Gyroscopic Investing

TLT has been dipping 6% since I purchased last week...Understand PP needs to be looked at on a  long term basis and each of the 4 items in the portfolio will cancel each other out with a combined positive return most of the time. Though SPY and GLD hasn't really been able yet to cover the loss from TLT alone and demonstrate the hedge...Is this a normal thing happened most of thime with pp or the drag of bond on pp currently is an anomaly?

It was bound to happen eventually with bond yields so low. The PP isn't designed to be stable on a day-to-day basis but rather a year-to-year basis. Take comfort in the fact that rising interest rates will actually help you in the long term as your short-term bonds and newly-purchased long-term bonds return more interest. The bond funds will eventually recover, and with higher dividend payments too.

I just posted about this in the bond forum.  Of course it happens as soon as I bought $18K worth of triple leveraged treasury bonds (TMF, for my VP).  You can safely know the rally is over once I jump in! 

I've been in the PP for about a year now.  I still check the components most days (out of interest, not fear), so I know how you feel.  What I learned over time is that one asset may be a drag for a few weeks but another may carry the portfolio the next few weeks.  The portfolio corrects over reasonably short timeframes (investment-wise) but not necessarily instantaneously, and you need to take note of the days when treasuries or gold shoot through the roof to mentally balance the negative days that are often easier to remember for worrisome investors. 

Over time, you'll have seen this type of behavior a few times and it will no longer spook you.  Then it'll be easier to just check less often.

I guess this is just the initial fear once you are just onboard and it happened that I started the journy on a bit of choppy water...Still got some money which could venture out pp a bit with reasonable risk exposure, understand the nature of the business for pp is to ignore timing the market, but anyone thought of a portfolio (not necessarily pp) which might suit current situation and deliver a better return and less votatility in the next 3 years, considering the probability of the market trend?

Please remember that if your bond investment has dropped 6% and if all of your other components have remained flat (which they haven't), then your overall loss would be 1.5%. Always look at your PP in it's entirety.

I hadn't noticed.

The PP fluctuates like any other investment strategy.  Over time (and as a package) it's very steady.

I understand how you feel, though.  I would say to just stick with it.  Over time, your concern will dissolve into a pleasant sense of disinterest and you will realize how much time and energy you wasted looking at the markets.

The PP exposes many bad investment habits, and what feels like discomfort with the PP is often discomfort at being forced to break a whole cluster of really bad investment habits.

Good luck.  I know it feels weird at first.

Reub wrote: Please remember that if your bond investment has dropped 6% and if all of your other components have remained flat (which they haven't), then your overall loss would be 1.5%. Always look at your PP in it's entirety.

The loss of 1.5%, instead of 6%, is something to feel relieved about from that point of view. I look at my portfolio almost everyday, out of interest and not fear also. From the past 9 years of month-to-month result analysis I conducted on Singapore Permanent Portfolio, I conclude that it can take 1 to 3 months at least before Permanent Portfolio will show positive total results, if any. I was in a similar situation when I started my PP, the gold component started diving while others hardly moved, and i consoled myelf "lucky my portfolio dropped 1.5%/2% and not 8%". After 3 months, long bond grew and suddenly shot up 10% and stocks moved up a little, and my portfolio became positive consistently from then onwards. Total returns still fluctuates but its ok since portfolio is already in the positive. I think you will have to wait for next big up move in one of the components to bring up the portfolio. I think learning as much as you can about PP will help also - the knowledge about why and how PP works and the backtested data helps give me confidence in PP strategy, and most beneficial of all, the understanding I gained of PP helps me to leave my PP alone and not try to tinker or second guess the strategy, which has served me well so far.

zleiupc wrote: I guess this is just the initial fear once you are just onboard and it happened that I started the journy on a bit of choppy water...Still got some money which could venture out pp a bit with reasonable risk exposure, understand the nature of the business for pp is to ignore timing the market, but anyone thought of a portfolio (not necessarily pp) which might suit current situation and deliver a better return and less votatility in the next 3 years, considering the probability of the market trend?

