Permanent portfolio in a donor advised fund

General Discussion on the Permanent Portfolio Strategy

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jwart
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Permanent portfolio in a donor advised fund

Post by jwart » Fri Jan 18, 2013 12:39 pm

** I accidentally pasted this same post under other discussions so copied it here.


Hi Everyone:

I am trying to implement a PP in a donor advised fund ( DAF). A donor-advised fund is a charitable giving vehicle administered by a public charity and created for the purpose of managing charitable donations on behalf of an organization, family, or individual ( Wikipedia def). I have mine with schwab and as is normally the case in constructing a PP, they dont have perfect options for implementing the portfolio.

The applicable choices they offer for PP consideration are

for equity portion,
Parnassus Equity Income (PRBLX) and Schwab Total Stock Market Index (SWTSX)

for fixed income,
Principal Short-Term Income (PSHIX) , American Century Inflation Adjusted Bond Fund (ACITX), PIMCO Total Return Bond Fund (PTTDX) 

for cash,
Schwab U.S. Treasury Money Fund (SWUXX)

and no gold options.

Alternatively, i could go with either of their two funds,  Manning & Napier Pro-Blend Conservative Term S (EXDAX) which has a 70% cash and fixed income component and a 30% allocation to equities or the Janus Balanced (JABAX) which has a 45 % allocation to cash and fixed income and 55 equity. With either of these options, i could supplement it with a percentage of total assets in gold and/or cash.


For equities suitable for the permanent portfolio, i am thinking SWTSX because of the low expense ratio.


Now here come the questions....

For fixed income, do i completely utilize any of their options and/or supplement it with one outside in my regular acct ( eg, tlt, edv or actual 30 year bond)


For gold, GLD or actual gold coins?

In considering your potential response, it should be noted that any investing components held outside of the fund, will be converted into cash if its transferred into the DAF account. This potentially could result in unwanted rebalances.

Thanks for reading and your advice in advance.

Cheers.
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AgAuMoney
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Re: Permanent portfolio in a donor advised fund

Post by AgAuMoney » Sat Jan 19, 2013 7:02 pm

What is your goal?

Obviously it cannot be to preserve your wealth, since the donor advised fund is gone.

Since the donor advised fund is impossible to rebalance out of, I don't see the point in trying to divide a PP between your donation and anything not yet donated.

I'd recommend to manage the donation fund as a standalone account because it truly is, far more so than even a retirement account.
jwart
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Re: Permanent portfolio in a donor advised fund

Post by jwart » Tue Jan 22, 2013 12:24 pm

The goal is to grow a portion of my assets earmarked for philanthropic purposes. I am trying to use the permanent portfolio as a vehicle for doing this.
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AgAuMoney
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Re: Permanent portfolio in a donor advised fund

Post by AgAuMoney » Tue Jan 22, 2013 11:13 pm

Rebalancing is critical to growth of a PP and will be a major issue with the PP divided like that.  Without all four assets in the charity fund, the only way it can work is if you are able to dedicate additional assets outside the charity fund, and commit to adding to those classes as needed to rebalance.  But even then there is a problem...

If the assets inside the charity fund need addition, what will you do?  Add more to the charity fund?  Or start holding more asset classes outside the fund to supplement those same classes held inside the fund?  If you don't add more to the charity fund, how does the PP help it grow?

When it comes time to make a donation from the fund, will that unbalance things so you need to add outside the fund?  Or perform commensurate reduction outside the fund?

It's hard enough to keep a PP balanced across multiple accounts when they are all yours and the assets in the end will be yours so they all form one big pool in the end.  I just don't think it works when one of the accounts is depleting and the assets will not be yours so part of the PP is going away.
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smurff
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Re: Permanent portfolio in a donor advised fund

Post by smurff » Wed Jan 23, 2013 5:21 pm

If you invest your assets in a fund and they are still yours, or if they are in a trust where you have complete control over the assets (such as where you and/or your family are beneficiaries) then you can move around parts of your PP and trusts to make sure all of your assets and assets held in trust are balanced. 

It sounds like in this case, you no longer control nor will benefit from the assets in the fund.  The assets have already been donated, at best you can have some input by choosing among a limited number of mutual and index funds as well as which charity or grantee will benefit from the funds, so you can no longer consider them part of your own current wealth. 

The HBPP is primarily a personal system for asset allocation, capital conservation, etc., but the emphasis is on the personal. (This does not mean some large or small organizations cannot make use of the PP, but organization staff have to agree with their employees, directors and other constituencies to do so.)

While some advisors might recommend DAFs as part of the "giving" portion of a personal finance plan or to ensure that charitable gifts to worthy nonprofit organizations are tax deductible when you want them to be, once they are placed in a DAF (given away) they are no longer part of your personal finances.
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