% of gold asset in ETF or CEF for rebalancing purposes

Discussion of the Gold portion of the Permanent Portfolio

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Kbg
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by Kbg » Sun Jun 23, 2019 5:27 pm

This is an age specific question, but for the younger investor, why would one not load up the ROTH space with equity? (Keep what is likely going to be the largest end amount tax free)
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by stuper1 » Sun Jun 23, 2019 6:53 pm

Some people use their Roth IRA as a place for their emergency fund, because you can always take your contributions out without penalty.
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by LittleDinghy » Fri Jun 28, 2019 9:36 am

pmward wrote:
Sun Jun 23, 2019 10:06 am

If it puts you at ease at all, from a technical standpoint there is no real hard resistance in gold until almost $1700. So if the breakout doesn't reverse in quick order here, there's a lot of room for this rally to run before the big institutional shorts will start to try to fade the rally. Buying a breakout is always tough, because breakouts like this either breakout like mad, or they reject and pull back. FWIW, while it is possible gold could reject, I don't think there is a lot of room for it to go down. It's about as safe of a breakout as you can buy, as the potential reward far outweighs the risks. If you are too nervous you could DCA once a week for the next two months or something like that? If we get a runaway breakout you might lose a bit on the whole, but you at least had some of your cash in play instead of standing on the sidelines too scared to do anything. Or you could wait until this coming Friday at the last hour of the trading day to see if we are going to get another weekly close above $1375, and if we do just pile it all in. I would feel reasonably comfortable with 2 weekly closes above that level. That also happens to be the end of month, so that gives some extra confidence as a lot of hedge funds make big moves on Fridays and on the last trading day of the month. Or you could do what flying said and just throw it all in tomorrow. Either way, the PP is set up so you are hedged, even if in the very slim chance gold should not only reject the breakout but have a violent breakdown (once again, I think this is very unlikely since gold has built a solid base over the last 5 years, there just isn't much room to go down, imo).
Thank you pmward once again. I ended up buying 3/4 of the 20% of my GB in AAAU on Monday and the remaining 1/4 in physical from APMEX on Tue. All of it is in my brokerage account. So I purchased pretty much at the most recent peak. Ah well..c'est la vie. At least our nest egg is now fully allocated to the GB. Now to start figuring out how to monitor it.
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by LittleDinghy » Fri Jun 28, 2019 9:44 am

Kbg wrote:
Sun Jun 23, 2019 5:27 pm
This is an age specific question, but for the younger investor, why would one not load up the ROTH space with equity? (Keep what is likely going to be the largest end amount tax free)
I would like to but we had to use equities in our retirement accounts at our employers because they did not have good treasuries or gold. There was some small cap value that was unfilled which we did fill in one of our roths. The rest of the roth money we used for 25-30 yr treasuries.
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by vnatale » Sun Jan 26, 2020 8:54 pm

pmward wrote:
Wed Jun 19, 2019 9:40 am
LittleDinghy wrote:
Tue Jun 18, 2019 11:11 pm
pmward wrote:
Tue Jun 18, 2019 9:36 am
One thing to remember is that these things do not need to be perfect. There is some flexibility in the system. This is supposed to be a simple system, not a complicated one. We humans have this natural tendency to want to just complicate the hell out of everything. There's not much benefit in over complicating the PP. None of us have a perfect portfolio. We all have constraints that cause us to have to deviate from utopia in one way or another. It's ok, it's the fundamental principles that matter more than the tiny micro details. Don't overcomplicate things to the point that they are unmanageable, doing so is going to be a whole lot of work that is not likely to improve your return much. Good enough is really good enough.
Thank you for your kind remarks. But I still feel the need for guidance on my questions, which I'll try to state more clearly here:
1) Where should I put the gold funds and 25-30 yr T-bonds? Should I place the gold funds in Roths and 25-30 yr T-Bonds in rollover IRAs? Or should I place the gold funds in the rollover IRAs and the 25-30 yr T-bonds in the Roths? Recall that my equities are all in employer sponsored tax deferred accounts (401ks and the like) because there are no treasury funds or substitutes.
2) If I'm putting 60-80% of my gold in funds for rebalancing purposes (in the event of 3 consecutive gold rebalancings), does AAAU really make sense? Right now it has low total assets, $104.7M, compared to IAU, $11.8B (commission free at Fidelity), and even compared to GLDM, $693.3M (the commission free gold fund at Schwab). I'm wondering if lower total assets will make selling more difficult when rebalancing is required.
3) Despite mentioning in several spots that it might be a good idea to hold some of one's gold in funds for ease of rebalancing, the book, "The Permanent Portfolio" really seems to emphasize that gold should primarily be held in physical. Yet, thinking about three consecutive gold rebalancings leads one to primarily hold gold in funds. What is the reasoning that one can use to resolve this apparent contradiction one way or the other?

