Is PRPFX cost (expense + tax) efficient? The answer is NO.

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chrikenn
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Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Mon Jan 31, 2011 8:51 am

I'm new to the forum and have been considering implementing the PP as about 50% of my total portfolio (and keeping the other 50% as a more traditional 70/30 equity/bond mix).  For various reasons (including that I've never had access to a 401k), about 99.5% of my portfolio is in taxable accounts. 

When I first read about PRPFX, it seemed like it might be a good option for me.  People on this forum seem to regularly praise it as being tax and cost efficient.  But as I explored the expenses and taxes associated with it, I realized I would be far better off doing 25% each in SHY ("cash"), TLT (long term treasuries), IAU (gold), and VTI (total stock market), despite the purported tax efficiency of PRPFX.  To prove my point, let's take a look at the following hypothetical:

Assumptions
-Most or all of assets are taxable (i.e., very little 401k/IRA/etc space)
-33% federal; state tax brackets ignored for this hypo
-15% capital gains rate for purposes of determining tax efficiency of distributions
-IAU makes no distributions (yes, I know there are small deemed distributions, that are tiny, but for this hypo I am ignoring those)

-Expense ratios of 0.15 for SHY and TLT
-Expense ratio of 0.07 for VTI.
-Expense ratio of 0.25 for IAU.
-Expense ratio of 0.82 for PRPFX

-To calculate tax cost ratios, I will use the current yields of VTI (1.77%), SHY (1.03%), and TLT (4.15%) multiplied by the tax rate, and for PRPFX I will use the figure provided on morningstar of 0.27 for the 3-yr average (I'm doing this rather than calculating it myself because I don't know what portion of the yield is due to stock, bonds, and gold sales).
-VTI: 1.77% yield * 15% capital gains = 0.27%
-SHY: 1.03% yield * 33% = 0.34%
-TLT: 4.15% yield * 33% = 1.37%
-IAU: 0% yield = 0%

To calculate total tax-cost ratio for the portfolio, multiply each individual ratio from above by 25% and add them together, since each component makes up 25% of the portfolio.

Total Tax-cost ratio = (25% * 0.27%) + (25%*0.34%) + (25%*1.37%) + (25% * 0%) = 0.50%.

So the VTI/SHY/TLT/IAU portfolio has a total tax-cost ratio of 0.50%.  PRPFX has a total tax-cost ratio of 0.27%.  PRPFX is the clear winner here.

However, now lets move on to expense ratios.  The expense ratio of PRPFX is 0.82%.  The net expense ratio of the VTI/SHY/TLT/IAU portfolio is as follows:

Net E/R = (25% * .15%) + (25% * .15%) + (25% * .07%) + (25% * .25%) = 0.155%.

Thus, the total cost (tax + expense) ratio of the VTI/SHY/TLT/IAU portfolio is 0.50% + 0.155% = 0.655%.

The total cost ratio PRPFX is 0.82% + 0.27% = 1.09%.

Therefore, overall, PRPFX is 66% more expensive than holding the individual components, despite the fact that it is somewhat more tax efficient.

A couple of things I would note: 

(1) This hypothetical does not take into account capital gains that might be realized if you hold the individual components due to rebalancing.  However, I would submit that if you aggressively tax-loss harvest, the realized gains due to rebalancing would not come anywhere close to offsetting the additional expense of PRPFX.

(2) If you hold physical gold and actual bonds rather than gold ETFs and bond funds, holding the individual components becomes even MORE cost efficient because then your expense ratios for the bonds and the gold drop to essentially ZERO.

(3) If you invest $100,000 each into an individual components portfolio and a PRPFX portfolio, and never add to it, over the course of 30 years, the individual components portfolio will end with a value that is approximately $190,000 higher than the value of the PRPFX portfolio (assuming a 8.5% annual rate of return for both portfolios).  This difference is attributable solely to the extra expenses of the PRPFX portfolio.

Conclusion

Even if some of my assumptions above are slightly off, they would have to be radically off to offset the substantially higher expense ratio of PRPFX as compared to holding the individual components.  My conclusion is that in almost any imaginable scenario, holding the individual components of a Permanent Portfolio in a taxable account is more cost efficient (when you consider both taxes and expense ratios) than holding PRPFX in a taxable account.

