Heavy in PRPFX

[Reub]

Yes, please publish the paper that Harry Browne wrote for you. I would love to see it!

[sophie]

Yes, please publish the paper that Harry Browne wrote for you. I would love to see it!

+1.  I'd love to see it too!

Not completely sure from your post but it sounds like the PRPFX fund is all in taxable.  Given how long you've held it, selling it now would be a tremendous tax hit on top of your high income, it would probably cost you a lot more than $15,000/year.  Current performance notwithstanding, PRPFX is not a terrible place to keep your money, and its inflationary bent makes it a good backstop for the annuity and SS. 

And I'd also pay off the school loan now, and then the mortgage when you retire.  Given the size of your nest egg it may be worthwhile to consult an estate planning attorney, if you haven't already.  That might be a better use of your time & financial acumen.  You've done very well already, and you certainly are under no obligation to take on new financial challenges that probably won't make much difference for you in the long run.

Incidentally, does anyone think it might be useful to set up a separate "help & advice" category?

[frugal]

Yes, please publish the paper that Harry Browne wrote for you. I would love to see it!

+3








TALMUD ROCKS!

Diversify that big amount of money. But with such amount I don't think you have too much to hurry about. SAVE for Sons or daughters ?

[dualstow]

Incidentally, does anyone think it might be useful to set up a separate "help & advice" category?

I was thinking that, too. Something like bogleheads' Help With Personal Investments section, which I have found very useful over the years. (Separate from a News and Theory section).

[portart]

All of this money (except $180,000) , including the annuity bought in 2009, is non taxable money. That is of course, until I start using it. I can sell or redistribute it without a tax event inside of the 401k or IRA. If I pull some out to pay off the house or the loan, I will have to pay tax on it at a high tax rate because of my income. It's actually the same thing though when I pay a little at a time through profits because none of it is tax deductible. I just don't pay it in a big chunk. I don't want to use the cash $180k because it is my backup in case I need to buy a car or something goes awry.

Would you still pay off these loans (house and loan) now and pay the tax?

[portart]

What do you think of me selling my PRPFX and going to this...


Schwab Offers More Commission Free ETFs for the Permanent Portfolio
Forum member KevinW found this piece of good news from Schwab. They have expanded their list of ETFs that trade commission free to now include a gold ETF:

Schwab Commission Free ETFs

Notably, the list includes ETFS Physical Swiss Gold Shares (SGOL). So it is now possible to implement a 4×25 PP at Schwab with zero commissions: SCHB, SCHO, SGOL, and individual bonds.

Translated for the ticker-impared:

25% Stocks - SCHB – Schwab’s U.S. Total Stock Market ETF (Expense Ratio of 0.04%!)

25% Cash – SCHO – Schwab’s Short-Term U.S. Treasury Notes (Expense Ratio of 0.08%)

25% Gold – SGOL – Physical Swiss Gold ETF (Expense Ratio of 0.39%)

25% Bonds – Buy them directly from Schwab’s bond desk (Expense Ratio of 0.00%!)

First preference for gold ownership is still going to be one of the physical storage options we list out in our book. But if you need (or want) to use an ETF, SGOL is a definitely an option to consider and I’m glad Schwab now makes it available in this program.

Commission-free of course doesn’t mean you go in and start trading your Permanent Portfolio! What it means is, more than ever, it’s very cheap to setup and maintain the portfolio. With the above ETFs you can have an expense ratio well under 0.15% a year. The less you pay in management fees, the more money you keep!

[Ad Orientem]

I am a big fan of the KISS rule (keep it simple stupid). With that view in mind, and conceding that PRPFX is actually a pretty decent investment vehicle particularly given that you have income streams outside of it, I would favor the 4x25% PP for a few reasons. First it's cheaper. You save on fees and expenses and that adds up to big money overtime because those fees and expenses are like compound negative interest on your long term returns. We are talking a lot more than $15k here. Secondly you are more diversified. Third you are indexing your stocks which is almost always going to produce better returns than active management and stock picking. And lastly as mentioned by others it adds greatly to your safety.

So if I had 2.65 M this is how I'd invest it...

I'd set u a portfolio consisting of 2.6 million (keep the $50k in the bank for mad money)...

25% Held directly or you can use TLT which entails a slight increase in risk traded for greater convenience
25% SHV (or alternatively SHY or SCHO but I don't like my CASH being more than 12 months out on the curve right now)
25% VTI or VT if you want some international exposure in stocks.
25% Gold split between IAU and physical which you can hold in two safe deposit boxes at different banks. IAU would be mainly for rebalancing so you should not have to sell your physical.

And then just review every 6 months or so and rebalance as needed (15% and 35% for any asset).

All of the above having been said I will repeat that I think your current portfolio is not bad. Yes, I think you can do better with the 4x25% version but PRPFX is one of VERY few actively manged funds I would ever recommend to someone. My only real heartburn is the expense ratio which will really hit your returns over time.

P.S. Just saw the preceding post... I have absolutely no issue with what was written there.

