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Hi Toofuzzy,
There are also people rebalancing once a year. Marc de Mesel does that according to his blog.
I think that Harry Browne was not stressing how to rebalance and left both options open, yearly or using bands.
Kind Regards,K
Hi Toofuzzy,
http://crawlingroad.com/blog/2009/09/16/a-fall-2009-update-you-did-rebalance-right/#more-2087
Rebalancing – Emotionally challenging but necessary
Now let’s consider the rebalancing strategy of the Permanent Portfolio. As we know, the Permanent Portfolio splits the assets of stocks, bonds, cash and gold into equal 25% portions. To rebalance, you buy an asset when it falls to 15% or less of the portfolio and sell an asset when it is 35% or more of the portfolio. These are the standard rebalancing triggers. Some people use figures of 20% and 30% for buying and selling which is fine, too.
Just have a figure set for your portfolio and don’t go around changing it based on what you think the markets are going to do. Also, don’t let any asset get above 35% of your portfolio because you open yourself up to taking a larger loss if that asset drops in value quickly. Likewise, don’t let an asset fall below 15% because you won’t own enough of it when needed to offset losses in other parts of the portfolio.
Kind Regards,K
Hi Ls7550, That is indeed a very nice set of numbers!
Thx Ls7550,
My 'problem' was with the value of Average and CAGR. I had expected a number close to 10%.
Kind Regards,K
Hi Ls7550,
That is nice, PP-uk has a stdev of 5.6% with a maximum of a 8.0% drawdown.
Then the chart of your previous post which showed the march drawdown was approximately -8% and one of these special events/buying opportunities. The max drawdown of stocks with -55% is probably the cause of any such event and this gives an new way of measuring and recognizing these extreme buying opportunities.
I am not sure how to read the Average and CAGR numbers. Maybe you can elaborate a bit on these.
I understand that PP-us is 7% up this year and had a rebalance of LT bonds early this year or late last year and had a gold rebalance during the year, with the expectation of a stock rebalance in the last part of the year. Last year PP-us was 1%.
Looking now at my AIM machines from september 2008 till now my performance was similar. Only i was down a bit more than 8% in march 2009.
Kind Regards,K
Hi Cindy,
Grats with the 60%.
I am now experimenting with a PP-eur and a PP-us. I envisage the PP's to be cash for AIM machines, although one could AIM the PP componenents seperately. They have good stability since 1972, only 2 down years , 4% and 2% down, the rest up years and a yearly return of 10% approximately. Great reading is the Bogleheads forum.
When you buy in AIM, equities are going down, so the equity part of PP will go down as well. In stead of rebalancing within PP, you can take out cash from bonds or gold and put it in your AIM machines.
Of interest is maybe the standard deviation of PP. I saw it somewhere but can't find it just now. The return of the PP are calculated over calendar years, during the year you could be 10% down, just when you want to do some serious buying.
In the Iceland scenario you would lose your money if you bought more and more Iceland equity(deep divers). So i would like to spread the AIM machines over the globe, the ishares global sectors will do that, or a mix of us/eur/pac/eem etc.
I keep for PP-us equity in VTI and for PP-eur equity in EUN2.
This is uncharted territory. It is not outside Harry Brown's original ideas, because he also talked about the variable portfolio. It could enhance performance of the cash part of AIM machines, but it will require a bit more trading.
I have no idea how this idea will function in the future, we will see:)
For me an added benefit is that i can keep my US cash in my PP-us. It solves my US cash problem. Just putting it in SHY didn't appeal to me.
Kind Regards,K
Hey Firebird,
CHW is doing nicely today giving me a sell signal.
CHY also gives a sell signal but i postpone selling until 12$. I did my last sell on 20 aug so waiting a month i like to see it sell on monday :)
Kind Regards,K
Hi LS7550,
Creating a PP in dollars, gives me a currency risk.
With the dropping dollar i was already buying US assets.
