Every time I read PERM it conjures images of curlers and hairspray.
I used PRPFX until I got more comfortable with the HBPP and now I'm all in (gold bullion, long bonds through brokerage, cash in bank/mm/safe in basement, and a dozen Blue Chip company stocks with a little S&P 500 ETF for rebalancing). My annual ER is approximately ~0.05 BP and there is basically total transparency in my investments as well as sound leadership.
PERM if you have to, but nothing compares to the real thing.
PERM is fine if you're investing less than, say $2000. I did that with an IRA account from one of my college jobs. for about $2000 - $10,000, I'd go with PRPFX. Then over $10,000, HBPP.
The wide spreads are indeed annoying. Every block I buy is down 0.2% - 0.3% immediately.
Again, I'm personally willing to tolerate these issues because I don't consider my PERM funds really a part of my PP; I consider it to be my super-duper savings account. Even if after the ER, the spreads, and any possible end-of-year taxable distributions, I've underperformed a 4x25 HBPP by several percentage points, I'm betting it will probably still be better than the 0.75% I would have made had I kept the money in my savings account.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Pointedstick wrote:
Again, I'm personally willing to tolerate these issues because I don't consider my PERM funds really a part of my PP; I consider it to be my super-duper savings account. Even if after the ER, the spreads, and any possible end-of-year taxable distributions, I've underperformed a 4x25 HBPP by several percentage points, I'm betting it will probably still be better than the 0.75% I would have made had I kept the money in my savings account.
I just had the thought that isn't the PERM really an ETF of an ETF with a double layer of fees?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
Pretty much, but it trades commission-free at eTrade, which is the big thing that enables this for me. Since I'm making regular "deposits", assembling a 4 ETF HBPP would cost more in trading fees than PERM's 0.49% ER, even if I could get 3 out of the four ETFs commission-free (like I have with TDAmeritrade).
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Pointedstick wrote:
Pretty much, but it trades commission-free at eTrade, which is the big thing that enables this for me. Since I'm making regular "deposits", assembling a 4 ETF HBPP would cost more in trading fees than PERM's 0.49% ER, even if I could get 3 out of the four ETFs commission-free (like I have with TDAmeritrade).
We need a sticky as to where we can trade what for free.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
MangoMan wrote:
Wouldn't it be better to just use PRPFX? I think the 0.2 difference in ER would be offset by the bid/ask spread on PERM. I know you have mentioned that you trade PERM free at etrade, but you can trade PRPFX free at Schwab [and probably most other large Fund Supermarkets like Fidelity although I have not checked lately].
Perhaps you're right, but I just don't like PRPFX. Its composition makes it far from a "real" PP, it's actively managed, and the ER is too high for me. I kinda like rooting for the new guy too
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
Pointedstick wrote:
The wide spreads are indeed annoying. Every block I buy is down 0.2% - 0.3% immediately.
Again, I'm personally willing to tolerate these issues because I don't consider my PERM funds really a part of my PP; I consider it to be my super-duper savings account. Even if after the ER, the spreads, and any possible end-of-year taxable distributions, I've underperformed a 4x25 HBPP by several percentage points, I'm betting it will probably still be better than the 0.75% I would have made had I kept the money in my savings account.
I read your post pointedstick and thought you must have an ing savings account because I also just dropped to .75%. Boooo.
Incidentally, I use PRPFX as short term savings as well. Even if it underperforms the 4x25 PP because of the expense ratio, it still beats any cash savings vehicle you could name. Although, I'm thinking that once the PP gets large enough that the cash position is substantially bigger than emergency fund needs, it would be simpler still just to use that.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
I'm trying to figure out what to do with two sizable and frequently-contributed-to chunks of money: the quarterly income tax due January 15th and the final payment due April 15th. Assuming that I know what the amount will be and have the cash, is it worth taking any risk at all for some extra reward, or should I just leave it in a savings account?
Xan wrote:
I'm trying to figure out what to do with two sizable and frequently-contributed-to chunks of money: the quarterly income tax due January 15th and the final payment due April 15th. Assuming that I know what the amount will be and have the cash, is it worth taking any risk at all for some extra reward, or should I just leave it in a savings account?