[frugal]

I really would like to use USPP.
I have only a EUPP.

Do you recommend it?

[BearBones]

A couple of thoughts:
1. A risk free 3.75% rate of interest looks pretty good right now, so paying off the mortgage is attractive (but you will be kicking yourself if we get into high inflation).
2. I like the idea of institutional diversity if you can do it (as KevinW is promoting), especially when dealing with such large amounts.
5. I like the idea of holding bonds directly. Vanguard and Fidelity are tops for this, IMO, since there are no hidden fees.. If holding "deep" cash in t-bills/notes bought directly, I like the Fidelity autoroll option that has been discussed elsewhere.
3. I especially like the idea of not having 2 or more ETFs from the same institution. I would not hold more than one from Blackrock (SHV, SHY, TLT, IAU). And, similarly, I would not hold more than 1 Schwab ETF (especially if the account is at Schwab).
4. If going with ETFs, I'd focus on liquidity and ER. I would largely ignore free trades, since you will not be trading much. A $10 fee a few times a year is petty cash here.
Hope that is helpful.

[portart]

This is very helpful indeed! I am going to liquidate $50k at a time so I am not out of the market even though it's like seven bucks a trade. I will start diversifying into these other choices until I am at least half out of PPRFX and then re access. My issues will be learning out to rebalance in a timely manner correctly.

It is really bothering me that PPRFX is showing so little movement now. Harry's idea of the fund is to let any of the areas moving to carry the growth. He stressed being super sensitive aggressive growth companies so if the market moves, it will reflect growth.  Well the market is moving and the fund isn't showing even a fraction of the gains so when it stops going up, we are going to go down. Basically what ever market timing they are doing in respect to the companies being held are not volatile enough on the upside to overcome the other parts that are holding still. Holding only stocks heaving in materials and ignoring tech, etc. is market timing IMO and PPRFX is paying the price right now. 

In another but unrelated topic, I see the Rare Earth stocks have started moving quickly the last few days. I don't know if this is tied to the beginning of commodities making a recovery or inflation but it's something to pay attention to. They have been killed over the last year and the sellers are all washed out. I am holding them, down about 45 to 65 percent over what I paid for them believing in "wealth in the ground" rarely goes to zero. Take a look at REE if you want to check out the trend. No recommending anything but just to notice the change in this area. Some of the gold stocks are also waking up.

[dualstow]

It is really bothering me that PRPFX is showing so little movement now.

But you enjoyed a 10% annualized gain in PRPFX for quite some time. You've done well!

[Dieter]

"  It is really bothering me that PPRFX is showing so little movement now  "

While there are some general concerns with PRPFX (inflation tilt, cost, active stock picking, Swiss Franks, ....), is the current tracking error specific to its PP implementation?

For a pure PP:

Cash flat (25% of portfolio)
LTTs & Gold down (50%),
Stocks up (25%).

As you say, many years of 10% returns, driven by LTT and Gold, so not surprising to me.

PERM (the other one stop PP fund I'm aware of) isn't going gangbusters either.

FWIW, I have a little in both. Re-considering PRPFX due to the fees and active stock picking.

[portart]

I started moving money around already out of PRPFX, Breaking it up into SCHB, SGOL, SCHO and TLO in even amounts. Once I have about half my portfolio in those, I will watch both this combo and compare it against PRPFX when the market moves in different ways and see how they respond going forward. If we do a have big inflation push which is going to happen eventually (who knows when), I want to see if PRPFX will have a higher return.

Once again yesterday the Dow was up .47% and PRPFX went down .01 although gold gave back some gains from the day before. The thing to notice is when the market was up  and gold was also on Thursday, PRPFX show no gain. Now the market is up again and gold is down a little less, PRPXF is still going no where.  The question then is, what combination is necessary for PRPFX to get back to 50 a share??? It feels like it's stuck in no man's land.

When the party stops, it's time to find a way to have PP respond as it was designed to do which is respond positively to one of the four sectors experiencing a major upswing, in this case stocks. If you check out he performance of PPRFX over the last few months, it has dropped from 50 to 48 and change with gold hanging around 1600 and market up strongly. All things being equal, PPRFX should have at least held 50, if not gone higher.

[Ad Orientem]

PRPFX does not index stocks and it is limited in terms of which sectors it can hold and in what proportion. But I would caution against checking daily movements in your PP. The HBPP does not go up every day either. There have been long (multi-week and in some case multi-quarter) periods where it stagnated or even lost ground. But it tends to go up over the long term as the various components shift gears. During 2008 there was a lag between the beginning of the stock market collapse and when LTTs started to shoot up.

The PP is best approached like the proverbial pot. Just leave it alone and it will boil. Spend your time watching it and you will just give yourself an ulcer and start questioning if it really works.

[BearBones]

And much of the rationale behind the PP is protection in severe economic/political circumstances, hence the directly held assets and out of country holdings. If this is important, you are not adding much (if any) security by moving from PRPFX to 4 ETFs, most all held by Schwab.

