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So in the portfolio you refer to--there is no allocation for REIT/real estate--but you owned some in past and still do from what I remember you mentioning...
So that skews your allocation/diversification from the standard for that portfolio---doesn't it?
my real estate is brick and mortar not reits . it is and was a business . my portfolio is where i put the money i make from the real estate .
the portfolio uses no reits as reits are a strange breed . they can not be counted on to react in a predictable fashion and in defensive portfolio's have been tried and ruled out .
some times they go up in inflation but then they go down when inflation crosses a certain point where it become high inflation .
so after much back testing and trying of different asset classes certain assets were only fair weather friends . assets like commodities plunged in 2008 while gold was up . so as much as we think of commodities and gold being similar they do not act them same .
reits , oil and commodities have all been tried over and over but only ended up confusing the portfolio's actions .
that is not to say if you are not looking at one of the defensive portfolio's in its purest form you cant add reits or commodities .
So there is a particular name for your defensive portfolio isn't there--because of the person who advocated it originally?
Think I have seen articles about it before but can't Google the precise one...
there are a few , the one i use is the golden butterfly .
you also have the permanent portfolio , the desert portfolio , the all season portfolio.overall i have about 45%-50% equities because i still have my s&p fund outside the portfolio , and a small position in gbtc a bitcoin etf .. but the associated assets can carry a lot more weight when these flight to safety's are triggered .
looking at the permanent portfolio yesterday for a random example ,i show
25% vti total market fund down 2.13%
25 tlt long treasury bonds up 1.22%
25% gld gold up 2.57%
25% cash earning almost 3% a year
Last edited by mathjak107; 10-12-2018 at 06:13 AM..
Permanent portfolio was the term I think I had seen it discussed under
I have read positive reviews but when I asked our FA about buying gold before (several times) as a hedge against volatility, he and my husband both just kind of dismissed it because they considered it "speculative" and wouldn't produce value--
But when you get down to it, anything is "speculative" under certain circumstances...
There is certainly no guarantee about anything you can invest in
Where is your cash that it is earning 3%?
I thought you didn't favor CDs
Do you think a "floating rate" fund like Fidelity's FFHCX is too risky?
My husband is finally getting disenchanted with the FA we have used for more than a decade
I have tried to point out to him for years that we really aren't getting a reward in profit for using an FA
We are just not seeing a "market" rate of return with the low-cost DFA/Index funds In our diversified portfolio
The FA's opinion is like "buy the world" because you can't "beat the market" which takes lot of downside risk IMO
I just don't think he is going to be willing to leave this advisor and go back to Fidelity for example and use someone there he doesn't really have a history with
We have used the CPA firm for past 30+ this advisory group is with --and I know my husband won't go to different CPA for tax purposes...
i don't favor cd's? i always use cd's but not for money that will not be used in the very short term .
with these portfolio's that hold powerful defensive assets you can not pull them out and look at the parts that make up the sausage individually .
they all are very volatile and very dependent on it being their time in the sun . but when each is coupled with the other parts these portfolio's yin and yang so much that it can be like watching paint dry at times .
i like ffrhx , i am not sure of the differences between ffrhcx , ffrhx is an excellent bond fund for a "normal portfolio" . but that is the opposite of what you want to fly fighter cover in a defensive portfolio since that will not go up in a recession but it will fall . because it is short term high yield it is more aligned with stock than bonds . it certainly is no proxy for cash instruments .
for a more conventional portfolio i would certainly use ffrhx today over a total bond fund but if the economy weakens it is not what i would hold .
Last edited by mathjak107; 10-13-2018 at 05:02 AM..
Ok--so if you keep certain portion of assets in CDs for "short term" access--so 6-12 mo term?
So what cash is earning 3%--
We thought we were lucky to get 17 mo CD at 2.88
And one for 21 mo at 2.90---we didn't get to catch it at 3.2
And does it matter what part of market cycle you might start using the "defensive portfolio"?
Or is that immaterial because of the balance with it--
I.e. That if stocks are high valuation then likely gold will be lower so you are not buying both at their high points...
there is always a bull market somewhere and a bear market so when using defensive assets there is really not a whole lot of difference .
you have bonds and gold in down markets and stocks in an up market with cash finally seeing some return .
in the long term scheme of things it likely wont matter much as far as timing goes .
sometimes they move together for short periods of time but usually reach a point they each do their own thing . periods of tightening like now are typically short term events and not real economic outcomes like:
If you expect gold to balance out a dip in the stock market at the end of a business cycle, you might want to rethink this. Gold has not historically been inversely related to either the business cycles or the stock market.
