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Old 08-26-2010, 05:25 PM
 
Location: Ponte Vedra Beach FL
14,617 posts, read 19,181,192 times
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P.S. I also don't know why anyone would keep 25% of a tax sheltered account in cash currently paying next to zero (except if it's waiting to find a better home). Anything paying next to zero should be outside a retirement account. Robyn
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Old 08-26-2010, 05:38 PM
 
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if you have a choice its better to keep the cash outside the ira's but for most folks they have no sizeable cash positions outside of retirement money thats not for short term goals..

the cash in that mix is there not really for return but to act as a stabilizer for all the other asset classes and to take some volatility out of the mix. its also used to make rebalncing easier.

remember this is a portfolio not geared to squeezing every last dollar of gains out of it but rather its a portfolio designed to never have to say im sorry , because any economic outcome left you devastated.
most portfolios are really geared to only 1 outcome ,prosperity.

if thats not in the cards they either have no gains or suffer steep loses...

the fact that this portfolio which is really a capital preservation portfolio did as well as it did for almost 40 years is something it was never designed to do...
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Old 08-26-2010, 06:00 PM
 
86,140 posts, read 83,642,429 times
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Quote:
Originally Posted by Robyn55 View Post
Average annual return isn't the same as annualized return - which is what you're looking for computing investment returns (e.g., Fidelity has a new performance evaluator - and it gives you annualized rates of return). Because you have to take compounding into account.

For example- there's the rule of 72 - which you use to compute doubling time. Money which returns 9 per cent a year will double in 8 years. But your average return will be 13 percent (100/8).

Average returns are meaningless when you're computing portfolio returns for this and other reasons. E.g., if you start with $100 - lose 40% in year one - and earn 80% in year two - your average return is 20%. But you'll only have $108 at the end of 2 years - not $140. Your annualized rate of return is 3.9%.

Any simple financial calculator will compute a simple annualized return for you. Appropriate when you're not paying taxes - or drawing money out of an account. It's more complicated when you're drawing amounts out of an account for taxes - living expenses - etc. Then you have to compute your IRR (internal rate of return). A lot more data entry. FWIW - outside a retirement plan - I think it's important to compute after tax yields (taxes can have a very big effect on net yields - the money you take home - which is all that matters IMO).

In any event - your numbers on gold are totally meaningless/wrong. And I don't agree with the notion of putting 25% of one's portfolio in gold on a long term basis (trading is another matter - although one has to be careful with the potential pitfalls in many of the new trading vehicles). I believe in the old rule of thumb - 5-10% of a portfolio in gold max - and you hope it always does badly (which it has done for the most part over the last several decades or more).

These days - the single largest shareholder in GLD is George Soros (among other hedge fund managers):

Soros Signals Gold Bubble as Goldman Predicts Record (Update2) - BusinessWeek

These guys are relatively short term traders. And when they leave the party (when their computers say "sell"- or another trade looks better) - you're going to hear one big whooshing sound. Regardless of the fundamentals (and note that gold isn't being used as an inflation hedge on a fundamental basis these days - it's being used more or less as a currency in a deflationary global zero interest rate environment). Robyn
robyn your trying to break pieces of the portfolio out like the gold and put what you think will happen in place of it. 40 years of history says it works as is very very well.

not only is it compounded average annual growth but each year figured in rebalancing back to the 25% each....

when it comes to protecting your portfolio 5-10% of gold or long term treasuries isnt nearly enough to carry the portfolios weight when the crap hits the fan for the other asset classes... the idea is we never know which asset class will rise and which one will get killed. we do know typically when asset classes take the hit down 50% isnt un-common. on the other hand the other asset classes can double or go higher if so inclined.

if anyone thinks they know whats coming next then keep all the money thats near and dear to you in the permenant portfolio and then keep a more speculative one weighted for whatever you like or believe will do well.

i have about 60% in the permanent portfolio at this stage and the rest in a more traditional income and capital preservation portfolio more weighted for good times.
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Old 08-26-2010, 06:17 PM
 
8,265 posts, read 11,225,574 times
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I've got a 25/4 too but it is:

25% large cap index
25% small cap index
25% total bond index
25% intl stock index

I suspect a more diversified mix with some precious metals, reits, energy, etc. would give an even smoother ride (I've seen forums where people carry 15+ asset classes) I just can't bring myself to spend that much time on it. The expense ratios on those are all quite low and like MathJak's is easy to rebalance with equals parts.

Most of it is in tax advantaged retirement accounts and the part that isn't is the intl stock index and part of the large cap index which I've got in an ETF that doesn't hurt me too bad with cap gains.
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Old 08-26-2010, 06:20 PM
 
Location: Ponte Vedra Beach FL
14,617 posts, read 19,181,192 times
Reputation: 6743
I really don't think you know how to do the math (I don't either - that's what calculators are for) - or undertand the concept of an annualized rate of return. If you start with $1000 in year 1 - and wind up with $3000 in year 10 - what is your annualized rate of return? What is your annualized rate of return if you wind up with $3000 in year 30? Thirty minute limit on this test (you should be able to find a decent calculator by then). Robyn
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Old 08-26-2010, 06:25 PM
 
86,140 posts, read 83,642,429 times
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its figured correctly , im quite good at math and my comuter is even better as well as independent sites track the same portfolio.. its quite well known and used by quite alot of people as well as having a mutual fund that follows the same concept,although not as pure anymore.... you can stop trying to find the flaws in it, just dont do it if its not for you and thats true for anyone.

everyone has to do whats right for them. if your looking to bullet-proof your assets so no one economic event will leave you devasted there is no better way i know of. if your looking to bet on good times or higher gains look elsewhere.

