Gyroscopic Investing

Hello all,

I'm a 22 year old just starting my Phd in neuroscience. I won't be making much money while I'm in school (around 5 years) but I do have a couple thousand saved in the bank.

I would like to safely invest some of my money so I could make even around 100 dollars or so a year. I thought about penny stocks but it seems I want something safer and something I don't have to constantly check.

Are treasury bonds my best bet here? it seems like they are safe since i'm guaranteed to get my money back and it's a higher interest rate than certificates of deposit. I saw this tutorial on treasury bonds (http://gyroscopicinvesting.com/forum/ht ... ic.php?t=0) and i was wondering if it is really that simple

Thank you for any insight!!

With that amount of money I might just open an account with PRPFX.  When you get to $10,000 or so, coonsider moving into an HB PP.

If you want to start investing, I would recommend a straight 4x25 permanent portfolio.

This is the Permanent Portfolio Forum; did you really expect us to say something different? 

I would certainly not create a 100% bond portfolio right now.  Bond rates are at historical lows which makes it likely that they will fall in value soon.  (I said likely --- no one can predict these things.)

If you only have a few thousand dollars to your name you might consider just holding everything in interest-bearing cash accounts.  While I was in grad school, my income and expenses were unstable; I just stockpiled cash and was glad I did so.

KevinW wrote: If you want to start investing, I would recommend a straight 4x25 permanent portfolio.

This is the Permanent Portfolio Forum; did you really expect us to say something different?  ;D

That reminds me of how a few years ago there was a competition to choose the new singer for INXS using some kind of reality show format.  I didn't watch any of it, but remember the "new" INXS singer being interviewed and the interviewer asked him what his favorite 80s band was.  The guy got a silly look on his face and then blurted out "INXS!"

Yeah, sometimes these answers write themselves.

neuro wrote:

I would like to safely invest some of my money so I could make even around 100 dollars or so a year. I thought about penny stocks but it seems I want something safer and something I don't have to constantly check.

Please don't "invest" in penny stocks.

Thank you for the replies!!

I have very little knowledge with finances, but I'm trying to learn as much as I can in hopes to start investing early. I have about 4k saved in a savings account that is tucked away and I get paid enough from my graduate assistant-ship to not worry about taking out any loans for living expenses. Also, my tuition is covered. So, while I'm not living a lavish lifestyle, I think I'm stable enough to invest some money (barring any emergencies )

It seems like having a more balanced financial portfolio is a good bet. Again, I'm learning all this on the fly so would it be best to meet with a financial advisor? I was hoping to invest on my own so I don't get hammered with fees later on.

Thanks again!

IMO advisors are unnecessary.  I would just read The Only Investment Guide You'll Ever Need by Tobias and Fail-Safe Investing by Browne.  Those books are a crash course in "what" to do.  If you want to learn "why" you can delve deeper.

Three pieces of advice:

1.  Don't get into debt.

2. Consider PRPFX for now. 

3.  Read the books recommended by kevinw.

Neuro
Welcome to the forum!  Obviously on a Permanent Portfolio forum you are going to get some predictable responses to questions like this.  But just because they are predictable doesn't mean they aren't good.  PRPFX and a standard 4x25% PP are both good choices.  I will add a few caveats.  First DON'T invest a dime in money that you may need in the next two years.  Even a PP is not absolutely impervious and you can have a down year.  They are rare, but it has happened.  Any money you think you may need in the next 24 months should be in cash in a bank account, MMF or very short term T Bill fund.  Secondly it's possible that you might have trouble with minimum investments in a standard 4x25% PP until you have accumulated a little more cash.  If that's the case I would say go with PRPFX and just add a little EDV, maybe 10%, on the side to smooth out the dollar portion of the fund.  My third caveat is that you will not be able to hold physical gold in a 4x25 PP at your current investment level.  Don't freak out.  An ETF (I like IAU) is perfectly fine.

P.S. I will add a book to Kevin's excellent list.  That would be The Bogleheads Guide to Investing.  In general we on the PP forum advocate a somewhat more conservative portfolio model than most Bogleheads.  But that book is full of really good insights on a wide range of subjects dealing with money, investing and life in general.  And though some might take issue with me for saying it, you could do a lot worse than just putting half your money in a broad based stock market index fund and the other half in a total bond market fund.  I do think the PP is a safer long term vehicle for investment but unlike most crazy and actively managed portfolios the 50/50 approach doesn't really bother me that much.  My only complaint is the lack of currency diversification.

The Bogleheads' Guide... is #3 on my list and I almost included it.  I think Tobias covers personal finance issues like insurance and debt more thoroughly, and the writing is livelier.  So Tobias gets the nod on my very-short-list of introductory books.

And I agree that 50/50 TSM/TBM is an OK portfolio.  Like the PP it has low expenses and a simple 1/N allocation, and will probably work great provided there's no currency crisis in your lifetime.  I think 50/50 total world stock/intermediate treasury index is a slight improvement.  I could live with that portfolio, though I prefer the PP.

I like buying individual corporate bonds myself. Many brokers only offer "investment grade" corporate bonds. Some brokers offer below investment grade bonds which pay a higher interest rate.

With a LOT of work, you can find corporations which were losing money a couple of years ago and thus have a poor credit rating, but are now making money. But their bonds pay a higher interest rate due to their poor credit rating. That would be below "investment grade". Note that corporations can stop paying their loans (bonds) at any time or can declare bankruptcy at any time. Or they may suddenly have a disaster - like a drug company has a drug which is found to cause cancer or whatever.

