PERM trades commission-free at E-Trade

[atrchi]

You don't pay trading commissions to buy or sell shares of the PERM ETF at E-Trade.

I don't work for E-Trade, I'm just sharing because some folks on this forum will find it useful -
https://us.etrade.com/e/t/estation/help?id=1204000003

IMHO the ETF with commission-free trading is the best choice for implementing the PP in small accounts such as Coverdell ESAs which are limited to $2,000/year.

[Greg]

That does seem like very good news for people in small accounts. Especially if people want to have the PP but don't want to worry about rebalancing and don't want the higher expenses or the active nature of PRPFX.

I'll still personally wait to use an offering such as this. They still have a reasonable bid/ask spread and correspondingly low volume. It makes sense because they are still new but I'd rather see those numbers go up on volume and have bid/ask and expense ratio come down before I'd consider using it in an IRA or something along those lines.

[Pointedstick]

I am using PERM in my taxable eTrade account like a supercharged savings account. I can afford to lose some principal, but I would like to beat inflation with it and maybe even rack up some real gains. I've only had the position a few months, but so far it's done exactly what I've expected of it, and I'm now several hundred dollars richer than if I'd left this money parked in a savings account

[Tortoise]

I am using PERM in my taxable eTrade account like a supercharged savings account. I can afford to lose some principal, but I would like to beat inflation with it and maybe even rack up some real gains. I've only had the position a few months, but so far it's done exactly what I've expected of it, and I'm now several hundred dollars richer than if I'd left this money parked in a savings account

Very nice!

I'm thinking about doing the same sort of thing. Now that I've saved up a 12-month emergency fund in cash and have been accumulating non-emergency savings on top of that for medium- to long-term savings goals (home down-payment, new car, etc.), I'm trying to decide how to invest the non-emergency funds.

The thought of that money sitting around as cash, losing 3% of its purchasing power year after year, doesn't sit well with me. If it's $50,000 in cash, for example, that's a $1,500 loss every year due to inflation! That's a big chunk of change to just flush down the toilet.

I'm seriously considering putting it in PERM, but if the bid/ask spreads are going to take a big bite out of the savings that might kind of defeat the purpose. Plus PERM's tax efficiency has not yet been determined since it's been around less than a year. I'm not really a fan of PRPFX since I'm more of a 4x25 PP purist, so maybe I would be better off just implementing my own taxable 4x25 PP? It wouldn't be as convenient as PERM, but it would avoid the large bid/ask spreads and would have probably 1/2 the expense ratio of PERM to boot.

[Tom]

I'm in the same predicament.  I have a little over 16k sitting in a 9 month risk free CD.  It was good when I bought in 2007 (5%), but I didn't know how long I wanted to have it tied up so I got the risk free so I can pull out any time without penalty.  The rate re-adjusted after 9 months and is now .3%.

I have another 135k sitting in a regular savings account earning around the same low .3%.  Of the options discussed on this thread I would probably choose PRPFX for the track record, but the expense ratio is a bit high.  More concerning than that capital gains taxes could very well raise in the near future.

This is money I have put away for a downpayment on a home.  I don't have a real timeline on when I'd buy, but probably in 2-5 years.  I know this has been discussed at length and I've read the thread - but curious if anyone has any advice considering the possible raise in capital gains.  Thinking I will leave my money where it is for the time being until the fiscal cliff stuff happens.

[Pointedstick]

Tom, another option I've warmed to for situations like yours is "Total Return" funds. They'll return a bit less them PERM or PRPFX, but be less volatile. Here's a chart of PTTRX vs PRPFX and SHY (which kinda sorta of approximates the return on your savings accounts).

[Tom]

Thanks Pointed Stick!  It looks like this fund is heavily in bonds though and not much of anything else?

[Pointedstick]

Right, exactly. It's pretty boring compared to a PP fund, trading some punch for safety. If you're like me and you can tolerate a small to moderate amount of fluctuation in your principal, I'd go with PERM instead to boost your return.

Coincidentally enough, I'm also using these funds for house savings!

[Tom]

Question for you about PERM.  Everywhere I read, people claim it basically mimmics the HBPP with the 25% allocation to the four assets - but on morningstar it says the asset allocation is quite different: 

Cash 0.34%
US Stock 18.82%
Non US Stock 16.04%
Bond 47.98%
Other 16.81%

Is that because it's holding the majority of the cash in the form of T-Bills and it's counting that as "bonds"?  I'm assuming the "other" category is gold?  Curious if you know since you hold it. 

Thanks again for the help!

[Pointedstick]

That's interesting. The prospectus seems to indicate differently:

Asset Class Allocation

Stocks:
9% U.S. Large Cap Stocks
3% U.S. Small Cap Stocks
3% International Stocks
5% U.S. Real Estate Stocks
5% U.S. and Foreign Natural Resource Stocks

U.S. Treasury Bonds (Long-Term):
25% (remaining maturity greater than 20 years)

U.S. Treasury Bills and Bonds (Short-Term):
25% (remaining maturity of less than three years)

Gold & Silver:
20% Physical Gold ETFs and ETCs
5% Physical Silver ETFs and ETCs

Total 100%

I would tend to trust the prospectus above Morningstar. Additionally, PERM has been performing very similarly to my DIY PPs, so I have no reason to not to believe them.

But yeah, in either case, the ?50% bond allocation Morningstar shows includes cash since cash in the PP is technically still just a bunch of bonds!