Why I Stopped Buying Stocks

Today we're going to talk about the Permanent Portfolio, how to invest in 2022, and my thoughts moving forward - Add me on Instagram: GPStephan

The YouTube Creator Academy:

Initially, this was referred to as the PERMANENT PORTFOLIO because it’s meant to PERMANENTLY last throughout your entire life, no matter WHAT HAPPENS in the market:

25% Stocks which do well in GROWTH.
25% Bonds that do well througH DEFLATION
25% Cash Or Treasury Bills which does well in a RECESSION
And 25% Gold which does well with INFLATION

The creator, Harry Browne, said that this portfolio would do well under ANY CONDITION, because - no matter what happens - you’d be making money, while minimizing the chance of losing anything.

In fact, MutinyFund reported that, from 1970 to 2012…the “Permanent Portfolio” has a growth rate of 8.55% with a maximum loss of 18%….while 93% of the rolling 12-month periods delivered positive returns.”

However…there was a hidden problem: even though holding on to 50% Cash and Gold worked in the 1970’s throughout runaway inflation and skyrocketing precious metals price - throughout the last 40 years…they’ve both underperformed - A LOT.

Instead of diversifying across 4 brackets…they argue that the trick is to diversify…WITHIN the diversification. Within these 4 sectors…you’re pretty much investing in EVERYTHING that could possibly happen…including, Elon Musk announcing that he’s planning to sell 10% of his Tesla Holdings…and, even more interesting is that - this “Cockroach Portfolio” also includes an equal allocation to BITCOIN…which, I have a feeling…helps increase these returns by a MONUMENTAL AMOUNT.

From the stock market perspective…SO FAR, the highest risk adjusted returns…historically…seems to have come from the SP500…MEANING, if you’re young, you plan to hold on for at least 20 years, and you don’t mind the rollercoaster ride along the way…if history is any indication, throwing in an SP500 index fund has the best chance at coming out ahead.

On the other hand, if you want VERY similar returns…with even MORE diversification…a TOTAL STOCK MARKET INDEX FUND, that covers EVERYTHING, would give you an even broader investment with slightly less volatility.

If you wanted SLIGHTLY more coverage to the “What If” scenario, since - technically - those only cover the US markets - you could allocate 15% to an INTERNATIONAL STOCK MARKET INDEX FUND, so that way - you’ve got some diversification, around the world.

And if we go even further, in terms of maximizing returns…there have been multiple articles and studies which now suggest that a 2-5% allocation to BITCOIN could wind up INCREASING your profit substantially, while helping you diversify through a new asset class.

Now, of course…since EVERY INVESTMENT has the potential to DROP in value…there SHOULD be a “safety net” that you keep easily accessible…and, for most people - a 3 to 8 month emergency fund, in a high interest savings account, should be more than enough.

So, all of this is to say that: the best way to beat the market…isn’t to beat the market..but, instead, to find the best RISK ADJUSTED RETURN that you can, which - typically happens when you diversify as much as possible.

My ENTIRE Camera and Recording Equipment:

[amandedora]

We are living in one of most volatile moments. Long term thinking will get you through these crazy times.

[JasonAThornberry]

"What's up Donuts, it's Dunkin here"

[theoking]

Every time there’s a small correction in the market all the YouTubers come out with doom and gloom videos. Best advice? Turn off all the videos, stay diversified, and live your life. I do 50% dividend and 50% real estate.

[seanhiggins]

I bought my first stock around 2018 right when I started watching this channel. It was AMD for $12 a pop. I watched it soar to $33 and panic sold at $15. I wish I had some of the knowledge that I would gain years later from watching these videos and had just been patient and held. Oh well.

[jessicamoore]

Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.

[AdventureCola]

I got out of the stock market except for one gaming company's stock that I still hold bc I like the stock. The stock market seems propped up on credit derivatives such as: Credit default swaps (CDS), Collateralized debt obligations (CDO), Total return swaps, and Credit spread options/forwards. Credit derivatives may have bubbled out entire financial system and it's probably gonna pop one day soon and not be good for everybody who has no idea what's going on.

[derekcarday]

I've been investing for fifteen years now and my favorite strategy is to NOT diversify but rather DCA on two or three companies that I believe in the most and that I think will leave the world a better place. For example: let's say you are passionate about Tesla and Apple and you truly believe in their company's values and mission. Instead of diversifying in an index fund to mitigate risk, you mitigate the risk by shoveling cash in on the dips and panic selling. I've found this to give me the best of both worlds of high returns with tolerable risk. Of course, there's a risk of losing it all but the same holds true with owning your own company.

[Je.rone_]

The problem is often they often use volatility as a measure of risk, and that is silly, unless you are short term investing, using margin, or "investing with your rent money" as the saying goes.

[orlandmalon]

Thanks for all the detail in the description.👍

[rootedrotor]

If you're young. Listen to what Graham just said. Picking individual stocks over the long haul is a suckers game. Sadly, most peoples Egos will never allow them to believe this - including my own for a long time.

[justinhodapp]

Bitcoin wasn’t included in calculating the return. This is from the footnote of article that you linked: We did NOT include bitcoin or other cryptoassets in the results as we did not feel that its historical performance was realistic on a walk-forward basis. Instead gold is substituted for the bitcoin allocation in the backtest.

[lisavivori]

Love that you're donating for clean oceans ❤️

[Nikolai]

Ok. I hear you. Yoloing all my moneyz on Elonballs.

[ItsJibb]

I think the best investment one can make, is the first one that hopefully snowballs your savings. You can do it! Just commit!

[AliexFolgueira]

Here was me thinking how dare you have so much in cash ??? And then you mentioned the T word….and then I realized I’m doing the same??? Lol

[bhershman]

love your even keel approach to investing, so good

[sun_free]

Every time I see you on my YT homepage you look stressed and in despair. Can you smile in your thumbnails? Show joy?

[AaronBogle]

Are you going to make a video about all the taxes you're going to pay/how you're going to lower your tax bill? That would be super helpful!💯

[stephen-finance]

Diversification is a beautiful thing! Index funds/ETFs solve a lot of these issues with very little work and cost.

[Unbedingt]

The inflation in 3:32 is calculated for 51 years not "41". Message is clear though.