The Permanent Portfolio, Investing, Finance and Random Thoughts.
Posts tagged Investing
Callan Periodic Table of Investing Returns 2011
0I love the Callan Periodic Table of Investing Returns. This chart shows major asset classes and how they’ve done from 1992-2011. It shows very vividly the unpredictable nature of the markets and why holding a diversified investing portfolio is a good idea. It doesn’t show gold and long-term bonds that the Permanent Portfolio also uses, but the general idea still comes across.
Callan Periodic Table of Investing Returns
Thanks to the people at Callan for putting this together.
The Suicide Portfolio
Over on the forum, member Tortoise came up with a great idea. Instead of trying to make a winning portfolio, why not make one designed to lose as much money as quickly as possible? He called it The Suicide Portfolio. The concept is simple. Instead of following a low-cost passive investing portfolio like Harry Browne’s Permanent Portfolio strategy, you instead hand pick stocks, mutual funds, etc. But you pick these assets using anti-Permanent Portfolio ideas. Use market timing. Go high leverage. Day trade penny stocks. The sky is the limit (or maybe we should say the bottom is the limit).
Investors started with $100K and the goal of the game is to lose it as quickly as possible. After a 12 weeks it looks like we have some people who have a knack for losing piles of cash. Sadly, I didn’t make a serious entry into this contest but intend to do so next time around. However, I see bright futures for the participants managing Hedge Funds on Wall St. with these performance numbers. L82Start is just about ready to start an investing newsletter at this point!
Thanks Tortoise for coming up with this great idea. This is a fun example of how not to invest.
Investing and Speculating – Human Mindset
Conventional wisdom on Investing vs. Speculating
Speculating – When something an investor doesn’t own goes up in value. e.g. “Well that asset has been going up, but that’s just a bunch of speculators causing the price increase.”
Investing – When something an investor does own goes up in value. e.g “I am 100% in that asset because it’s a fine investment and my brilliant market analysis has rewarded me with good profits.”
The frame of mind of a person plays a part in how they may be viewing various investments. Use caution when reading investment advice and consider that the person giving it may have certain biases one way or another.
The Dollar is Crashing!!
What was this stuff I kept hearing last year about the dollar crashing? In December 2009 this talk reached a fevered pitch. Here’s the dollar index over the last year and you can see how much it’s recovered since the dark days of December 2009:
You can track the US Dollar index at this link.
Since this time the Euro has taken a pounding due to the issues with Greece possibly going into sovereign default. This drove the Euro down and the Dollar was the beneficiary. I’m not a dollar bull necessarily, but I post this just to show (yet again) that reacting to news that everyone else already knows is rarely a good way to invest. The markets are random and things we think must happen may not happen for a very long time (if at all).
Best to ignore all of the financial news and just stick to a simple diversified portfolio that can take care of you whether the dollar is sinking or flying.
Be a Skeptical Investor
If you’re in the investing world long enough, you’ll eventually get tempted to put your money into some new investment or try to tweak your portfolio to outperform the market. It’s easy to get lulled into an idea that you can beat the markets if you just do enough research, just make enough trades, just own the right funds, just follow the right market prognosticator, etc. But what you’re really doing when you try to beat the markets is moving from the realm of investing to speculating. And when you speculate, you take the chance you may beat the markets, but you also take the chance that you may not.
So in this vein, I went back and found a short segment of what I feel is one of the core ideas behind the Permanent Portfolio from Harry Browne himself. I think this little two minute clip captures a fundamental truth in the investing world about why you need to be skeptical and why you should understand the differences between investing and speculating:
Harry Browne the Skeptical Investor
This clip was taken from Harry Browne’s radio show on October 31, 2004.
Podcast: Play in new window | Download