[sophie]

Ah, but I think the point here is that we are comparing the performance of PRPFX with that of its major components.  Portart and others have pointed out that most of its price changes are driven by gold and stocks.

So let's check this on ETFreplay.  PRPFX is 20% gold, 5% silver, 35% treasuries (avg maturity 6.6 yrs), 10% Swiss francs, 15% growth stocks, 15% natural resource and real estate stocks.  When I plug these into ETFreplay using GLD, SLV, IEI, FXF, and VTI, here's what I get:

past 24 months:  portfolio 11%, PRPFX 6.5%
past 12 months:  portfolio 3.8%, PRPFX 2.1%
past 6 months: portfolio 1.7%, PRPFX 1.9%
past 3 months:  portfolio 0.9%, PRPFX 0.7%

When I look back 36 months, the portfolio matches PRPFX very precisely up through mid 2011, after which the traces start to diverge:



This means the difference isn't explained by the expense ratio, and the divergence appears to be increasing over time.  Hard to tell if this is the effect of stock picking vs recent underperformance of the natural resources sector, but either way it doesn't bode well for PRPFX.  Having so much stocks concentrated in a couple of sectors is just as bad as the active management, IMHO.  Not to say PRPFX isn't a perfectly good investment, just one that has its weak points.

[portart]

Yes, these charts tell you mathematically what I have noticed through price action.  I have been watching it everyday for ten years, not just lately. I think something else is happening. I remember reading that the Swiss Frank could be the culprit tying itself to the Euro. Most likely it is the stocks owned in the fund that are underperforming and are just rotated out of favor. I am just an average investor so I am no expert for sure but I know for a fact that something has changed over time. When your paying .71 management fees, an additional divergence away from what you expect the fund to do, it gets your attention. The other thing is that PPRFX was the number one conservative fund out of all of them. Now they are near the bottom as the numbers even out by sheer odds. I think it is unrealistic for this fund to keep outperforming other conservative funds every year. I feel luck was on my side picking it at just the right time. I believe moving some money around using the same philosophy makes good sense.

[BearBones]

I am just an average investor so I am no expert for sure...

Ah, the difference between expertise and wisdom... Of the two, I'd certainly favor the latter, and it sounds like you have it in spades. Congratulations on your success so far, and best wishes going forward. Thanks for sharing your story.

[Reub]

Yes, please publish the paper that Harry Browne wrote for you. I would love to see it!

Have you located that letter from HB? I'd love to read it.

[portart]

I have his papers somewhere as I saw them not too long ago.. I looked the other day but didn't locate them yet. When I find them, I will do a full report. At the time I got them, I didn't realize he would become famous posthumously as this.

[portart]

PRPFX down from 99 percent to 68 percent of my portfolio as I continue to redistribute using other funds for the same breakdown. I own more gold through since PRPFX has 5% silver as part of it's 25% PM. Picked up some GDX which is so sold off that the risk reward here may be the best buy in the last twenty years, when gold goes over $2,000 which could be breathtakingly fast. GDX is priced for $800 gold so which do you believe?

[portart]

Hi people, I haven't written to this post in awhile. For whatever reason, I am back to 100 percent in PRPFX. It has gone nowhere for a long time. I am getting a little nervous about if and when the stimulus stops, this portfolio might find it's way back to $45.00 a share. I don't know what other diversity I would go to now with stocks so high, increasing exposure there could be expensive in a set back which could come at any time. Anyone have ideas on this?

[Ad Orientem]

Hi people, I haven't written to this post in awhile. For whatever reason, I am back to 100 percent in PRPFX. It has gone nowhere for a long time. I am getting a little nervous about if and when the stimulus stops, this portfolio might find it's way back to $45.00 a share. I don't know what other diversity I would go to now with stocks so high, increasing exposure there could be expensive in a set back which could come at any time. Anyone have ideas on this?

If you are looking for radical diversification in 1 stop shopping you would be hard pressed to find a better choice than PRPFX. My only complaint is its E/R which will detract from your long term returns. The future is unpredictable but the fund has withstood all of the economic storms of the last 30+ years. I would try to avoid worrying about future events. That's kind of the point in owning such a fund.

[Kshartle]

Hi people, I haven't written to this post in awhile. For whatever reason, I am back to 100 percent in PRPFX. It has gone nowhere for a long time. I am getting a little nervous about if and when the stimulus stops, this portfolio might find it's way back to $45.00 a share. I don't know what other diversity I would go to now with stocks so high, increasing exposure there could be expensive in a set back which could come at any time. Anyone have ideas on this?

What makes you think stimulus is going to stop?

The FED is trying to have their cake and eat it too. The stimulus is neccessary to keep the banks and government afloat but if they let the cat out of the bag that they have no intention of withdrawing (I think they're more likely to up it) then they will plunge the dollar.

If they actually do stop printing by some miracle, PRPFX will probably get hurt but I imagine the dollar will really firm up so you might not lose too much purchasing power.

I wouldn't bet on a strong dollar as long as this regime is in power though. They have made a lot of promises to people that can only be kept if they print the money to pay for it.