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I would disagree …foreign stocks not only are dependent on their own markets but they are dependent on where the dollar goes .
They play no part in any of the all season portfolios because they fall short of their job function more often then not .
When we have prosperity here in an all season portfolio it needs to react as strongly as possible and we could never count on foreign stocks and bonds to fill that roll.
Tax exempt bonds are not treasuries and can’t be counted on either in a 2008 scenario or soar 30% ..at these rates taxes are rarely an issue from interest if you ain’t very wealthy
@mathjak107
I think you have fully convinced me that permanent portfolio is the best Way to go ( for my reserves) I’m already maxing out a retirement account and an smaller Brokerage account for growth.
My biggest concern is that everyone is warning about investing in bonds at this time and since permanent portfolio is 55% bonds .Do you think that is still prudent in this environment ?and will approximately 15% gold be able to “fly fighter cover” as you say for those bonds?
That's one of the more contentious topics on the entire forum!
Personally I still believe that foreign stocks are a better dollar-hedge, than are the various instruments in "defensive" portfolios. Unfortunately the US dollar has been inordinately strong. It did sustain maybe an 8% breather a bit over a year ago... a nice bounce for American-based holders of foreign stocks. But overall the trend since 2007 has been a strengthening dollar.
Also of note is tax-consequences. For this reason I prefer tax-exempt bond funds, and in particular Vanguard's intermediate-term tax exempt bond fund.
Assuming you still live in Ohio, the Vanguard Ohio Long-Term Tax-Exempt Bond Fund would also shield your bond income from state, city, and school district income taxes. My school district just taxes earned income, but some districts also tax unearned income.
As to whether the Vanguard fund is better or worse than buying individual bonds through a broker, I don't know. With the death of my mother in 2020, I now have both types.
@mathjak107
I think you have fully convinced me that permanent portfolio is the best Way to go ( for my reserves) I’m already maxing out a retirement account and an smaller Brokerage account for growth.
My biggest concern is that everyone is warning about investing in bonds at this time and since permanent portfolio is 55% bonds .Do you think that is still prudent in this environment ?and will approximately 15% gold be able to “fly fighter cover” as you say for those bonds?
Thanks
No , the ultra short term bonds or cash instruments used in the pp are not actually considered bonds as such . I used t bill etfs and money markets which are very short term and not effected much. Even shy which is 1-3 year bonds has very little volatility
For all purposes they are a proxy for cash instruments …if you think rates are headed higher use treasury money markets
Last edited by mathjak107; 08-13-2021 at 07:56 AM..
Drawing 4% safely can require the same 40-60% equities starting out whether 3 miilion or 500k or 250k or ….
In order to sustain 4% you need to achieve a 2% real return (that is after inflation ) for the first 15 years of a 30 year retirement…. That is very hard to do with fixed income as higher rates mean higher inflation.
So amounts don’t matter , the percentage draw over number of years determines how much in equities is needed
Last edited by mathjak107; 08-13-2021 at 10:25 AM..
I'm going to give the same advice I did in 2011. Anyone who does not need to use their account for ten years or longer should have the highest stock allocation their stomach will allow. (And note that this is not the advice I've always given). A person who is near retirement or in retirement is facing a different situation, and it's not so simple.
With respect to specific bond investments, Loomis Sayles Bond is a fund that's done a decent job navigating the investment/junk landscape. The long-term returns are a little better than from a bond market index fund. I would rather take some credit risk today, as opposed to interest rate risk.
Michael kitces is one of the most brilliant researchers we have in the field of retirement planning .
In his view it depends where you are in your cycle …if you are in the red zone he would definitely caution you about going as high as you can stomach at that point in time …the red zone is the 10 years leading in to retirement when portfolios tend to be at their fullest and the first ten years in retirement …after that go as high as you can tolerate but he has a great case for not doing it sooner
Michael kitces is one of the most brilliant researchers we have in the field of retirement planning .
In his view it depends where you are in your cycle …if you are in the red zone he would definitely caution you about going as high as you can stomach at that point in time …the red zone is the 10 years leading in to retirement when portfolios tend to be at their fullest and the first ten years in retirement …after that go as high as you can tolerate but he has a great case for not doing it sooner
You might take the time to actually read posts before replying. Note that I said my advice is for people who won't need to use their account for 10 years or longer.
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