IMHO, I think the past decade and probably next few years of market trend will be high volatility as prices are more news driven and fast moving. Hence I think PP will suit this trend quite well because overall portfolio volatility is reduced, while individual component volatility gives better chance of bringing up the portfolio. This conclusion came partly from how PP and PRPFX has performed so well since 2000 compared to other portfolio strategy.
My perception is that major up moves will normally be bigger than major down moves during non-recession times, that's how a diversified portfolio makes total positive profits.

Tyler wrote: What I learned over time is that one asset may be a drag for a few weeks but another may carry the portfolio the next few weeks.  The portfolio corrects over reasonably short timeframes (investment-wise) but not necessarily instantaneously...

Has someone monitored how the PP behaves when only the gold was going down for few weeks?

escafandro wrote:

Tyler wrote: What I learned over time is that one asset may be a drag for a few weeks but another may carry the portfolio the next few weeks.  The portfolio corrects over reasonably short timeframes (investment-wise) but not necessarily instantaneously...

Has someone monitored how the PP behaves when only the gold was going down for few weeks?

How about from 1980-2000?  The PP did okay over that period.

Reub wrote: Please remember that if your bond investment has dropped 6% and if all of your other components have remained flat (which they haven't), then your overall loss would be 1.5%. Always look at your PP in it's entirety.

Also the remaining value of the LTT is now receiving a higher interest rate.  This doesn't amount to very much with these low rates, but it's a little boost.

It looks like LTT are continuing their descent this morning.

I would expect LT treasury rates to climb as high as 4.35% before heading back down again.

I think that for the next few years (at least), we will see LT bond yields trading in a range of about 2.7% to about 4.3%.

That's my prediction.

For a trader I would say buy bonds when they are above 4% yields and sell them when they are below 3% yields.

MediumTex wrote: For a trader I would say buy bonds when they are above 4% yields and sell them when they are below 3% yields.

What are you personally going to do?

If this keeps up, TLT will be where my monthly contribution goes.  This is one of my favorite parts of the PP, in that it forces me to buy the undervalued asset in the accumulation phase.

Bean wrote: If this keeps up, TLT will be where my monthly contribution goes.  This is one of my favorite parts of the PP, in that it forces me to buy the undervalued asset in the accumulation phase.

Ding ding ding, we have a winner! I'm preparing to do the same thing. Personally I can't wait until LTTs fall even lower so I can buy them at an even better discount.

buddtholomew wrote:

MediumTex wrote: For a trader I would say buy bonds when they are above 4% yields and sell them when they are below 3% yields.

What are you personally going to do?

I try to think about the markets as little as I can, and when I do just as a hobby (i.e., no money on the line).

MediumTex wrote: For a trader I would say buy bonds when they are above 4% yields and sell them when they are below 3% yields.

I'm glad you started with "for trader", MT

...and rates are falling today.  TLT up almost 1%.

Been in the PP going on 2 years now and have gotten to the point where I don't look at it very often. Last week however, I found myself with a lot of money to invest from a 401k rollover so I had to figure out where to put it. After re-balancing last January I was surprised to see that I was actually overweight in LTTs. Had to buy mostly stocks and gold, much to my surprise.

I think on any given day you can find dire warnings about the future of any of the 4 PP sectors if you look hard enough for them. And no doubt some of them will eventually turn out to be right. The thing is, you don't know which ones so I don't see any point in worrying about it.

notsheigetz wrote: Been in the PP going on 2 years now and have gotten to the point where I don't look at it very often. Last week however, I found myself with a lot of money to invest from a 401k rollover so I had to figure out where to put it. After re-balancing last January I was surprised to see that I was actually overweight in LTTs. Had to buy mostly stocks and gold, much to my surprise.

I think on any given day you can find dire warnings about the future of any of the 4 PP sectors if you look hard enough for them. And no doubt some of them will eventually turn out to be right. The thing is, you don't know which ones so I don't see any point in worrying about it.

Spoken like a true PP veteran.

Looks like that was pretty short-lived...  Bonds rallying lately.