Comments and criticism welcomed!
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by mbh » Mon Jan 31, 2011 9:47 am

chrikenn,

Interesting post.  I've also run a similar analysis to yours.  Like you, I concluded that a traditional 4x25 PP in taxable accounts would ultimately have a lower total cost (including ERs and taxes) than PRPFX.....unless I'm just missing something.

One note about gold.  I actually purchased IAU in a taxable account early in the year.  After my purchase, I found the following document about tax treatment:

http://us.ishares.com/content/stream.js ... cation/pdf

I don't like the idea of tracking adjusted basis.  It just sounds messy.

I'll probably buy gold in a variety of forms:

- Physical gold
- Perth Mint certificates
- GTU (has the added benefit of being taxed at LTCG rate assuming PFIC  election)

Gold is the most problematic asset class for me.  I don't have a problem with the PP's 25% allocation to gold per se, but it's not as easy to hold (and store) in a taxable account.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by MediumTex » Mon Jan 31, 2011 10:29 am

I don't know that it's correct to say that PP gains can be mostly offset with losses in other assets.

For example, in the last 10 years, gold has quintupled in value, stocks are more or less flat, LT bonds have had a steady positive return (with some up years and down years) and cash has had a small steady positive return.

Where would one find PP losses in the last 10 years to offset a quintupling in the price of gold? 

I agree that PP losses can offset some PP gains, but there will still be significant capital gains to deal with along the way.  PRPFX seems to manage this tax component very well.

I think PRPFX has also become more appealing in recent years as its expense ratio has been almost cut in half.

I'm not saying that PRPFX is not still possibly more expensive than a traditional PP over time (considering both expenses and taxes), but I don't think it is a slam dunk one way or the other.

To me, the most appealing features of PRPFX is that it offers convenience and simplicity in a one-stop package.  It also gives an aspiring PP investor a way to get started with the strategy with as little as $1,000. 
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Mon Jan 31, 2011 10:34 am

Thanks for the comments, mbh.

I've seen discussions about having to track the basis of IAU and how it might be a pain.  However, I'm also aware that the IRS is instituting some new rules to make brokerages do a better job of tracking that for you.  I'm curious if these new rules will make it easier (i.e., perhaps going forward, iShares will be required to track your basis---or at least, provide better information to make it easier for us to do it ourselves).  In any event, I haven't actually implemented a PP yet so I do not hold any gold, but I figure if it comes down to it, I will hold a mix of GTU and IAU and do my best to keep track of the bases. (I'll hold GTU so that if I ever need to rebalance gold by selling it, but don't have sufficient capital losses to offset the capital gains of gold, I can sell GTU instead of IAU and incur 15% tax instead of 28% tax).

By the way, speaking of GTU, do you happen to know it's expense ratio?  I can't seem to find much information on it.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by kka » Mon Jan 31, 2011 10:56 am

chrikenn wrote:By the way, speaking of GTU, do you happen to know it's expense ratio?  I can't seem to find much information on it.
http://www.gold-trust.com/financials.htm -> 3rd Quarter 2010 Report:

"The expense ratio for the nine-month period ended September 30, 2010 was 0.27% compared to 0.30% for the same nine-month period in 2009.  For the twelve months ended September 30, 2010, the expense ratio was 0.36% compared to 0.42% for the twelve months ended September 30, 2009."
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Mon Jan 31, 2011 10:58 am

MediumTex wrote: I don't know that it's correct to say that PP gains can be mostly offset with losses in other assets.

For example, in the last 10 years, gold has quintupled in value, stocks are more or less flat, LT bonds have had a steady positive return (with some up years and down years) and cash has had a small steady positive return.

Where would one find PP losses in the last 10 years to offset a quintupling in the price of gold?
Well, let's do another hypo.  Say you start with a $100,000 portfolio at time 1 --- so, $25,000 in each of the 4 asset classes.  Let's say after 10 years of average annual returns of 8.5%, the total portfolio is worth $226,098.3.  Let's also say that gold quintupled in value in that time period, so it is now worth $100,000 of your $226,098 portfolio, or 44%.  We want to get it back down to 25%, which would be $56,524.59.  So we need to sell about $43,500 of gold.  Assuming ZERO capital losses to offset (and let's be honest, if we are talking about the period from 2001-2010, you would have harvested $10-15K of capital losses in 2008, so the assumption of ZERO capital losses is extreme) and a 28% tax rate on gold, you get $12,180 of tax.  That's a good chunk of change.