Again there have been two growth cycles for gold. For most of the 1970s gold prices increased and peaked about 1980. There was a similar growth phase for 10 years starting about 2002. Perhaps the gas crisis in the 70s was a factor. Perhaps the dot com bust was a factor for the next spurt. Other factors such as demand from China and India are way more important.
In any case, gold has not been inversely related to the stock market and is not a reliable asset to counter a drop in stocks. In addition the two previous gold growth cycles were long and slow. Loading up on gold in advance seems totally unnecessary and just a drag on potential returns. At the end of the current business cycle, gold may or may not increase. If the past is an indication, if there is an increase it is likely to be slow.
It seems to me you have worked yourself into a corner. You started retirement, fearing the worse and began on a "glide path" will a low stock allocation. Now you have moved towards a portfolio loading up on gold and TLT.
the above was posted buy my buddy jrkliny back in august when stocks were making new highs .
well once again gold is maintaining a positive real return floor since markets have turned down ... as i said 98% of all market downturns have had gold supporting a positive real return floor when stocks don't .
gold is up almost 5% the last 3 months , markets down 18% , long treasury bonds up 4% .
so yep , somethings still hold true .
" your balance is never your balance until the cycle completes " famous last words from mathjak107
i have tried to convey over and over that what people think is diversification is really not , nor are the associated assets to stocks like total bond funds ,powerful enough to give equities any meaningful lift when the negative part of the cycle happens .
some assets can pretty much be counted on in the negative half of the cycle to do some heavy lifting . other assets do not unless held in large percentages . a total bond fund has moved close to zero since the downturn .
so historically certain assets have been shown to fly fighter cover far better . when markets are up , i find is the time to start to move some chips in to some of these more defensive assets like GLD and TLT . you can still hold 40-50% in equities but the supporting assets have far more lifting power .
so i just wanted to reiterate that no one sees these plunges coming . there is no memo that says now is the time to shift assets over if you wanted to try to preserve more of those gains . the time to get defensive is while you still were up and not try to hang in there and milk every penny of gain .
that rarely plays out the way one thinks . there is always nothing that says this is a bit more serious then a minor dip and by the time you realize there will be substantial erosion in gains it is usually to late .
Last edited by mathjak107; 12-22-2018 at 04:01 AM..
Penny stocks are often very risky, I'd never invest in them. People who invested in mutual funds are doing well right now.
LOL. That's not true today! I sold off my mutual funds a couple weeks ago. Since then, it's lost ALL of its gain in 2018 and is now moving into erasing gains in 2017.
I've got 10% of my cash in stocks. That feels like plenty right now.
the above was posted buy my buddy jrkliny back in august when stocks were making new highs .
well once again gold is maintaining a positive real return floor since markets have turned down ... as i said 98% of all market downturns have had gold supporting a positive real return floor when stocks don't .
gold is up almost 5% the last 3 months , markets down 18% , long treasury bonds up 4% .
so yep , somethings still hold true .
" your balance is never your balance until the cycle completes " famous last words from mathjak107
i have tried to convey over and over that what people think is diversification is really not , nor are the associated assets to stocks like total bond funds ,powerful enough to give equities any meaningful lift when the negative part of the cycle happens .
some assets can pretty much be counted on in the negative half of the cycle to do some heavy lifting . other assets do not unless held in large percentages . a total bond fund has moved close to zero since the downturn .
so historically certain assets have been shown to fly fighter cover far better . when markets are up , i find is the time to start to move some chips in to some of these more defensive assets like GLD and TLT . you can still hold 40-50% in equities but the supporting assets have far more lifting power .
so i just wanted to reiterate that no one sees these plunges coming . there is no memo that says now is the time to shift assets over if you wanted to try to preserve more of those gains . the time to get defensive is while you still were up and not try to hang in there and milk every penny of gain .
that rarely plays out the way one thinks . there is always nothing that says this is a bit more serious then a minor dip and by the time you realize there will be substantial erosion in gains it is usually to late .
So we have not done any reshuffling of one part of our portfolio (that is with our FA in DFA index funds and short term bond fund) but we have as much or more money in cash/CDs--one of them comes due end of Dec...
I think this market could see more downturn because of the inanities that caused it-not to mention reduction in liquidity from the Fed's actions that will continue into 2019...
Now that gold has gone up--is it too late to buy with its higher cost factor as hedge against losses in the other areas?
Or does it just mean not as much a return than buying GLD in September, for example?
I agree that at this point it is difficult to tell if this is the beginning of another 2008
Chartists posit divergent views
And the market can go up even in times of business recession----
It has happened historically....
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