Pmward!

GREAT advice here!

Vinny

Thank you all!
1) Until you are able to roll your 401k over after you retire, I would personally put the bonds in tax deferred and gold in Roth. This simply because you will want the bonds in tax deferred both before and after retirement. But it probably doesn't matter to be honest. Just do whatever you gotta do to get your allocation as close to your desired percentages as possible.

2) You're over thinking this. I wish they hadn't mentioned the mix and rebalancing thing. If you want to be super anal you can go that route. Or you can go all physical or all ETF. I mean these things really don't matter all that much. You're not going to be selling often so I wouldn't worry about the spread in AAAU. AAAU is still a very new ETF, by the time you actually need to do a rebalance it will have more assets under management / liquidity. It's an ETF, like GLDM, that is meant for buy and hold. The ER matters much more than liquidity for a long term hold.

3) The book did mention that things should be primarily held physical, and physical is a great way to hold gold. But the point we were getting at is that AAAU is "as good as gold" because it is an ETF that can be exchanged in kind for gold that is allocated and backed by the government of western Australia. This ETF did not exist at the time of the book. If it had, it is possible that their recommendations may have been stated differently, especially considering that a .18% ER is SO much cheaper than physical for anything other than a lifetime hold. Their main concern in the book with ETF's was safety. But I think AAAU checks all the boxes for safety. I think it's just as safe as a Perth Mint unallocated account at the end of the day. It's your choice. Don't overthink these things. Just do whatever is easiest and safe enough for you to sleep at night. Diversity in holdings isn't bad either, some physical, some AAAU, some in an unallocated account somewhere, etc can work, but it adds complexity. Don't complicate these things to the point that you will not comply with the rules. Simplicity is usually best, and this is a trait that Harry personally spoke a lot about that has kind of gotten lost in the book and on these forums. Harry routinely chose simplicity over optimization.
"I only regret that I have but one lap to give to my cats."
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by vnatale » Sun Jan 26, 2020 9:39 pm

LittleDinghy wrote:
Fri Jun 28, 2019 9:36 am
pmward wrote:
Sun Jun 23, 2019 10:06 am

If it puts you at ease at all, from a technical standpoint there is no real hard resistance in gold until almost $1700. So if the breakout doesn't reverse in quick order here, there's a lot of room for this rally to run before the big institutional shorts will start to try to fade the rally. Buying a breakout is always tough, because breakouts like this either breakout like mad, or they reject and pull back. FWIW, while it is possible gold could reject, I don't think there is a lot of room for it to go down. It's about as safe of a breakout as you can buy, as the potential reward far outweighs the risks. If you are too nervous you could DCA once a week for the next two months or something like that? If we get a runaway breakout you might lose a bit on the whole, but you at least had some of your cash in play instead of standing on the sidelines too scared to do anything. Or you could wait until this coming Friday at the last hour of the trading day to see if we are going to get another weekly close above $1375, and if we do just pile it all in. I would feel reasonably comfortable with 2 weekly closes above that level. That also happens to be the end of month, so that gives some extra confidence as a lot of hedge funds make big moves on Fridays and on the last trading day of the month. Or you could do what flying said and just throw it all in tomorrow. Either way, the PP is set up so you are hedged, even if in the very slim chance gold should not only reject the breakout but have a violent breakdown (once again, I think this is very unlikely since gold has built a solid base over the last 5 years, there just isn't much room to go down, imo).
Thank you pmward once again. I ended up buying 3/4 of the 20% of my GB in AAAU on Monday and the remaining 1/4 in physical from APMEX on Tue. All of it is in my brokerage account. So I purchased pretty much at the most recent peak. Ah well..c'est la vie. At least our nest egg is now fully allocated to the GB. Now to start figuring out how to monitor it.
LittleDinghy,

Now 7 months later after you finally made the decision and made the big plunge.....how do you feel and think about it all?