But this entire 10 years you would have been spending 1.09% per year on expenses/taxes in PRPFX, compared to only 0.655% per year in the individual components portfolio.  So if you had invested $100,000 in PRPFX at the same time 1, it would have only grown to ~$217,000.

So the individual components portfolio ends at $226,098 - $12,180 = ~$214,000.  Slightly less than the PRPFX portfolio.

I guess the conclusion is that in extreme scenarios, over relatively short periods of time (i.e., 10 years instead of 30 years) where the price of gold increases massively in comparison to the price of the other 3 assets, and you have no capital losses with which to offset any of the capital gains of gold, PRPFX could come out ahead.

My guess is that such scenarios rarely, if ever, happen.  The 70s might have been a time that this was occurring.  But even the 2000s wouldn't qualify because that decade gave us at least one year---2008---of massive capital losses to harvest.  2001 and 2002 probably would have given capital losses as well.

Not to mention, if you are in the accumulation stage of your life, another way to rebalance would be to add your incoming funds to the lagging asset classes.  So in the example above, if you had been adding $10,000 per year to your portfolio, you would have had to sell far less gold to rebalance it back to 25%, and at the same time, you would have been able to take capital losses from the stocks.

So basically, I think for 99% of taxable investors, 99% of the time the individual components portfolio is going to be less expensive.  Now, if PRPFX would lower its expense ratio to 0.3 (heck, even 0.5), then things would get very interesting!
To me, the most appealing features of PRPFX is that it offers convenience and simplicity in a one-stop package.  It also gives an aspiring PP investor a way to get started with the strategy with as little as $1,000.  
I can't argue with that.  Simplicity is beautiful, and PRPFX has that going for it.  But personally, I will take the extra cash, put it in the bank, and spend an extra 30 minutes per year balancing my portfolio myself  ;D
Last edited by chrikenn on Mon Jan 31, 2011 12:53 pm, edited 1 time in total.
Octavio Richetta

Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Octavio Richetta » Sat Feb 26, 2011 3:39 pm

Since, unfortunately, the ETFs have not been around for 10 years, I calculated the average 5 year return for the period ending 2/25/2011 using http://www.morningstar.com, which, as you know, does keep track of dividends and share distributions when calculating returns. If you just type the mutual fund/etf symbol in the quote field you get the following 5 year average returns:


PRPFX 10.46%  (in five years 10K grow to 16443.64)

SHY 4.03% (in five years 10000K grow to 12184.09)
TLT  4.67% (in five years 10000K grow to12563.51)
VTI  3.28% ((in five years 10000K grow to 11751.17)
IAU  19.82% (in five years 10000K grow to 24697.13503) for GLD the average return for last 5 years is 19.81%, virtually identical.

If you put 25% into each etf, in five years 10000K grow to 15298.99 for a 8.89% average 5-year return (divide 15298.99 by 10000 and take the fifth root and you get an average of 8.88% return (notice that this is not equivalent to (4.03% + ... 19.82%)/4= 7.95%

So for that 5 year period, PRPFX  did 10.46%-8.89%=1.57% better than the indexed choice.

There is no guarantee PRPFX will beat your indexed choice in the future but I can sleep well with a quick and easy small investment I made on PRPFX last week. Also, I much prefer the way the PRPFX holds its gold vis-a-vis the ETF.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Octavio Richetta » Sat Feb 26, 2011 3:43 pm

BTW notice that the 1.57% advantage for PRPFX is NET of fund expenses for both PRPFX and the ETFs and before tax. the after tax advantage is even larger. I don't need to convince you of that part since you did the legwork very nicely:-)
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Sat Feb 26, 2011 4:16 pm

Octavio Richetta wrote: So for that 5 year period, PRPFX  did 10.46%-8.89%=1.57% better than the indexed choice.
Well, that's because PRPFX actually does not strictly adhere to a 4x25 PP portfolio.  I don't know exactly what all PRPFX holds, but I don't think it holds much in the way of long term bonds.  I also know that it holds some swiss franc assets, some silver, and a few other things a typical 4x25 doesn't hold.  So yes, its performance will differ slightly from that of a pure 4x25 PP from year to year and decade to decade.  I think that PRPFX has outperformed a typical 4x25 for the past decade, in fact.  Without looking up the numbers, however, I'm also pretty sure PRPFX lost in the '80s and '90s.