By spreading your PP over several currencies, you cant AIM the whole package, so to say.
My thought was to AIM a PP denominated in US dollars. This seems better than a dollar/euro fund, because a PP is a better value holder than a currency an sich. The portfolio value which is based on dollars would be converted to euros and compared to a eurobased portfolio control.
If you are selling the US PP, you could use the EU PP as cash and vice versa. This would mean an AIM machine where we have cash and equity, for example for europeans the EU PP would be cash and the US PP would be considered to be equity. For US investors the US PP would be cash and the EU PP would be equity.
A pacific PP could be added to the mix, but this would be a multi currency basket which is not nice. So i think everything outside the dollar and euro area should be AIMed.
Kind Regards, K
Hi LS7550,
I created a PP portfolio today and feel indestructible :)
It gives you lets say 4 thermometers to gauge the economic temperature.
1. Right now there is the opposite of a recession, this is gauge 1, cash.
2. There is depression, long bonds, gauge 2. I bought a car, which is now 10% cheaper than the same car I bought 3.5 years ago.
3. Panic is slowly building up, gauge 3, Gold.
4. We live in a period of prosperity, mostly borrowed from the taxpayer, gauge 4, our stocks. This could be shortlived, the patient could be dead and a 3K Voltage will not help.
I must say, this gives a good direction to my thinking and maybe the best thing to do now is to buy AAA debt and gold. Of course AIMers want to profit from the up and downs :)
Kind Regards, K
Hi Ls7550,
That all makes good sense:)
For PP cash i would take rebalance percentages of 15% and 35%.
For PP long bond rebalance of 22.5% and 27.5%.
For PP gold also 22.5% and 27.5 %.
For PP equity 20% and 30%.
Merging AIM equity with PP equity seems a bit confusing, because i want to keep PP equity 100%. One could remove the core from AIM and put it into PP, leaving behind a LD-AIM machine. That would be nice in a situation where AIM produced a free stock and you want to stop trading, moving the core into PP with its associated free cash stream.
Adding sequence would be:
1 value stock, if one is known or other black swan
2 sector/income etf
Removing whatever needs to be removed.
Rotations whenever a valuestock is fully priced.
To implement the new management style will take some time, i will start by rotating my ETFS All Commodities into PHAU. What I also like is that all cash, wherever it is, can be part of PP cash.
I am sure more new things will come up for the combination of PP and AIM.
Kind Regards,K
That was similar to what i thought.
I was thinking of a PP and a set of AIM machines.
PP would be the cash of all AIM machines.
Then you could set PP to zero when you think that all cash would be exhausted, that could be done in an exact way with ladder and an approximation with AIM.
However you could make PP larger, so it is not empty after a 50% AIM drawdown, but maybe 80%.
That would be an extra parameter to set.
You could even make PP much larger, so you could always execute AIM buys.
Personally i was envisaging a PP of 75% ( 3 times 25% :) ) at the top. That would equate now to something like 10% for me.
Then AIM on top a combination of machines:
- dividend/ income based machines
- strong stocks, value algorithm like Value Stock selector or Fwallstreet
- sector based machines, I admired the performance of the global Ishares sector funds this year
- any other ETF/opportunity i like to AIM(Black Swan capture)
For PP, I was looking at 2 PPs:
- VTI(or sliced with LC,MC,SC), TLT, SHY. GLD/IAU
- Eurostoxx50(or sliced with a combo of smallcap/midcap euro ETFs, could maybe enhance with International SC), IBGS, IBGL, PHAU.
This allows for US and Euro AIM on top.
Kind Regards, K
Hi ls7550,
A set of three 80/20 stock/cash AIM's against stocks, bonds and gold, with some held in foreign currency (perhaps gold in USD, bonds in Euro, Stocks in domestic, cash into a surplus countries deposit) seems to be pretty protective
I have nearly finished reading the Bogleheads forum about the PP.
PP seems to be a very stable portfolio with growth similar to a stock index.
