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I don't think you guys are understanding my question! I am not talking about being so safe that there is no profit.
On any given day in the stock market there is a combination of ETF index funds, that combined in a certain percentage would cause your portfolio to make money that specific day no matter how terrible the results of the Dow Jones Industrial Average was that day. Because on days that the Dow Jones goes down there are usually bond, REIT, Foreign stocks or other investment vehicles that go up more than making up for a fall in the Dow Jones. And reversing this there are days that the Dow Jones goes up that will have a negative impact on Bonds, etc.
There is a correct mix that will create an up date for pretty much any day the stock and bond markets are open. But what is it?
it was in the past but not for a long time , we popped up a bit in the 2,000's but fell right down again . . i certainly wouldn't plan an inflation adjusted retirement around them.
I took a class on investing and the instructor claimed it is possible to have a portfolio that would rarely lose money on any one day. (Though over time the investor may make less money over the long run.)
The trick is to find the mix of ETF Index Funds that would hedge against losses. Here is what he said:
In most cases when Stocks funds (like DIA, SPY, VTI) that mirror the total stock market, go down, total bond funds (like BOND) go up. Also, in many cases, investments like REITS and some foreign funds move in the opposite direction than stocks. So if someone could find the right mix of ETF's, in a wide variety of investment types, that move in opposite directions, with the right percentage of each, you could come out in your portfolio nearly every day.
But what is the right mix and which ETF's? (The instructor did not tell us!)
He just wanted to sound like he knew something you didn't. Poser. Also "rarely" gives him a loophole - he didn't say "never".
Anyway, what MathJak said.
In theory (CAPM), asset classes with negative correlations and positive returns will do what you want. In practice, it's mostly bunkum. It is true that stocks and bonds usually move in opposite directions; but in periods of extreme stress, like the 2008-2009 meltdown or hyperinflation; both will fall hard. Similarly, cash and gold are inversely correlated. So overall, the Permanent Portfolio should have the lowest volatility with some overall upside - since stocks have historically earned 6.5% in real (after inflation) returns according to Prof Siegel; gold and bonds will keep up with inflation on an average (e.g. gold up, bonds down if inflation increases); and cash will lose some value but not enough to offset gains from stocks; all in mild inflationary scenario. Roughly invert for deflationary scenarios. In hyperinflation, all bets are off.
long term treasuries soared in 2008-2009 . in fact the permanent portfolio was actually up by about 1% that year while stocks fell 37%.
That's the part you concentrate on in my entire thoughtful reply, after I give you respect and everything? For shame
Fine, I will qualify - CORPORATE bonds fell hard in the 2008-2009 crisis.
Doubtless, our fine politicians will make sure that one day, treasuries will fall hard too.
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