Anyways, yes, performance will differ.  But that does absolutely nothing to change the fact that PRPFX is more expensive to own than a typical 4x25.  And that was the only point I was trying to make when I started this thread: that PRPFX is not as cost-efficient as some people make it out to be.  That fact remains, even if PRPFX goes up 50% next year and 4x25 only goes up by 5%.

Edit: I would also add, we have absolutely no control over how our portfolios perform, be it PRPFX or 4x25.  We choose the asset allocation and we hope for the best.  What can we control? Expenses.

Edit #2:  Did some extra backtesting.  From 2001 to 2010, PRPFX had a CAGR of 11.12% w/ a standard deviation of 8.71%.  A pure 4x25 had a CAGR of 8.61% with a standard deviation of 4.71%.  So yeah, PRPFX killed it (although with a slightly bumpier ride).

From 1991 to 2000, PRPFX was CAGR of 5.44%, standard deviation 5.99%.  Pure 4x25 was CAGR of 8.38%, standard deviation of 7.26%.

From 1985 to 2010, PRPFX was CAGR of 7.89%, standard deviation of 7.60%.  Pure 4x25 was CAGR of 9.21%, standard deviation of 6.73%.

So yeah, both are good investments, but don't be deceived into thinking that PRPFX is cost (tax + expense) efficient, because it's not.  That does not mean it's a bad investment.  It just means it's expensive  :)
Last edited by chrikenn on Sat Feb 26, 2011 4:26 pm, edited 1 time in total.
Octavio Richetta

Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Octavio Richetta » Sun Feb 27, 2011 5:39 am

On your edit #2 calculations above, what specific available investments did you include in your pure 4x25 calculation? For the equity, bonds, cash portions one could probably find suitable  vanguard funds but what does one use for gold? If one uses just historical prices one needs to consider the cost of storing gold and the bid/ask spread cost involved in the re-balancing. Otherwise you are being unfair to the PRPFX guys who do face these costs. Given your numbers, the 4x25 would probably still come ahead even if you left some cost elements out of your calculation. I am just curious.

Also, it would be interesting to see how PRPFX and pure 4x25 did from the gold peak of 875 in January 1980 to the 250s  bottom in August 1999. In other words  I am interested in knowing how the 4x25 strategy did during the 20 year 1980-1999 gold bear market. My hunch is that given the incredible bull market in equities and the long bond during this period the 4x25 strategy did reasonably well. So it would appear the 4x25 strategy is quite robust. Can one find a 10, 20, or 30 year period in which the strategy was a laggard?

As you can probably guess, I just discovered the 4x25 strategy and I am trying to learn as much as I can about it.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Octavio Richetta » Sun Feb 27, 2011 8:25 am

Thanks! Great response and great spreadsheet. I played with it a bit. Found a typo in the texbox on top: it should read E6 instead of E5 but this one is obvious. For convenience, I added cells that calculate the % split for the 5yrT-stocks allocation.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Sun Feb 27, 2011 9:40 am

Octavio Richetta wrote: On your edit #2 calculations above, what specific available investments did you include in your pure 4x25 calculation? For the equity, bonds, cash portions one could probably find suitable  vanguard funds but what does one use for gold? If one uses just historical prices one needs to consider the cost of storing gold and the bid/ask spread cost involved in the re-balancing. Otherwise you are being unfair to the PRPFX guys who do face these costs. Given your numbers, the 4x25 would probably still come ahead even if you left some cost elements out of your calculation. I am just curious.
As Clive correctly guessed, I'm using Simba's backtesting spreadsheet.  However, I added TLT to it per the instructions in the readme, and I use TLT in the calculations instead of the Long-Term bond fund that is part of Simba's original spreadsheet.