Could we then use PP's stability, by making it the CASH store of our AIM machines?
Kind Regards, K
Hi Aptus,
Thanks for the link. Really nice meters!
I looked a bit at the formulas you supplied, this is way more sophisticated than FWallstreet stuff. To get this depth, I think you really need the software, its takes a lot of time to get to this level.
Thanks again, K
Hi Grabber,
There is the MSCI world index, ishares has an ETF for it.
I am not sure, but i thought(?)that is was somewhat GDP driven.
At least that is what i sometimes look at, the distribution of GDP, as a kind of guideline for asset allocation.
World GDP worldbank 2006
US 27.4% Canada 2.6%
Japan 9%
China/HK 5.5%
Europa 22%
Brazil 2%
Russia 2%
India 2%
Mexico 1.7%
Australia 1.6%
Korea 1.8%
Other 22.3% also europe
That implies 30% North america, 25 % Europe(old and new), BRIC 12 %, Far east excl Japan 5%, Japan 10% and the rest:)
Sometimes I look at it, it is not something for which I keep a weekly record,
Kind Regards, K
Hey Grabber,
No, i don't compare versus any index. Wouldn't know which index to use, because it is invested all over the place, in euros and dollars.
I am moving into the direction of value investing at the moment, where i look at cash yield and cash return on capital. Just saw a reference of greenblatts book, which is using earnings yield and also return on investment. If a stock is a good value stock it is even better to buy with AIM. The only thing against it is that a lot of these stocks don't move much.
Kind Regards,K
Hey Grabber,
August for me was 5.95% up.
Kind Regards,K
Hey Conrad,
Fully agree. You can sum up all equity costs or gains for each transaction. That is what i did as well.
This 'aggregate' calculation does the same, and you can apply it whatever you do with your machines.
Costs and interest can be included, you can regard them as part of your current cash, or seperate them out completely to handle them on overall level.
Kind Regards,K
Hey Lostcowboy,
Yes, that is AIM doing its job. When the cost = zero you have Freeshares! When it is negative, the market gave you some shares. Also when the avg cost goes down your dividend yield will go up, the dividend yield can help you to decide what to sell. For example i bought some CLMS earlier this year. I had one AIM sell which brought my avg cost to -$0.02(i targeted for zero). My dividend yield is now infinite, or the cash/dividend stream is free from now on. Now i have a difficult decision because CLMS is on its MA200 (or close) and threatens to go under it. Do i keep it or sell and rotate into something else? Rotations are nice, but you need to know where to rotate to. I am evaluating the cash stream and cash yield of equities now and use that to determine growth and price(DCF). I hope to find candidates for rotation in that way.
At least i hope to avoid bad choices.
(The thing i noticed was that this calculation is the same as when you recalculate the avg cost after each transaction using usual algorithms to calculate an average. It is easy and applicable whenever you know how much shares and cash you have and what the initial amount of shares and cash was. It aggregates all activity)
Kind Regards, K
Hey Conrad,
All trading methods over all asset classes, managed by managers who know what they are doing.
That was roughly the synopsis, as i understood it.
About the average share cost, it is indeed trivial, but up till now i calculated it for each transaction via a calculation that took in account what i had, how much i bought or sold and calculated the new avg price.
This new calculation is much simpler and is equivalent, without any difficult calculations especially when you do some nonstandard stuff to your machine.(like taking part from the machine and combine it with another machine)
Kind Regards,K
Hey All,
AIM calculation for cost value. I use now a new(for me) calculation to get the cost value of my equity in an AIM machine, and i thought maybe interesting to share. I get the same value in this way as when I calculate the average cost value by doing a calculation whenever there is a change.
1- Take the amount invested in the machine, both equity and cash.
2- Deduct current cash
3- Divide by number of shares to get average cost value.
