What Permanent Portfolio Rules do you "break"?

[pplooker]

As laid out in Fail Safe Investing, the Permanent Portfolio is actually more than just four equal slices in certain asset classes.  There are a number of provisions, ideas really, that one is supposed to follow with it.  I personally break many of them.

For example I have no money outside the U.S., partly because I am poor and don't have a huge net worth that foreigners would court me.  ;D It's something I may try some day, but I am in no hurry.  I have to admit while I see the reasoning on this, I don't trust foreign governments any more than I trust my own, which is to say not at all.  I also don't see the point in geographical diversity unless you live in a locale that's conducive to immediate escape and also own a craft and have the skills to circumnavigate the world, but even then it's dodgy.  Even if I did flee the US for some reason, I'd be an illegal immigrant with no rights wherever I went.

I do not subdivide the categories as Browne reccommends.  All my stocks are Vanguard's Total Stock Market fund, for instance.  Again, a lot of this is because I am poor and it's just too hard to meet minimums at multiple brokers, and even if that weren't the case, I value simplicity for its own sake and don't want redundant accounts and holdings.  I don't bother with making sure I have everything in at least three funds in at least two brokers.

I don't bother with physical custody of gold.  A major component of this is that I currently do not have a storage option due to a convoluted set of personal circumstances (sadly, I am afraid that I would be robbed by someone I should be able to trust and any workarounds would constitute hassle on my part).  Also, I have serious trust issues with people who sell gold physically, they all seem to dodgy and I feel they misrepresent their product with their claims (Gold always outperforms stocks, etc.).  I feel I am the most likely to come around on this one as the security issue is temporary as it has to do with my living situation, and surely there must one at least one legitimate seller.

But I would never buy that much physical gold as I'm just lazy.  It just seems so much easier to buy and sell digitally.

I do not use a treasury money market for cash.  Right now all cash is either I bonds or a boring old savings account.  All the savings are at the same bank, not at multiple banks either.

All my bonds are in funds or ETFs not held individually.

I also have a very large Variable Portolio that's very John Bogle inspired, so half is in one strategy and half is in the other.  While that's technically not a rule breaker, it's probably atypical.  I feel between the methods of Browne and Bogle however I am more likely to fare better than just using one strategy or the other.  So I see it as more of a strategy diversification.  I figure others are likely doing much more exciting things with the Variable Portfolio so why can't mine be boring.  I have other reasons but it boils down to this: I sleep better this way.  If John Bogle and Harry Browne are both wrong then what chance did I ever have to begin with, eh?

I'm just curious if I'm unique in my deviations, or if anyone else breaks any of the "rules".

[mbh]

I'm just getting started with PP, but I feel like I'll be breaking a few rules too.

First, I'm considering PP to be my Plan B.  My main portfolio is a typical DFA 60/40 slice and dice with some gold and commodities mixed in.  I'm not prepared to abandon Plan A.  My goal is to put enough in Plan B so that either one would be enough to carry me in retirement.

Second, I'll be using i-bonds for the cash piece due to limited tax deferred space.

Finally, I'm toying with the idea of using some SCV and EM in the equity piece.  I've been looking at some scenarios in the Simba spreadsheet.  Adding SCV and EM seems to boost real returns *and* reduce volatility. 

[fnord123]

The main area I break PP rules is around the cash part, where following the rules would produce ~0.1-0.2% yield currently.  I use I-Bonds (up to the maximum yearly limit) as cash to increase my tax advantaged space.  Once that's used up, I store the rest in 5 year CDs that have a low penalty to break them.   The way I see it, for the FDIC to fail would mean pretty much a USD failure, at that point having USD isn't that useful anyway.  Doing these two things has given my cash component a ~3% yield, bringing up my PP CAGR as a whole by around 0.75%.

[Roy]

I do not subdivide the categories as Browne reccommends.

I don't bother with physical custody of gold.  

I do not use a treasury money market for cash.  Right now all cash is either I bonds or a boring old savings account.  All the savings are at the same bank, not at multiple banks either.

All my bonds are in funds or ETFs not held individually.

I also have a very large Variable Portolio that's very John Bogle inspired, so half is in one strategy and half is in the other.  While that's technically not a rule breaker, it's probably atypical.  I feel between the methods of Browne and Bogle however I am more likely to fare better than just using one strategy or the other.  So I see it as more of a strategy diversification.

I'm just curious if I'm unique in my deviations, or if anyone else breaks any of the "rules".

I would be OK with most of your rule-breaks as to how you hold the four assets.  I likely would not hold assets outside the US unless very wealthy.  I could be wrong on that...  