It's a very cool tool, as you will discover :)

And again, I want to stress that the purpose of this thread was not to say that PRPFX is a bad investment.  I actually think it's pretty good.  And if its expense ratio were closer to 0.5 or so, I might even buy it myself :)
Last edited by chrikenn on Sun Feb 27, 2011 9:42 am, edited 1 time in total.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Octavio Richetta » Sun Feb 27, 2011 11:35 am

Clive, any thoughts on building something simple around a 10% allocation to a 30 yr stripped T?
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by guineapig » Sun May 08, 2011 12:38 am

chrikenn wrote: (3) If you invest $100,000 each into an individual components portfolio and a PRPFX portfolio, and never add to it, over the course of 30 years, the individual components portfolio will end with a value that is approximately $190,000 higher than the value of the PRPFX portfolio (assuming a 8.5% annual rate of return for both portfolios).  This difference is attributable solely to the extra expenses of the PRPFX portfolio.
I got different numbers than you by using 100,000*power(1+8.5%-x%, 30), given x% being the total expense ratio. Then after 30 years DIY version is 963,830, while prpfx is 853,771. the difference is 110,058. However this assumes that you never have to rebalance and get taxed for capital gains.

Here is more, when you liquidize them one day, the gold part of DIY version will be taxed for 28%, while prpfx version only pay 15%. Assuming your gold etf is still 25% of the total portfolio, the extra tax burden for you is (963,830-100,000)/4*28%-(853,771-100,000)/4*15%=32201. The difference between two strategy is now down to $77,857.

Prpfx is still less productive, but not as much as the number you put out.

According to my calculation, they will break even when prpfx lower the expense ratio from 0.82% to about 0.50% and assuming the individual investor never need to rebalance and never pay capital gains before they start to liquidize the portfolio. So your conclusion still holds.
Last edited by guineapig on Sun May 08, 2011 12:51 am, edited 1 time in total.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by chrikenn » Fri May 13, 2011 9:46 am

guineapig wrote:
chrikenn wrote: (3) If you invest $100,000 each into an individual components portfolio and a PRPFX portfolio, and never add to it, over the course of 30 years, the individual components portfolio will end with a value that is approximately $190,000 higher than the value of the PRPFX portfolio (assuming a 8.5% annual rate of return for both portfolios).  This difference is attributable solely to the extra expenses of the PRPFX portfolio.
I got different numbers than you by using 100,000*power(1+8.5%-x%, 30), given x% being the total expense ratio. Then after 30 years DIY version is 963,830, while prpfx is 853,771. the difference is 110,058. However this assumes that you never have to rebalance and get taxed for capital gains.

Here is more, when you liquidize them one day, the gold part of DIY version will be taxed for 28%, while prpfx version only pay 15%. Assuming your gold etf is still 25% of the total portfolio, the extra tax burden for you is (963,830-100,000)/4*28%-(853,771-100,000)/4*15%=32201. The difference between two strategy is now down to $77,857.

Prpfx is still less productive, but not as much as the number you put out.

According to my calculation, they will break even when prpfx lower the expense ratio from 0.82% to about 0.50% and assuming the individual investor never need to rebalance and never pay capital gains before they start to liquidize the portfolio. So your conclusion still holds.
Fair enough.  I certainly make no claim that my numbers are 100% accurate... they are ballpark figures using the assumptions stated in the first post, which may or may not be accurate for any given person on any given day.  The number I gave for the 30-year difference between PRPFX and 4x25 was just the numbers spit out by Simba's spreadsheet, so if you use a different calculation and arrive at a different number, that's fine.

You could get your gold cap gains down to 15% if you use GTU instead of IAU and deal with the additional tax form every year.

And yeah, if PRPFX lowered its expense ratio to about 0.5%, it would be much more attractive to me.  Certainly at that point, any difference in cost (tax + expense) between PRPFX and 4x25 would be negligible.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by TBV » Fri May 13, 2011 10:59 am

guineapig wrote:
chrikenn wrote: (3) If you invest $100,000 each into an individual components portfolio and a PRPFX portfolio, and never add to it, over the course of 30 years, the individual components portfolio will end with a value that is approximately $190,000 higher than the value of the PRPFX portfolio (assuming a 8.5% annual rate of return for both portfolios).  This difference is attributable solely to the extra expenses of the PRPFX portfolio.
I got different numbers than you by using 100,000*power(1+8.5%-x%, 30), given x% being the total expense ratio. Then after 30 years DIY version is 963,830, while prpfx is 853,771. the difference is 110,058. However this assumes that you never have to rebalance and get taxed for capital gains.