Hypothetical Example:
1 - Equity $5000 + Cash $5000 =$10000, (for example 500 shares for $10/share)
2 - Current cash = $1000
3 - Current numbers of shares = 1000 (hypothetical number)
Then: ((5000+5000)-1000)/1000 = $9 = average cost per share.
Very straightforward, but I only 'saw' this during the weekend and i use it now in my spreadsheets.
Kind Regards, K
Hi Toofuzzy,
Interesting fund.
Currently i am looking at combining 'value investing' with AIM.
Determine when a stock is cheap based on cash flow(based on Joe Ponzio's FWallstreet,Buffett like), determine cash yield, cash growth and DCF value.
You can make a buy list and sell list and use that for AIM's buy and sell signals, or rotate in between. Your portfolio would only exist out of 'strong' stocks.
Kind Regards, K
Sells,
Up to now i have ignored some sell signals. Today there was some activity in PGF that made me execute my sell in PGF. Making use of this selling mood, also other machines were brought back into the Lichello hold zone. Basically i took all profits and tomorrow i will continue in the same way with my euro based machines.
Kind Regards, K
Hi MDSuth,
Not adding cash could be wise now, because the vwave is in the Hold Zone.
During the winter 2008-2009 i had some machines that had a zero cash level. I consider the fact that AIM is asking for cash and the fact that there is no cash as a very positive signal.
So i bought more equity(and other stuff). But i didnt buy more of the same equity, i bought another one that seemed worthy of buying. Generally then the new shares leave that machine and will form a new machine. The old machine gets a bit lower PC which is nice as well.
In March i was at the crosspoint of using Margin which I did in 2003. Didn't had the guts this time :)
A few months of confused buying happened for me. Sometimes I didnt know what to buy, so I bought CHY etc., much discussed here, and being lucky it all went well.
So now i have a humongeous # of entities and i have to create some order. At this moment I am looking at the ultimate buy and hold portfolio to give me that order. I noticed i am low on SC stuff. So i cant buy anymore, the signals are gone( actually ignoring some sell signals, in the belief of more upside) but i can rotate. So i am now rotating stuff to get the right order and structure. I am not using 40% ST bonds, but replacing this part with VYM, DHS, DTH, PGF and others.
I hope i have everything nicely sorted out when the next buying opportunity will be available.
Kind Regards,K
Hi Toofuzzy,
All good points!
I am working with Independent Brokers, their subsidiary here in Amsterdam, and they don't use MM accounts here.
When reading chapter 17(3rd edition) Retirement AIM, Lichello talks about using short-term bond funds in stead of MM funds.
I was wondering if anyone is doing this and what their experiences are.
Whatever you do it is important that the sweep acount doesn't cost you anything to get in and out of
Using a short term bond fund would cost me 6 dollar to get in and 6 dollar to get out.
1% Paytrading could maybe earn you a bit when using these types of funds. LDAIM with a Lichello band of 1% is also an option.
I consider Vanguard because of their low costs.
You see how well Americans are served !
Kind Regards,K
Hey Grabber,
March was 3X for me, but Febr was -2.5X.
April and May were roughly 1X.
June was nearly -1X.
October last year was also nasty with nearly -2X.
Kind Regards,K
Thanks Toofuzzy,
On monday I will ring my broker to see if we have such a thing here.
I was also thinking for cash management to have a mix of for example BSV and BLV. They both have been flat for along time now. These vehicles could also be used with the paytrading 1% strategy where the downside is covered by AIM. The 1% could maybe done with a LDAIM.
Still thinking...
Kind Regards,K
Hey Grabber,
July was excellent with a 16.88% increase on total portfolio.
Much of it happened when away on holiday, so you can imagine the smile when I came home and noticed the July rally!
Kind Regards, K
Hey All !
I have a question on cash management in US dollars.
When selling Aim generates cash. I am using an account with an american broker now and cash is being generated.
My question is : where do i store that cash? For example in BSV or TUZ or SHY ? Or are money market funds available?
How are people storing cash in their superannuation accounts ?
