Tag Archives: risk management

The Permanent Portfolio Strategy – Comments in the Face of a Stock Bull Market

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In some recent discussions on the Permanent Portfolio, it became clear to me that a lot of people are confusing the purpose of the strategy and comparing it against other approaches. In particular, in a year with the market doing well it has become en vogue again to move money into the stock markets. Well, I want to lay out a few points about what the Permanent Portfolio is and is not (to me at least). These ideas are also covered in our book on the Permanent Portfolio. A Different Objective The Permanent Portfolio has a much different objective than a lot of stock heavy portfolios. The Permanent Portfolio is designed to grow and protect your life savings at moderate rates, it is not designed to swing for the fences. Harry Browne (and myself), believed first and foremost that your career builds your wealth and your investing can accelerate that growth given Continue reading →

Always Avoid Complicated Investments

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The investment industry often tries to sell complicated investment products as “sophisticated” ways to grow your money. In this NYT article they discuss the perils of complicated and opaque investing products: Complex Investments Prove Risky as Savers Chase Bigger Payoff From the article: Regulators across the country are confronting a wave of investor fraud that is saddling retirement savers with steep losses on complex products that until a few years ago were pitched only to the most sophisticated investors. Here’s the reality: Successful sophisticated investors don’t like complicated investments. In fact, my experience in the venture capital and entrepreneur world has shown repeatedly that the best investors avoid needlessly complex investments almost entirely. Why? Because they hide tons of risk behind all the moving parts. I really dislike complicated investment products of any sort. I don’t care what is being promised, chances are there are significant risks buried in it that will Continue reading →

Beware of Investors Bearing Charts

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Since I’ve been venting about topics like Tapas, I may as well keep the ball rolling on another topic I really can’t stand: Charts. Specifically, investing charts. Even more specifically, investing charts going back decades that ignore history and make gross assumptions about the future. Here are the big problems with investing charts that I often see: The Problem of Induction This is partially the idea that what you see around you is bound to continue on into the future as it did in the past. Big mistake. A line on a chart may not always continue going up for instance even though a chartist may think it will. I feel sorry for people that just don’t seem to get this idea. Risk is real and can show up at any time. We need to consider how unknown risks may affect our investing strategy instead of looking at what a Continue reading →