In response to concerns about the Permanent Portfolio having a bit of a down month over at the forum I posted the following:
I have been running this portfolio for almost five years now. I sleep so much better vs. my older index stock/bond portfolio I cannot put it into words. It has taken me through the 2007 real estate bubble, the 2008 real estate crash, the 2009 stock market recovery, the 2010 “double dip” recession (which was a banner year for stocks BTW), and now the 2011 Quantitative Easing Part III and Euro panic. It has done these things with a stability that I never had before I started using it. If I owned another portfolio over all of this I would have given up a long time ago.
I strongly encourage people not to track their portfolio values over days or weeks. If you can stomach not checking but only once a month that is an OK start. If you can check once a quarter that is great. If you can do it once or twice a year that is fabulous. But emotionally most investors just can’t stomach looking at things frequently. There are powerful psychological reasons why this happens. So, I recommend we just accept it and don’t fall victim to them. The best way to do this is to not look at things too often. Simple!
You will go nuts checking portfolio values frequently. If you don’t go nuts because you think you are losing money, then just wait until your neighbors are bragging about their +20% gains some year at the company Christmas Party. That will drive you insane with jealousy if you maintain a short-term attitude (but of course they never brag about the negative years they have, do they?).
I am perfectly happy with my boring and low volatility 9-10% average returns the portfolio has had through the years. This really is a remarkable thing when you look at what other portfolios put their owners through to get the same results. The Permanent Portfolio is still positive year to date where many stock/bond portfolios are probably well into negative territory by now.
The Permanent Portfolio is not a magic elixir that eliminates all short-term losses, but I haven’t found anything that works better so I’m going to stick to the plan. Part of that plan is not checking the portfolio constantly!