Please let me know how you are doing it ?
Kind Regards, K
Hey Tom,
Interesting is Jeremy Siegel's portfolio:
• Total Dividend Fund (DTD) -- 15%
• Earnings Index Fund (EXT) -- 15%
• DEFA Fund (DWM) -- 20%
• High Yield Equity Index (DHS) -- 10%
• DEFA High Yield Equity Index (DTH) -- 10%
• International Energy Sector (DKA) -- 10%
• International Consumer Non Cyclical (DPN)-- 10%
• Low P/E Index Fund (EZY) -- 10%
http://www.marketwatch.com/story/new-lazy-portfolio-using-fundamental-etfs-sparks-furor?dist=TNMostRead
Kind Regards,K
Hi Ken,
I saw it, it probably explains the 'better' price of CHW in the past. I dont find CHW extremely attractive at current numbers relative to the other ones. CHI could be the better one looking at market yield and NAV yield. If i had a buy signal i would take CHI right now.
Regards, K
Permanent portfolio
I was looking at:
1 equity: VT(0.09%) or VTI or IWRD
2 gold : PHAU(0.39%)
3 cash : SHY(0.15%) or/and euro equivalent
4 long term treasuries: TLT(0.15%) and/or euro equivalent
I would choose the lowest fee ETF. Also would split between euro and dollar and rebalance over the currencies as well.
Interesting to see PP win in 2008, leaving behind Merriman Buy&Hold, William Bernstein and Coffeehouse amongst others.
Also interesting spreadsheet from 1972 till now where $10000 grows to $250000 in 47 years, where all dividends and interest were reinvested.
Rebalancing with a 10% band (15% to 25% and 35% to 25%) which is maybe equivalent to a 20% AIM hold zone. Rebalance the Portfolio controls via normal once a month checkpoints.
I wouldnt use OIL, there is something wrong with that ETF, it doesnt follow the oil price. Craig doesnt like oil and reits only in the variable portfolio.
I like the concept and like to hear other opinions about the right vehicles to use. I will set up a test spreadsheet to get a feel for it. Backtesting seems difficult because of dividends and interest.
Kind Regards, K
Hey Ken,
I did buy a small position in CHW. I had another machine with some buying-space which I used to buy CHW. I moved CHW from that machine to its own machine. With the sell in CHY and the buy in CHW I increased my monthly income which is nice. The 15% yield of CHW is nice and roughly 4% better than CHY. I must say CGO has a nice NAV discount but the distribution rate is a bit lower.
The last remark that Tom made about the cash limit (maybe 20%) or so, is an important one for me. You dont want to sell these high payers too soon or keep too few of them , especially because we bought in such distressed times. If this is the start of an epic Bull market you can buy at all these price levels, because in 4 years time prices will be way higher.
If we get some drops we can add additional shares to increase the cash flow.
I also noticed some nice news about Calamos paying back their TARP(?) early for all these funds. So a nice good news flow from Calamos.
I am happy that I have more of them now.
Kind Regards,K
Hi Firebird,
Looking at the Calamos site indeed they all have a discount except CHI.
I like CHW, nice distribution and discount:)
In fact I may have a look monday if i can create a buy order in some machine and buy some of these, they just look great.
Kind Regards,K
Hi Firebird,
I was researching Calamos this morning
I use ETFconnect from Nuveen investments for 'research'.
Now i am a beginner on the USA market, trying to find my way.
What sources of research do you use that are freely available on the internet?
Kind Regards,K
Sells!
Took a few AIM directed sells, that could have been done earlier.
I was difficult to sell my PGF, but I am happy that I did it.
Next round i will follow AIM's advice and sell when i can.
Also sold some CLMS. I bought some at a much lower level. This sell means the rest of the CLMS shares are free now!
Also acquired some CHY a few months ago and had my first sell.
The same for JQC.
In my multi equity portfolio i nearly reached a sell. Maybe next time.
