How we dared to start investing

Our investment journey started with that we both went through crisis at work; where we realized that our financial future shouldn't rely on the paycheck alone.

Yet we had too much fear of the total stock market, and of stocks, to go all in on stocks.

Looking back we had some investments, mostly in mutual funds with corporate bonds that had a return of 4%. So very weak returns for the accumulation phase. And we really didn't pay attention to it. 

At some point, Antinous said that if we put our brains to it, we should be able to get at least a 7% return, still with reasonable risk. 

Sunrise for Antinous & Lucilius Financial Freedom Journey

Enter Asset Allocation

That's when we came across the permanent portfolio. We soaked up and read everything about it, we got the books of which we would especially recommend Craig Rowland's The Permanent Portfolio from 2012 that goes into more depth and answers some of the questions otherwise left unanswered. 

Compared to the advice one would get from one's bank, this is a wildly different approach.

It allocates 25% in four completely different asset classes (cash, long term government bonds, gold and the domestic stock market via a broad index fund).

Why? If we don't know anything about the future, then we bet equally on what's going to happen. And then the asset balance each other out, providing a radically different risk approach than anything one has heard from the old bank's investment advisors.

Why we dared going all-in

We already had a bunch of money when we started to be interested in investing. But it didn't feel good to go all in in the stock market, as many seemed to recommend in the financial independence-sphere.

Basically, it was the table below that made us dare to put our hard-earned money in a portfolio. The data below sums all periods from 1970 to now, with yearly re-balancing. We added US and France below just as a reference, with the US stock market as a benchmark. 

	PP SE	PP US	PP FR	Stocks (US)
Deepest Drawdown	-12%	-14%	-13%	−49%
Longest Drawdown	5y	5y	5y	13y
Average Return*	5.9%	5.2%	4.9%	8.2%
Short Term 3y Bad Case*	1.1%	1.6%	1.6%	-2.3%
Long Term 10y Bad Case*	3.2%	3.9%	3.6%	1.4%
Min Time to FI**	4y	7y	6y	3y
Max Time to FI**	10y	10y	10y	14

* Returns here are per year without inflation. So one needs to add one's expectation on inflation to see the same returns one would see in a brokerage account. The bad case is at the 15% percentile. 

** We assumed a 50% savings rate and 8 years expenses already saved. But this is 

When we started, we didn't really find online numbers for Sweden, so we crunched the numbers ourselves. It would show that the permanent portfolio is even better in Sweden than we first thought. Now there's portfoliocharts that is excellent for getting better ideas about different asset allocation strategies. 

So the higher average return in the stock market has also a very high price of 4 red boxes in our table, where each and one of the red box represent a very unnerving result for us. 

In short: the idea of asset allocation and perhaps the permanent portfolio might be worth checking out. 

So we did go slightly slower, but preferred to avoid the red trapdoors. Can you go more aggressive? Yes. Did we dare go more aggressive? No. So better to have something to start with rather then bring scared into doing nothing at all, or to pretend to be an ideal stoic sage that will be unaffected whatever happens just to discover that it might not be true. 

Farewell,

//antinous&lucilius