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to offset losses in a plunge you would need 3x the amount in a total bond fund as the stocks .
long term treasuries have tremendous power , like being leveraged in comparison . in 2008 gold and long term treasuries would have left you up for the year like they did in the permanent portfolio .
which is why that stupidly simple mix with only 25% equities beat my 60-70% growth and income model over the next 10 years . so much effort was spent just getting back that even with the great gains we had it still was not enough to get ahead of the 25% equity pp , which also holds 25% in cash too .
so not giving back money in a downturn can be part of winning but trying to time things rarely works . it all needs to already be in the portfolio design ,ready and waiting .
so it depends if you want pedal to the metal growth or having made the bulk of your money , bullet proof proofing what you already have so neither the ravages of inflation or the pain of a recession can devastate you .
i have been giving some thought to a new model to try . using the pp for 2/3's of the money and the insight 100% equity , growth model for 1/3 of the money and so far i like what i see . when a portion zigs the other zags . yesterday gold got hammered because we have a very strong dollar now , and long term treasuries were down a bit , but the equities were up enough to make the day positive . over the last two weeks the long term treasuries carried the ball .
it is not a model for growth , it is a model for preservation and working some of the volatility and uncertainty out of the money you already made as an aggressive investor . whether it is out of control inflation like the 1970's , 1929 or 2008 again, the pp has preserved the bulk of your money just fine .
yeah it has at times had the individual components go through their own bear market , but when called upon for its day in the sun the assets have sprung to life and performed their role just fine as they reversed course on a dime .
Last edited by mathjak107; 07-18-2018 at 02:31 AM..
MsShultz, I wonder why your mother has those accounts in a Trust? If she listed you as a beneficiary, I believe the portfolio's would go directly to her heirs.
What is the reason to put investment accounts in a Trust?
My parents had a living trust. When dad died in 2014, mom had dementia by then. My sister and I had to handle everything. I became successor trustee. When mom dies, my sister and I will inherit the trust. The process of gaining control was neither quick nor easy, but it would have been much worse without the living trust.
well you can buy the etf's from fidelity but they have nothing to do with the insight newsletter .
the pp (permanent portfolio ) has been around for 40 years . it consists of 4 primary asset classes where each part responds very powerfully to the 4 major economic scenarios .
by themselves the assets are very volatile and can soar or plunge individually .
but when put together ,when one zigs the other zags and as volatile as it is , it can be like watching paint dry . but it has done very well over time considering it is not about growth , it is about preservation after you had growth .
it has had very few losing years in the last 40 years . even 2008 saw it up a bit .
it is very simple :
25% TLT LONG TERM TREASURIES
25% VOO OR VTI EQUITIES
25% GLD GOLD
25% TREASURY MONEY MARKET
even the 25% cash has a roll. it acts as a stock option would , only with no expiration date , so you can buy stocks when markets plunge and rebalance . the cash also acts as a barbell with TLT so it has a duration of about a total bond fund . but TLT can soar when it's time comes in a recession or depression actually lifting the equities portion when it plunges .
there is a growth oriented version called the golden butterfly which adds a small cap tilt so each piece gets 20% and over all you are 40% equities instead of 25% .
i kind of like that model a bit better as the odds of each economic scenario playing out are anything but equal . usually prosperity does better .
i am testing a model now with 2/3's in the permanent portfolio and 1/3 in the 100% equity fidelity insight growth model .
overall that is about 43% equities ,. but unlike a conventional portfolio this model has very strong upward pulls in times stocks get hit hard .
since 2007 the permanent portfolio beat my 60-70% equity growth and income model which fell 33% in 2008 and had to use a major part of these gains just to get even . the pp was up in 2008 as long term treasuries soared and gold was up. so it did not have to work hard to stay a head
So, that's not Fidelity?
I'm trying to figure out the newsletter and the portfolios and am at a wall.
Think I'll just keep doing what I've been doing.
why can't you decide on a model or models ? just guessing i would think you would want a mix of the income model and growth and income model and proportion it so both equal the equities level you want .
to offset losses in a plunge you would need 3x the amount in a total bond fund as the stocks .
...... .
This is the crux of the issue. Putting a high allocation in total bonds means you miss out on the growth of equities. This is a very, very expensive insurance policy with limited coverage. Using long term treasuries might have more "lifting" power but the cost is still very high.
It is easy to make a case for 100% equities for long term investing. Most of us cannot stomach the potential variation. Having cash and bond allocations gives us the ability to react to a market crash. Buying in at the bottom of the market can help offset the insurance costs and helps flatten short and intermediate term volatility.
i don't see much effectiveness in a total bond fund for off setting stock losses in a flight to safety .
like i try to convey all the time , our balance in a bull market is not our balance until the cycle is completed . like day follows night our balances 80% of the time are somewhere between the last low and the last high .
our balances from this bull will definitely , yes definitely take a hit , we just don't know when or how much but you can bet on it at some point . no political party has found away to abolish the recession portion of a business cycle ..
so just like i saw my 60-70% growth and income model take a hit in 2008 , the amount of gains needed to claw back again was tremendous .
that simple portfolio with 25% cash , 25% long term treasuries ,25% gold and 25% equities beat me by a bit even with 300% market gains in the recovery .
so yes , a total bond fund does not have lifting power . but the long term treasuries and cash that acted as a stock option made all the difference in the world . so these are not just ordinary asset classes in that mix . they respond very powerfully when it is their day in the sun , .
here is year by year with a hypothetical 100k ,, me compared to that model i love to hate since with 25% equities it has no business beating a 60-70%equity model .
this starts in 2007 and ends january 1 2018 . would i use it for all my money ? nope . but i can see taking the portion near and dear to you that you want to preserve your growth in while still taking part in the upside , and then using what is called the variable portfolio to go for the alpha .
i find 2/3's in the pp today and 1/3 in the 100% equities insight portfolio gives you a 40-45% allocation to stocks but in an unconventional manner gives you a lot of gain potential still in down markets where it makes up lost ground in the bull ..
Last edited by mathjak107; 07-20-2018 at 07:29 AM..
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