Last edited by mathjak107; 08-26-2010 at 06:33 PM..
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Old 08-26-2010, 06:29 PM
 
86,140 posts, read 83,642,429 times
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Quote:
Originally Posted by slackjaw View Post
I've got a 25/4 too but it is:

25% large cap index
25% small cap index
25% total bond index
25% intl stock index

I suspect a more diversified mix with some precious metals, reits, energy, etc. would give an even smoother ride (I've seen forums where people carry 15+ asset classes) I just can't bring myself to spend that much time on it. The expense ratios on those are all quite low and like MathJak's is easy to rebalance with equals parts.

Most of it is in tax advantaged retirement accounts and the part that isn't is the intl stock index and part of the large cap index which I've got in an ETF that doesn't hurt me too bad with cap gains.
its basically geared for prosperity ,,, it all moves in the same direction .... if things do well you will have some nice gains......if not it can be a heck of a roller coaster ride.

my days of riding those wild swings are done.. im looking to retire early sometime between the next 1-3 years so i have toned my variable portfolio down considerably from what it was. the permanent portfolio always stays .

Last edited by mathjak107; 08-26-2010 at 06:37 PM..
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Old 08-26-2010, 07:51 PM
 
86,140 posts, read 83,642,429 times
Reputation: 61878
Quote:
Originally Posted by Robyn55 View Post
I really don't think you know how to do the math (I don't either - that's what calculators are for) - or undertand the concept of an annualized rate of return. If you start with $1000 in year 1 - and wind up with $3000 in year 10 - what is your annualized rate of return? What is your annualized rate of return if you wind up with $3000 in year 30? Thirty minute limit on this test (you should be able to find a decent calculator by then). Robyn
this is your formula,,,,
F = S*(1+r)^n

where F is the Final stock price
S is the Starting stock price
n is the number of years you hold it and
r is the average annual return

its a complex formula but most financial tracking software does it for you.

for those without a clue about what we are talking about there is a fairly simple explanation here.

http://www.stock-market-investors.co...e-formula.html

Last edited by mathjak107; 08-26-2010 at 08:01 PM..
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Old 08-26-2010, 10:00 PM
 
8,265 posts, read 11,225,574 times
Reputation: 4788
Quote:
Originally Posted by mathjak107 View Post
my days of riding those wild swings are done..
Nah man you'd be surprised at how many middle aged folks show up at swinger clubs these days. Biggest problem is the male/female ratio, not the age group.
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Old 08-27-2010, 03:57 AM
 
86,140 posts, read 83,642,429 times
Reputation: 61878
Quote:
Originally Posted by Robyn55 View Post
Average annual return isn't the same as annualized return - which is what you're looking for computing investment returns (e.g., Fidelity has a new performance evaluator - and it gives you annualized rates of return). Because you have to take compounding into account.

For example- there's the rule of 72 - which you use to compute doubling time. Money which returns 9 per cent a year will double in 8 years. But your average return will be 13 percent (100/8).

Average returns are meaningless when you're computing portfolio returns for this and other reasons. E.g., if you start with $100 - lose 40% in year one - and earn 80% in year two - your average return is 20%. But you'll only have $108 at the end of 2 years - not $140. Your annualized rate of return is 3.9%.

Any simple financial calculator will compute a simple annualized return for you. Appropriate when you're not paying taxes - or drawing money out of an account. It's more complicated when you're drawing amounts out of an account for taxes - living expenses - etc. Then you have to compute your IRR (internal rate of return). A lot more data entry. FWIW - outside a retirement plan - I think it's important to compute after tax yields (taxes can have a very big effect on net yields - the money you take home - which is all that matters IMO).

In any event - your numbers on gold are totally meaningless/wrong. And I don't agree with the notion of putting 25% of one's portfolio in gold on a long term basis (trading is another matter - although one has to be careful with the potential pitfalls in many of the new trading vehicles). I believe in the old rule of thumb - 5-10% of a portfolio in gold max - and you hope it always does badly (which it has done for the most part over the last several decades or more).

These days - the single largest shareholder in GLD is George Soros (among other hedge fund managers):

Soros Signals Gold Bubble as Goldman Predicts Record (Update2) - BusinessWeek

These guys are relatively short term traders. And when they leave the party (when their computers say "sell"- or another trade looks better) - you're going to hear one big whooshing sound. Regardless of the fundamentals (and note that gold isn't being used as an inflation hedge on a fundamental basis these days - it's being used more or less as a currency in a deflationary global zero interest rate environment). Robyn
thankfully george is a better investor then his track record of his predictions.. he is one of the greatest investors of all time though.....

back in the 80's he was promoting getting out of the dollar and into what was not even on the drawing board yet but the euro. he wrote books and articles about it . thankfully he didnt take his own advice. lately depending on the day, hes got interviews predicting we are through the worst of the downturn only to be told in another interview the worst is yet to come.

i love ole george but he certainly is in the camp of " if your going to predict,predict ofton"

Last edited by mathjak107; 08-27-2010 at 04:34 AM..
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