I'm in that situation too and I just leave it in a savings account. Of course, the sum isn't that large for me. If we're talking about $100,000, then you may want to reconsider.
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
- CEO Nwabudike Morgan
sophie wrote:
Ally is up to 0.95%, which is kinda nice.
Incidentally, I use PRPFX as short term savings as well. Even if it underperforms the 4x25 PP because of the expense ratio, it still beats any cash savings vehicle you could name. Although, I'm thinking that once the PP gets large enough that the cash position is substantially bigger than emergency fund needs, it would be simpler still just to use that.
Are you aware of the 90% PRPFX/10% EDV strategy that we have discussed in the past?
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
Xan wrote:
I'm trying to figure out what to do with two sizable and frequently-contributed-to chunks of money: the quarterly income tax due January 15th and the final payment due April 15th. Assuming that I know what the amount will be and have the cash, is it worth taking any risk at all for some extra reward, or should I just leave it in a savings account?
I'm in that situation too and I just leave it in a savings account. Of course, the sum isn't that large for me. If we're talking about $100,000, then you may want to reconsider.
sophie wrote:
Ally is up to 0.95%, which is kinda nice.
Incidentally, I use PRPFX as short term savings as well. Even if it underperforms the 4x25 PP because of the expense ratio, it still beats any cash savings vehicle you could name. Although, I'm thinking that once the PP gets large enough that the cash position is substantially bigger than emergency fund needs, it would be simpler still just to use that.
Are you aware of the 90% PRPFX/10% EDV strategy that we have discussed in the past?
MediumTex:
Would you please so kind as give me the links? I searched and couldn't find the discussion.
You mean to use PRPFX/EDV for Cash part of PP?
thanks in advance.
sophie wrote:
Ally is up to 0.95%, which is kinda nice.
Incidentally, I use PRPFX as short term savings as well. Even if it underperforms the 4x25 PP because of the expense ratio, it still beats any cash savings vehicle you could name. Although, I'm thinking that once the PP gets large enough that the cash position is substantially bigger than emergency fund needs, it would be simpler still just to use that.
Are you aware of the 90% PRPFX/10% EDV strategy that we have discussed in the past?
Yes...in fact I'm using this. It's a bit of added complexity which you don't have to deal with when you buy PERM. And once you have two funds, I guess why not just have 4, and implement a separate but equal PP. I just figured that for short term savings there's nothing wrong with using just PRPFX, which will still accomplish the goal of preserving your $$ while beating the returns you might get from a savings account.
edamat, here's a link to the bogleheads discussion of the PRPFX/EDV strategy. It's not on this board.
clacy wrote:
I personally would just go with a 4 x 25% split with the following ETF's:
25% VTI (total US stock market)
25% TLT (20+ yr US treasuries)
25% SHY (1-3 yr US treasuries)
25% GLD (gold etf)
See how PERM performs and at least give it time to pick up some liquidity. If it more or less tracks the PP over the next year, then you could make the switch for simplicity's sake.
As I'm talking about on another thread - I'm perplexed about what to do with medium-term house savings. PERM and PRPFX have their downsides. This option seems intriguing, but the idea of a gold ETF rather than actual gol worries me a bit and don't know much about SHY or TLT. Curious what MediumTex or CraigR would think about the best approach for medium-term house savings?
My options as I see it now are what's described above, PERM, PRPFX or splitting 50/50 between PERM and PRPFX.
If house savings is <= 25% of your liquid net worth, I would put the house savings in a taxable T-bill mutual fund and treat it as part of your overall PP. It's simplest to have all of your liquid wealth in one PP. And in the current low interest rate environment, there is very little penalty for keeping a big chunk of cash in taxable. When you buy the house it may trigger a rebalance; no big deal.
Otherwise I would probably put the house fund into PERM in a taxable E*Trade account since PERM is commission-free there. Yes, PERM has its issues, but try this thought experiment: if TSHTF so badly that PERM blows up, are you still going to be interested in using this money to buy a house in the US?
Thanks KevinW. My fear of PERM is not so much about TSHF in terms of the economy as much as it is about it being a new fund and something going very wrong with it's management and the fund collapsing. PRPFX has a long track record that PERM does not. That said, I certainly like the asset allocation of PERM much more.
I'm considering spreading the risk and putting half in each or a 40/60 split.
