Regular monthly investing and trading fees

General Discussion on the Permanent Portfolio Strategy

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dreambig
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Regular monthly investing and trading fees

Post by dreambig » Sun Nov 24, 2019 10:20 am

Hi all,

I'm currently in the accumulation phase of my life. I understand the rebalancing part (once per year) of the permanent portfolio, but what about regular investing? I have a decent amount to invest each month and was wondering what the efficient way to go about this might be.

I was thinking to wait until cash reaches 35% and then invest it. But should I split it between all three of the other asset classes each time, or just buy one to save on trading fees?

Perhaps I'm splitting hairs here but would be interested in your opinions. Thank you.
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ochotona
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Re: Regular monthly investing and trading fees

Post by ochotona » Sun Nov 24, 2019 11:35 am

Whatever you do, only use a brokerage where you can buy without paying a trading commission. Schwab, Fidelity, TD Ameritrade, Interactive Brokers "Lite" platform.
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Kbg
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Re: Regular monthly investing and trading fees

Post by Kbg » Sun Nov 24, 2019 8:14 pm

There is a lot written on this and many options. I think the consensus is to simply top up the asset below 25%.
Last edited by Kbg on Mon Nov 25, 2019 9:26 am, edited 1 time in total.
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Tyler
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Re: Regular monthly investing and trading fees

Post by Tyler » Mon Nov 25, 2019 9:26 am

Yep, it's easier than ever to invest regularly thanks to the industry race to eliminate trading fees. My main recommendation would be to invest new money into any assets below their target percentage, as that also helps prevent rebalancing fees (capital gains taxes).
Mechanical engineer, history buff, treasure manager... totally not Ben Gates
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Tortoise
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Re: Regular monthly investing and trading fees

Post by Tortoise » Wed Nov 27, 2019 3:39 pm

I think in retirement accounts it doesn’t matter much and largely comes down to personal preference.

But in taxable accounts, I personally like to put new contributions into cash until it hits 35%, then rebalance all assets. That approach seems to minimize the overall number of trades, which makes bookkeeping a bit simpler when filing my tax return.

If you contribute to cash until it hits 35%, then rebalance everything to 25%, just be aware that your portfolio averaged over time will be cash-heavy. So to compensate, you can rebalance cash to 15% and the other three assets to 28%.
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Re: Regular monthly investing and trading fees

Post by Pet Hog » Fri Nov 29, 2019 1:34 am

Tortoise wrote:
Wed Nov 27, 2019 3:39 pm
...just be aware that your portfolio averaged over time will be cash-heavy. So to compensate, you can rebalance cash to 15% and the other three assets to 28%.
This is such a wise comment, Tortoise. I hope everyone takes it to heart.

Having said that, personally I'm not a fan of adding to cash until it gets to 35%. That way you are picking an arbitrary day to rebalance -- the day you added that last cash "straw" to break the PP "camel's back." It says nothing about whether it would be right in terms of the state of the market. For example, we are now at an all-time high for stocks. Would you buy stocks today, just because you added cash to 35%? Surely you should, if anything, be selling! But I understand that if you always buy the lagging asset, eventually something like stocks-at-their-all-time-high will become the lagging asset. It's a dilemma, and probably not something to worry about. Remember that the percentages we fret over -- 15, 25, and 35% -- are all arbitrarily set and defined. From all the modeling I've done, the PP does seem to be an all-roads-lead-to-Rome portfolio. Pick a strategy, follow it for a while, change course, whatever -- you'll get to Rome!

I'm also in the accumulation phase. My preference these days is to add to cash if cash is under 25% -- regardless of whether it is the lagging asset or not. If it's above 25%, I'll buy the lagging asset only to the degree that the purchase keeps cash at or above 25%. This way I'm keeping my cash close to 25% at all times. The other three assets can move around as they like with their volatility, but with this strategy, in the accumulation phase, the laggards never get too far from 25% either.

That might sound confusing. So, for example, if cash is at 23% and gold is the laggard at 21%, I add the new contribution to cash. If, after a new contribution, cash is at 27% and gold is the laggard at 21%, I rebalance to 25% cash and 23% gold. It's a strategy that keeps me slightly active in portfolio management, and it works for me psychologically.
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sophie
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Re: Regular monthly investing and trading fees

Post by sophie » Fri Nov 29, 2019 10:54 am

I use kind of a hybrid approach: large contributions get invested right away, using a lagging asset approach, and small ones get thrown into cash. When I notice the cash bucket getting up there, I make some more volatile asset purchases. No need to wait for the magic rebalance band.

I don't do fixed monthly investments except for the the Perth Mint - Depository online gives you a break on the purchase fee of 0.5%. Don't know why I got off this wagon but I think for two reasons: First, Fidelity's auto invest software is a nightmare. I've had it screw up badly and make multiple duplicate withdrawals, boxing my checking account. Second, I want to direct new volatile asset purchases to the appropriate accounts for tax management, I don't want to just blindly put everything into taxable. For example, I'm loading up my solo 401K with bonds, and focusing my Roth IRA on stocks. Because, over time I want the solo 401K to be the money loser and the Roth to be the big winner - no guarantees of course :-). I also want to minimize cash and bonds in my taxable account.
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