving assets.

but after that i am not comfortable  using the pp in retirement .  to untested ,  and in un charted waters with rising rates  rates  and high stock valuations so  potentially stock  returns may not be the great so i don't want gold and heavy bets on interest rates destroying whatever the markets can produce.

remember it is those moves in  longer term bonds that hurt success rates in the trinity study.

nope no pp for me in retirement just a  plain ole 50/50 mix  using less interest rate  sensitive bonds .