I am determined to follow AIM's advice strictly, that means I have to think less.
Kind Regards, K
Hey Grabber,
The cost basis is $8 with lower priced packages bought on AIM signals. These packages want to be sold, but I have the feeling that it is too early for that.
Tom's advice of weighing the capital gain versus the dividend % is excellent. If the price goes back to $20 with a div% of 7, I would think that selling is easier.
Kind Regards, K
April evaluation
Most Buy signals are gone !
Entered Hold territory for most machines!
I am back at February level, but without the buy signals.
My multi-equity machine is also in the Hold zone, this machine asked for a lot of big buys just recently.
Some machines give sell signals. For example PGF, but it is difficult to sell. The div% is around 14% now, but long time price level is around $20, while we are now at $10. In a Bull market I never have a problem with selling, but now it is difficult, because I have the feeling that more upside will come.
Kind Regards, K
Hey all,
Very interesting end of month evaluation.
My total (calculated over all machines) Market Order now is the same as in March 2003.
My overall Portfolio Control is also the same as in March 2003, this is because I exited some AIM machines in 2007/2008.
My ratio Portfolio Value / Portfolio Control was 0.54 in March 2003 and is now 0.69.(I started the downwave with approx. 70% cash.)
In March 2003 i had roughly 20% margin, I dont have any today.
March 2003 felt worse than March 2009. I still dont have margin and am adding whatever cash i can loot. Because a lot of machines are under water, i combined several machines in one huge machine and buy whatever i like at a certain moment in this AIM-classic machine. The components of this huge machine , I cant really oversee anymore, just dump stuff in it :)
Kind Regards, K
Hey Cindy,
I have the same question as you have : which ETF's to use ?
I use ETF's in Europe, mainly iShares. I prefer the Dublin based ishares or ishares II because they pay dividends per quarter, while the DE type for example typically pay per year. The same applies to other ETF families in Europe. They have to discover first that they exist for their customers who like frequent payouts.
Because i notice a run in the dollar I also like US ETF's, hoping for euro/dollar benefits on top of Aiming. I have looked at different suppliers and noticed:
- ishares, I like the international sector ETF's. Disadvantage is the cost of 0.48% and half-year dividend payments.
- Vanguard, I like the costs( for example VNQ 0.10%). They dont have global sector funds which is a minus. Only domestic sector funds. I like VGK with its high dividend, better than i can buy in Europe itself.
- Powershares, I like the diversity of what you can buy. It is a nice product set with monthly and quarterly dividend payments although their costs are a bit high. Their indices are not passive but active and looking at their graphs this gives more amplitude for example over the 2003-2008 period. How this method performs from 2008-2009-2010 is unclear to me at this moment. I read about traders who know the Invesco algorithms who anticipate on the portfolio realignments which could undermine the dynamic advantage.
- CEFs - the Nuveen list is very nice and you can search using ETFs, CEFs. I bought a bit here and there, looking at high dividend payments, but have no thoughts about what i see.
- Wisdomtree, I like the Siegel algorithm. Wisdomtree is paying dividends now quarterly. Their costs are at the higher end, but a problem is the ability to trade. Not all trades fill. They supply international sectorfunds.
- Calamos and ACG. You can read a lot on this forum because a lot of people use these for income. CHY is nice to AIM currently.
This is roughly what I consider at this moment. I must say that I get the best feelings using the iShares Global Sector funds. They feel like hard currency to me. It could be because I am based in Europe, but I believe in the Global economy and don't want to be overweight in a particular area.
I also still Aim Stocks, although I liquidated some machines at the top.
I would also like to read other people's ideas/thoughts about ETF's and how they are getting used.
Kind Regards, Karw
Admission
I have to admit that i started a machine in PGF and VFH.
At the same time I am not buying in certain bank machines, all based in the euro. I think/hope that the US$ will rise vs the Euro, based on my excel charts, so i am rotating some into the US$ area.
Kind Regards, K