Vinny
"I only regret that I have but one lap to give to my cats."
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by vnatale » Tue Apr 14, 2020 7:49 pm

pmward wrote:
Wed Jun 19, 2019 9:40 am
LittleDinghy wrote:
Tue Jun 18, 2019 11:11 pm
pmward wrote:
Tue Jun 18, 2019 9:36 am
One thing to remember is that these things do not need to be perfect. There is some flexibility in the system. This is supposed to be a simple system, not a complicated one. We humans have this natural tendency to want to just complicate the hell out of everything. There's not much benefit in over complicating the PP. None of us have a perfect portfolio. We all have constraints that cause us to have to deviate from utopia in one way or another. It's ok, it's the fundamental principles that matter more than the tiny micro details. Don't overcomplicate things to the point that they are unmanageable, doing so is going to be a whole lot of work that is not likely to improve your return much. Good enough is really good enough.
Thank you for your kind remarks. But I still feel the need for guidance on my questions, which I'll try to state more clearly here:
1) Where should I put the gold funds and 25-30 yr T-bonds? Should I place the gold funds in Roths and 25-30 yr T-Bonds in rollover IRAs? Or should I place the gold funds in the rollover IRAs and the 25-30 yr T-bonds in the Roths? Recall that my equities are all in employer sponsored tax deferred accounts (401ks and the like) because there are no treasury funds or substitutes.
2) If I'm putting 60-80% of my gold in funds for rebalancing purposes (in the event of 3 consecutive gold rebalancings), does AAAU really make sense? Right now it has low total assets, $104.7M, compared to IAU, $11.8B (commission free at Fidelity), and even compared to GLDM, $693.3M (the commission free gold fund at Schwab). I'm wondering if lower total assets will make selling more difficult when rebalancing is required.
3) Despite mentioning in several spots that it might be a good idea to hold some of one's gold in funds for ease of rebalancing, the book, "The Permanent Portfolio" really seems to emphasize that gold should primarily be held in physical. Yet, thinking about three consecutive gold rebalancings leads one to primarily hold gold in funds. What is the reasoning that one can use to resolve this apparent contradiction one way or the other?

Thank you all!
1) Until you are able to roll your 401k over after you retire, I would personally put the bonds in tax deferred and gold in Roth. This simply because you will want the bonds in tax deferred both before and after retirement. But it probably doesn't matter to be honest. Just do whatever you gotta do to get your allocation as close to your desired percentages as possible.

2) You're over thinking this. I wish they hadn't mentioned the mix and rebalancing thing. If you want to be super anal you can go that route. Or you can go all physical or all ETF. I mean these things really don't matter all that much. You're not going to be selling often so I wouldn't worry about the spread in AAAU. AAAU is still a very new ETF, by the time you actually need to do a rebalance it will have more assets under management / liquidity. It's an ETF, like GLDM, that is meant for buy and hold. The ER matters much more than liquidity for a long term hold.

3) The book did mention that things should be primarily held physical, and physical is a great way to hold gold. But the point we were getting at is that AAAU is "as good as gold" because it is an ETF that can be exchanged in kind for gold that is allocated and backed by the government of western Australia. This ETF did not exist at the time of the book. If it had, it is possible that their recommendations may have been stated differently, especially considering that a .18% ER is SO much cheaper than physical for anything other than a lifetime hold. Their main concern in the book with ETF's was safety. But I think AAAU checks all the boxes for safety. I think it's just as safe as a Perth Mint unallocated account at the end of the day. It's your choice. Don't overthink these things. Just do whatever is easiest and safe enough for you to sleep at night. Diversity in holdings isn't bad either, some physical, some AAAU, some in an unallocated account somewhere, etc can work, but it adds complexity. Don't complicate these things to the point that you will not comply with the rules. Simplicity is usually best, and this is a trait that Harry personally spoke a lot about that has kind of gotten lost in the book and on these forums. Harry routinely chose simplicity over optimization.

I pronounce this one also to be a "gem" (and, thereby worthy of resurrecting!).

Vinny
"I only regret that I have but one lap to give to my cats."
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Re: % of gold asset in ETF or CEF for rebalancing purposes

Post by vnatale » Tue Apr 14, 2020 8:04 pm

vnatale wrote:
Sun Jan 26, 2020 9:39 pm
LittleDinghy wrote:
Fri Jun 28, 2019 9:36 am


Thank you pmward once again. I ended up buying 3/4 of the 20% of my GB in AAAU on Monday and the remaining 1/4 in physical from APMEX on Tue. All of it is in my brokerage account. So I purchased pretty much at the most recent peak. Ah well..c'est la vie. At least our nest egg is now fully allocated to the GB. Now to start figuring out how to monitor it.
LittleDinghy,

Now 7 months later after you finally made the decision and made the big plunge.....how do you feel and think about it all?

Vinny
And, now that "peak" no longer looks like a peak?

It looks like when you bought it that last week of June 2019 you paid about $1,425 and now, almost 10 months later it is at: $1,745! About a 22% increase over less than ten months. After you thought you were buying at a peak.

C'est la vie, indeed!

Vinny
"I only regret that I have but one lap to give to my cats."
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