And investment advisors can not predict the future any better than you or I. Sh** happens! No one knew it was coming! Just be quick to cut your losses in that event.

Corporates take a lot of research work and news reading. News reading is contrary to going to college! But you need to know if that corporation is likely to continue making profits or go out of business. Read their financial reports.

I don't care for municipal bonds. Many cities/counties/states are having severe financial difficulties these days.

If you don't need the money within 5 years and don't want to risk losing principal in another economic downturn, then I would park it in I-Bonds until you can properly focus on investment management instead of your studies.

MG

neuro wrote: Hello all,

I'm a 22 year old just starting my Phd in neuroscience. I won't be making much money while I'm in school (around 5 years) but I do have a couple thousand saved in the bank.

I would like to safely invest some of my money so I could make even around 100 dollars or so a year. I thought about penny stocks but it seems I want something safer and something I don't have to constantly check.

Are treasury bonds my best bet here? it seems like they are safe since i'm guaranteed to get my money back and it's a higher interest rate than certificates of deposit. I saw this tutorial on treasury bonds (http://gyroscopicinvesting.com/forum/ht ... ic.php?t=0) and i was wondering if it is really that simple

Thank you for any insight!!

I like the PRPFX idea.  You can open an account for as little as $100, and then use their AIP. 

It's a good habit to get into.

AdamA wrote: I like the PRPFX idea.  You can open an account for as little as $100, and then use their AIP. 

It's a good habit to get into.

You mean $1,000, right?

MediumTex wrote:

AdamA wrote: I like the PRPFX idea.  You can open an account for as little as $100, and then use their AIP. 

It's a good habit to get into.

You mean $1,000, right?

No.  If you agree to use AIP then you can open an account for $100.

AdamA wrote:

MediumTex wrote:

AdamA wrote: I like the PRPFX idea.  You can open an account for as little as $100, and then use their AIP. 

It's a good habit to get into.

You mean $1,000, right?

No.  If you agree to use AIP then you can open an account for $100.

Oh, cool.

I assume at some point that PRPFX will become somewhat harder to invest in (higher minimums at least).  Their minimums have always seemed surprisingly low to me.

MediumTex wrote: Oh, cool.

I assume at some point that PRPFX will become somewhat harder to invest in (higher minimums at least).  Their minimums have always seemed surprisingly low to me.

I was surprised too. 

What determines a fund's minimum?  Any idea?

AdamA wrote:

MediumTex wrote: Oh, cool.

I assume at some point that PRPFX will become somewhat harder to invest in (higher minimums at least).  Their minimums have always seemed surprisingly low to me.

I was surprised too. 

What determines a fund's minimum?  Any idea?

I'm sure there is some fixed cost to the fund provider in setting up a new account, sending statements, etc. and obviously a fund company would rather have more of your money than less.

Vanguard has been active in raising and lowering some of their funds' minimums over the years, probably in response to flows of money.

Personally for such a small amount, I like Series I Savings Bonds...  You can even borrow from them for education expenses if needed.

Thank you all for the information

I read the book by Tobias and it was really helpful! But I guess I'm still unsure on how exactly to get started.

I think I'm going to invest 1000 in the PRPFX like many of you suggested for now. Do I just create an account on T Rowe Price and select PRPFX once I transfer over some money? I must be missing something, but most of the info I've been reading has been about the bigger picture of investing, not the details on how you actually starting doing it.

Thanks again for any insight!

neuro wrote: Thank you all for the information

I read the book by Tobias and it was really helpful! But I guess I'm still unsure on how exactly to get started.

I think I'm going to invest 1000 in the PRPFX like many of you suggested for now. Do I just create an account on T Rowe Price and select PRPFX once I transfer over some money? I must be missing something, but most of the info I've been reading has been about the bigger picture of investing, not the details on how you actually starting doing it.

Thanks again for any insight!

Neuro,
You will want to open an account with a broker of your choice.  This can be done online or in person although typically there are some important things they will need like copies of a valid ID etc.  You can also open your account directly with the Permanent Portfolio Family of Funds.  I think you can do that by mail.  Probably the easiest method is to look for a discount broker in your area.  Be sure they explain any and all fees and expenses associated with your account before you sign up.

neuro wrote:
Do I just create an account on T Rowe Price and select PRPFX once I transfer over some money? I must be missing something, but most of the info I've been reading has been about the bigger picture of investing, not the details on how you actually starting doing it.

Thanks again for any insight!

I think the best way is to do it through The Permanent Portfolio Family of Funds directly.  Why go through a broker?  It's just one other entity that can goof and rip you off.

Just go to PRPFX.com and download the pdf.  You have to mail them the forms, but it's very easy.  Should be setup in about a week.

AdamA wrote:

neuro wrote:
Do I just create an account on T Rowe Price and select PRPFX once I transfer over some money? I must be missing something, but most of the info I've been reading has been about the bigger picture of investing, not the details on how you actually starting doing it.

Thanks again for any insight!

I think the best way is to do it through The Permanent Portfolio Family of Funds directly.  Why go through a broker?  It's just one other entity that can goof and rip you off.

Just go to PRPFX.com and download the pdf.  You have to mail them the forms, but it's very easy.  Should be setup in about a week.

That's the way I would do it (and that's what I have personally done in the past).