A folk etymology is one that is widely believed but which is unfounded linguistically, though often it ‘seems’ right. One example is the widespread belief that the word posh derives from an acronym of Port Out Starboard Home, these being the preferred sides, being sheltered from the sun, of passengers on P&O liners sailing between Britain and India. However, there is no real evidence to support this theory. The etymology given in the OED is:
[Of obscure origin, but cf. posh n.2 The suggestion that this word is derived from the initials of ‘port outward, starboard home’, referring to the more expensive side for accommodation on ships formerly travelling between England and India, is often put forward but lacks foundation. The main objections to this derivation are listed by G. Chowdharay-Best in Mariner’s Mirror (1971) Jan. 91–2.]
The reference to posh n.2 leads us to the definition:
which seems quite plausible.
The Mariner’s Mirror article and other comments can no longer be found on line (12 May 2013) but there seems little room for doubt: the acronym etymology is not valid.