bogleheads vs. permanent portfolio
bogleheads vs. permanent portfolio
would having a permanent portfolio be such a bad idea?
I'm talking about the fund along with taylor's 3 core funds+value.
thoughts?
I'm talking about the fund along with taylor's 3 core funds+value.
thoughts?
let the debate begin....
personally, i've studied it and it's amazing how well it's performed over a 40 year period, in all sorts of different markets. It has held up extremely well during this past correction as well. The folks on the gyroscope investing board that discusses the permanent portfolio have been gloating about it's simplicity and performance this past week.
So, no doubt you'll get all sorts of valuable opinions and comments. I, for one, think it's a strategy worth employing. That said, you MUST be able to stomach seeing half of your portfolio crashing while the other half increases. You must also be able to have the courage to rebalance when you hit your bands. Otherwise, simply buy shares in PRPFX and be done with it.
personally, i've studied it and it's amazing how well it's performed over a 40 year period, in all sorts of different markets. It has held up extremely well during this past correction as well. The folks on the gyroscope investing board that discusses the permanent portfolio have been gloating about it's simplicity and performance this past week.
So, no doubt you'll get all sorts of valuable opinions and comments. I, for one, think it's a strategy worth employing. That said, you MUST be able to stomach seeing half of your portfolio crashing while the other half increases. You must also be able to have the courage to rebalance when you hit your bands. Otherwise, simply buy shares in PRPFX and be done with it.
- nisiprius
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For a very sympathetic and appreciative article about Harry Browne and the Permanent Portfolio, from a Bogleheadish point of view, see William J. Bernstein's 2010 article, Wild About Harry. Read it. It's really good.
Personally, I feel that the Permanent Portfolio emerges from and can't be separated from an ideological view which I don't share (and which can't really be discussed in this forum). I also feel that it's important to separate the virtues of the portfolio itself from the superb recent performance driven by the price of gold.
I feel that from the perspective of how the Permanent Portfolio is supposed to perform, it has actually been too good--that is, too good since 2000 (thanks to gold), and not good enough before that (also "thanks to" gold). Remember, it's not supposed to be a world-beater; it's supposed to be a long-term, defensive, low-risk, low-return, steady-Eddie portfolio.
I think it's fair to compare it to Wellesley, and I think it's at least reasonably fair to use the Permanent Portfolio Fund, PRPFX as a practical implementation of the strategy. So much depends on endpoints and I encourage people to use the link to the live chart and play with the slider. Over the last ten years, it has been sensational, just sensational, certainly better than any of the funds I own. Over the life of the fund... not. Note that
* The year 2000 is a dividing point between two decades of lackluster performance and one decade of fabulous performance.
* The performance since 2000 has not been high enough to make up for the degree to which it fell behind before 2000.
* While it has been relative crash-resistant, so has Wellesley...
* It had to wait for gold to shine before it overtook Vanguard Prime Money Market.
To put it bluntly: it's all about gold, and about in the words of a particularly meaningless Reuters article, Is it too late for gold fever? It will not surprise you to learn that according to Reuters, some say it is and some say it isn't.
Personally, I feel that the Permanent Portfolio emerges from and can't be separated from an ideological view which I don't share (and which can't really be discussed in this forum). I also feel that it's important to separate the virtues of the portfolio itself from the superb recent performance driven by the price of gold.
I feel that from the perspective of how the Permanent Portfolio is supposed to perform, it has actually been too good--that is, too good since 2000 (thanks to gold), and not good enough before that (also "thanks to" gold). Remember, it's not supposed to be a world-beater; it's supposed to be a long-term, defensive, low-risk, low-return, steady-Eddie portfolio.
I think it's fair to compare it to Wellesley, and I think it's at least reasonably fair to use the Permanent Portfolio Fund, PRPFX as a practical implementation of the strategy. So much depends on endpoints and I encourage people to use the link to the live chart and play with the slider. Over the last ten years, it has been sensational, just sensational, certainly better than any of the funds I own. Over the life of the fund... not. Note that
* The year 2000 is a dividing point between two decades of lackluster performance and one decade of fabulous performance.
* The performance since 2000 has not been high enough to make up for the degree to which it fell behind before 2000.
* While it has been relative crash-resistant, so has Wellesley...
* It had to wait for gold to shine before it overtook Vanguard Prime Money Market.
To put it bluntly: it's all about gold, and about in the words of a particularly meaningless Reuters article, Is it too late for gold fever? It will not surprise you to learn that according to Reuters, some say it is and some say it isn't.
Last edited by nisiprius on Thu Aug 11, 2011 6:30 pm, edited 1 time in total.
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I have been dollar cost averageing into this fund all this year. Its been holding up very well. I recommend you ordering a perspectus or download one. After viewing this perspectus it is more diversified than one thinks. Also its a very small portion of my overall portfolio. About maybe 2%. I like my assets spread over as many different classes as possible, and low cost such as index funds.
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It's worth noting that Harry Browne's simplified 4x25 Permanent Portfolio (25% Stocks, 25% LTTs, 25% Gold, 25% Cash) did just fine even when gold was doing terribly. Though, certainly stocks were doing much better...nisiprius wrote:I also feel that it's important to separate the virtues of the portfolio itself from the superb recent performance driven by the price of gold.
The whole idea of the PP is that at least one asset will do "superb" through different economic conditions. So, it's no surprise that it's gold right now. Next year it may be stocks...or LTTs...or nothing (and then we have Cash on hand).
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Re: bogleheads vs. permanent portfolio
1) For risk-adverse wealth preservation I think it's a great portfolio - for growth, not so much.jumpin wrote:would having a permanent portfolio be such a bad idea?
I'm talking about the fund along with taylor's 3 core funds+value.
thoughts?
2) The simplified 4-sided PP is the way to go - the fund is junk, IMO, due to the other things it holds and ways it tilts.
3) I think there may be a best-of-both worlds solution for someone not looking to be as aggressively stock-oriented, nor have quite so much in cash and gold: http://lazytraders.com/the-bhpp-3-hybri ... ortfolios/
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Although Harry Browne had a distinct political viewpoint, I don't believe this translated into the Permanent Portfolio. The whole philosophy of 4 x 25% is that the future is unknowable and therefore one needs to prepare for any outcome.nisiprius wrote:Personally, I feel that the Permanent Portfolio emerges from and can't be separated from an ideological view which I don't share
Ideologically-driven portfolios are usually rooted in a strong belief of what the future will look like.
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Very compatible
In my opinion, Harry Browne's philosophy and John Bogle's are very similar. Their philosophy's work well together. Harry Browne adds gold as a financial asset. This seems to be the biggest difference.
Re: bogleheads vs. permanent portfolio
The virtues of the PP can be and are discussed at length in many places.jumpin wrote:would having a permanent portfolio be such a bad idea?
I'm talking about the fund along with taylor's 3 core funds+value.
thoughts?
I would be wary of the idea that by adding a small commitment to the PP that you will have accomplished anything at all other than having more holdings. By the same reasoning, if there are drawbacks to the PP, holding the PP plus a small addition of three core funds is hardly going to have any meaningful effect.
What might happen if one were to blend equal amounts of the four holdings in the PP and the three holdings in the 3-core, I don't know. I doubt there is any evidence for some spectacular synergism that is heretofore undiscovered.