Here is more, when you liquidize them one day, the gold part of DIY version will be taxed for 28%, while prpfx version only pay 15%. Assuming your gold etf is still 25% of the total portfolio, the extra tax burden for you is (963,830-100,000)/4*28%-(853,771-100,000)/4*15%=32201. The difference between two strategy is now down to $77,857.

Prpfx is still less productive, but not as much as the number you put out.

According to my calculation, they will break even when prpfx lower the expense ratio from 0.82% to about 0.50% and assuming the individual investor never need to rebalance and never pay capital gains before they start to liquidize the portfolio. So your conclusion still holds.
Actually, gold gets taxed at either 28% or your regular marginal income tax rate, whichever is lower.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by guineapig » Fri May 13, 2011 11:11 am

TBV wrote:
guineapig wrote:
chrikenn wrote: (3) If you invest $100,000 each into an individual components portfolio and a PRPFX portfolio, and never add to it, over the course of 30 years, the individual components portfolio will end with a value that is approximately $190,000 higher than the value of the PRPFX portfolio (assuming a 8.5% annual rate of return for both portfolios).  This difference is attributable solely to the extra expenses of the PRPFX portfolio.
I got different numbers than you by using 100,000*power(1+8.5%-x%, 30), given x% being the total expense ratio. Then after 30 years DIY version is 963,830, while prpfx is 853,771. the difference is 110,058. However this assumes that you never have to rebalance and get taxed for capital gains.

Here is more, when you liquidize them one day, the gold part of DIY version will be taxed for 28%, while prpfx version only pay 15%. Assuming your gold etf is still 25% of the total portfolio, the extra tax burden for you is (963,830-100,000)/4*28%-(853,771-100,000)/4*15%=32201. The difference between two strategy is now down to $77,857.

Prpfx is still less productive, but not as much as the number you put out.

According to my calculation, they will break even when prpfx lower the expense ratio from 0.82% to about 0.50% and assuming the individual investor never need to rebalance and never pay capital gains before they start to liquidize the portfolio. So your conclusion still holds.
Actually, gold gets taxed at either 28% or your regular marginal income tax rate, whichever is lower.
yes, but how IRS treat the gold holding inside the prpfx? will prpfx say which part is from gold, and which is from stock?
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by MediumTex » Fri May 13, 2011 11:32 am

guineapig wrote: yes, but how IRS treat the gold holding inside the prpfx? will prpfx say which part is from gold, and which is from stock?
When you sell PRPFX, any gains are capital gains.

I don't know how they do it, but that's how it works.

It's been a while since I read the prospectus, I don't recall if it is addressed there.
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by jjames » Wed Jan 11, 2012 8:57 am

some nice calculations her but, don't you have to pay commissions if your dollar cost averaging? isn't buying one fund easier than buying 4? and what about tax reporting when your taking a distribution, if you've dollar cost averaged? isn't that going to be a mess?
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Re: Is PRPFX cost (expense + tax) efficient? The answer is NO.

Post by Ad Orientem » Sun Jan 15, 2012 11:39 pm

chrikenn wrote: (2) If you hold physical gold and actual bonds rather than gold ETFs and bond funds, holding the individual components becomes even MORE cost efficient because then your expense ratios for the bonds and the gold drop to essentially ZERO.
Chrikenn
A very interesting post and I don't really disagree with your general findings though I would make one small point with reference to physical gold.  When you buy physical you are going to pay a premium, typically 3-5% above spot.  ETF's charge anywhere from .25-.5% in fees and expenses.  I don't think it is quite accurate to say that there are no fees in physical gold vs ETFs when you consider the premium you pay.  All of which said I strongly advocate holding at least some of your gold in physical form as a hedge against an SHTF scenario.

My general sentiment on PRPFX is that it is the best second choice for conservative investors.  And for sheer convenience it is hard to beat.
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