UK Permanent Portfolio - please advise!

General Discussion on the Permanent Portfolio Strategy

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Cox
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UK Permanent Portfolio - please advise!

Postby Cox » Mon May 01, 2017 8:55 pm

Hi everyone,

I am looking at setting up a UK permanent portfolio after reading Harry Browne and Craig's books (as well as listening to Jake's podcasts and reading as much as I can about this online). Before going any further I was really hoping for some advice from the forum.

My situation is as follows:

I have some inheritance money which is currently sitting as cash in the bank in a taxable account, and some personal savings which are held in a tax free cash ISA. The inheritance money is substantially more than the personal savings.

I plan to move all of this into two separate permanent portfolios; one using the inheritance money consisting of taxable investments (Non ISA portfolio), and one using the personal savings consisting of tax free investments (ISA portfolio).

Non ISA portfolio

25% Equities: Vanguard FTSE UK All Share Index Unit Trust – Income GBP
Fund held directly with Vanguard (no broker)
25% Bonds: TR60 – United Kingdom 4% Treasury Gilt 22/01/60 GB00B54QLM75
Buy on secondary market through broker (iweb?)
25% Gold: The Royal Mint Gold Bullion Allocated Storage
Direct buy and storage at the mint
25% Cash: UK Government Gilts short term bond ladder
Buy on secondary market through broker (iweb?)

ISA portfolio

25% Equities: iShares Core FTSE 100 UCITS ETF
Broker iweb
25% Bonds: TR60 – United Kingdom 4% Treasury Gilt 22/01/60 GB00B54QLM75
Buy on secondary market through broker (iweb?)
25% Gold: Zurcher Kantonalbank Gold ETF ZGLD OR ETF Securities Exchange Traded Gold PHGP
Broker iweb
25% Cash: Cash ISA
Held with commercial bank


Every year I intend to max out my yearly ISA limit (£20k) and buy more tax free investments – adding to the 'ISA portfolio'. Any additional money over the 20k limit will be added to the taxable investments held outside the ISA – adding to the 'Non ISA portfolio'.

The sum of both portfolios will be added together to obtain the combined asset allocation percentages. These combined percentages will be used for rebalancing.

In terms of brokers, it looks like the best (or cheapest) is iweb at £25 start up cost and then £5 per trade. I don't know how to buy gilts through them – I recall reading I may have to speak to them over the phone to do this and am concerned this may cost a lot more.

Any advice on the above in terms of overall strategy and choice of funds/brokers etc would be greatly appreciated. I am not sure if I am over-complicating the situation by having two portfolios but currently (with my limited knowledge) cannot see a simpler way of doing this.

Many thanks!
gizmo_rat
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Re: UK Permanent Portfolio - please advise!

Postby gizmo_rat » Thu May 04, 2017 6:22 am

Hi Welcome to the forum.

Looks like a sound plan, just a few comments for consideration.

  • fscs compensation limits are 85K for cash and 50K for investments per person per institution, so consider spreading your stash around a few brokers.
  • Aim to use your tax exempt accounts carefully, I'd suggest wrapping stocks,bonds, gold in that order.
  • Under current tax laws / interest rates, wrapping cash seems a bit pointless.
  • If you're holding substantial amounts of cash use the government's NS&I products eg.income bonds and direct saver.
  • iweb's system doesn't support Gilt purchases over the Web, you have to ring them but the trade price is the same (£5)
  • XO's system does now do Gilts over the Web
  • Longest term Gilt is currently TR68
    http://www.fixedincomeinvestor.co.uk/x/bondtable.html?groupid=3
  • Aim to minimise holding costs / fees

    Broker comparison table here
    http://monevator.com/compare-uk-cheapest-online-brokers

    EFT price list here
    http://monevator.com/low-cost-index-trackers

  • Consider holding some gold in the form of sovereigns / britannias (just the bullion quality ones)
    https://www.hattongardenmetals.com/buy/cid5/gold-coins
  • Gold EFT availability per broker can be a bit hit and miss so be prepared with a couple of alternatives from the low cost table.
  • Dont worry too much about rebalancing/ watching your portfolio like a hawk , I haven't hit a rebalance point in 6 years.
Cox
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Re: UK Permanent Portfolio - please advise!

Postby Cox » Sun Jun 18, 2017 12:47 pm

Thanks for the great reply gizmo_rat. It has taken me far longer to respond than I would have liked, but I’ve only just got around to setting up the ISA part of the portfolio (life gets in the way!).

Below is my ISA portfolio. I used iweb as my online broker as they seem cheap and easy (£25 set up and £5 per trade).

25% Equities: iShares Core FTSE 100 UCITS ETF (ISF)

Recommended in Craig’s book and has a low OCF of 0.07%. It cost £5 flat fee to trade.

25% Bonds: TR68 United Kingdom 3 ½% Treasury Gilt 2068

Longest term UK government bonds currently available. Iweb do not trade gilts online so I had to call them and complete a telephone trade – this was a very simple process. I just had to provide my account number and PIN and tell them what I wanted to buy and how much. It cost £5 flat fee to trade.

25% Gold: Source Physical Gold ETC (SGLD)

I used the advice from this old thread:https://www.gyroscopicinvesting.com/forum/viewtopic.php?f=5&t=6826 to help pick my gold ETC. iweb only trades PHAU or SGLD. I chose SGLD as it has a lower OCF of 0.29%. Again it cost £5 flat fee to trade.

25% Cash: Commercial bank savings account

So total cost for setting this up is £35 - not bad.

With my salary I will keep adding monthly to the cash portion of the portfolio (my bank account) until it reaches 35%. Then I will rebalance. This should keep costs to a minimum.

One thing that may be worth considering regarding FSCS limits is checking where the fund is domiciled – see this excellent Monevator article: http://monevator.com/investor-compensation-scheme/. The iShares ETF and Source Physical Gold ETC are both domiciled in Ireland. From my understanding that would mean I would only be covered up to €20,000 on each if things went tits up.

Source Physical Gold (SGLD) is traded in USD (so is PHAU) and not GBP. I couldn’t find a physically backed gold ETC/ETF on iweb that trades in GBP. Do you think this will cause any issues with the PP due to currency exchanges?
GH47
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Re: UK Permanent Portfolio - please advise!

Postby GH47 » Sat Jun 24, 2017 7:40 am

Hello,

It's good to hear from other UK investors.

I too am with iWeb and noticed they don't offer IGLN. I wasn't sure about holding SGLN for gold, so I opted instead for physical in the form of 1oz Britannias which are CGT and VAT free and have no ongoing charge. Yes I know there could be storage/insurance costs, but they really are so compact that it's not difficult to put them out of sight and out of reach with a bit of ingenuity. The fire risk is another matter of course, but not holding everything at one location could mitigate that. I got the coins at ATS Bullion in London and was pleased with the service (no connection with ATS myself).

I love the idea of the PP but can't quite bring myself to commit to it 100% yet, so I have a Golden Butterfly-esque Portfolio which is as follows:

20% UK All Share Index
20% Dev World ex UK Index
20% Gold
20% Medium/Long Gilts
20% Short Term Gilts/Cash

I don't hold gilts directly only via funds.

I arrived at this after a lot of reading, indecision and playing around with Tyler's excellent Portfolio Charts. One thing that did surprise me recently was that the Portfolio Finder seems to suggest that it's slightly better to hold UK equities and not global equities as part of the mix, which runs counter to the usual argument for going international if you're in the UK. I may shift myself more towards the PP depending how things go.

All the best.

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