And I would not hold physical Gold, though the idea of playing with my Gold in some large room dedicated for that purpose is compelling!  It just sounds too damned complex, even as I am sure it is less so than I think.

I suppose I would quibble with the idea that "different strategies" makes for better diversification—of any sort.  At day's end, the portfolio as a whole is the thing that matters.  And your two strategies are just one portfolio—with different asset class weightings—no matter how you choose to view them.  Though, I can understand the emotional desire behind viewing them as you do.

Roy

[MCSquared]

As laid out in Fail Safe Investing, the Permanent Portfolio is actually more than just four equal slices in certain asset classes.  There are a number of provisions, ideas really, that one is supposed to follow with it.  I personally break many of them.

For example I have no money outside the U.S., partly because I am poor and don't have a huge net worth that foreigners would court me.  ;D It's something I may try some day, but I am in no hurry.  I have to admit while I see the reasoning on this, I don't trust foreign governments any more than I trust my own, which is to say not at all.  I also don't see the point in geographical diversity unless you live in a locale that's conducive to immediate escape and also own a craft and have the skills to circumnavigate the world, but even then it's dodgy.  Even if I did flee the US for some reason, I'd be an illegal immigrant with no rights wherever I went.

I do not subdivide the categories as Browne reccommends.  All my stocks are Vanguard's Total Stock Market fund, for instance.  Again, a lot of this is because I am poor and it's just too hard to meet minimums at multiple brokers, and even if that weren't the case, I value simplicity for its own sake and don't want redundant accounts and holdings.  I don't bother with making sure I have everything in at least three funds in at least two brokers.

I don't bother with physical custody of gold.  A major component of this is that I currently do not have a storage option due to a convoluted set of personal circumstances (sadly, I am afraid that I would be robbed by someone I should be able to trust and any workarounds would constitute hassle on my part).  Also, I have serious trust issues with people who sell gold physically, they all seem to dodgy and I feel they misrepresent their product with their claims (Gold always outperforms stocks, etc.).  I feel I am the most likely to come around on this one as the security issue is temporary as it has to do with my living situation, and surely there must one at least one legitimate seller.

But I would never buy that much physical gold as I'm just lazy.  It just seems so much easier to buy and sell digitally.

I do not use a treasury money market for cash.  Right now all cash is either I bonds or a boring old savings account.  All the savings are at the same bank, not at multiple banks either.

All my bonds are in funds or ETFs not held individually.

I also have a very large Variable Portolio that's very John Bogle inspired, so half is in one strategy and half is in the other.  While that's technically not a rule breaker, it's probably atypical.  I feel between the methods of Browne and Bogle however I am more likely to fare better than just using one strategy or the other.  So I see it as more of a strategy diversification.  I figure others are likely doing much more exciting things with the Variable Portfolio so why can't mine be boring.  I have other reasons but it boils down to this: I sleep better this way.  If John Bogle and Harry Browne are both wrong then what chance did I ever have to begin with, eh?

I'm just curious if I'm unique in my deviations, or if anyone else breaks any of the "rules".

My "breaking of the rules" is mostly limited to just slight "tinkering".  For example, I will buy the occasional zero coupon bond to supplement my long term treasury position.  Another example might be a small holding in a gold ETF (GTU for rebalancing) to supplement my physical gold position.  I also keep a small physical silver position for kicks and giggles. 

The one rule I do break is the 25% cash allocation.  As my business generates very good cash flow, I tend to keep a slightly higher allocation in long treasures, stocks, and gold.  I do this as I am able to continue to add cash to the short treasury component.

[pplooker]

I suppose I would quibble with the idea that "different strategies" makes for better diversification—of any sort.  At day's end, the portfolio as a whole is the thing that matters.  And your two strategies are just one portfolio—with different asset class weightings—no matter how you choose to view them.  Though, I can understand the emotional desire behind viewing them as you do.

Roy

Which is fine, it's just "mental accounting" on my part.  In reality it works out like this; I set up a spreadsheet where I type everything in and it averages the two strategies together, but in reality the rendundant components such as the Total Stock Market Index just get weighed differently than if I were using either approach on its own.

I spend a certain amount each month on living expenses.  I never add that in to these calculations even though I may have the money in the bank.  Again, mental accounting at work.

I mean really when you're looking at two options, and can't decide which is better, you start to think why not both?  I'm actually perfectly fine with the contention my VP is speculation because really it is, even if it's very mild speculation.

[macclary]

I break the buy and hold rule for the equity slice by using a timing/rotation strategy with ETFs instead of a S&P 500 fund    I also own more paper gold than I want, and I am trying to get to more physical and less paper.