Anyone using the Permanent Portfolio as a second level emergency fund?

[drewdavis]

Exploring splitting my emergency fund between cash in a HYSA and a lower volatility portfolio that consistently beats inflation. I plan to overfund the account to cushion market ups and downs. The Permanent Portfolio appears to historically meet both goals.

[mathjak107]

there are times when all assets move the same way , it’s not low volatility.

in 2022 it was down the same as most balanced funds at about minus 15%

[welderwannabe]

One of my favorite emergency fund vehicles are iBonds. Takes a while to build them up, but they adjust for inflation, you can cash them out in $1 increments after the first year, and the penalties for early withdrawal are small for the first 5 years (like 3 months interest on the amount youre taking out), and 0 after 5 years.

I still keep a few thousand at the local credit union, but the rest of my efund is in iBonds.

[coasting]

One of my favorite emergency fund vehicles are iBonds. Takes a while to build them up, but they adjust for inflation, you can cash them out in $1 increments after the first year, and the penalties for early withdrawal are small for the first 5 years (like 3 months interest on the amount youre taking out), and 0 after 5 years.

Add to that list of benefits: the interest that iBonds earn is not taxed until the year they mature or that you decide to redeem them early. A form of additional tax-deferred space.

[blue_ruin17]

I treat my cash clearing accounts like rain barrels: constantly drawing from them for my daily needs because the water is easily accessible. They are periodically replenished when it rains (on payday). Ideally, I draw less from these barrels than flows in, so over time they overflow into an underground cistern (the Permanent Portfolio). In the event of a drought, where the rain barrels run dry, I would begin tapping into the long-term reserves stored in the cistern.

The challenge is deciding how much cash to keep in these shallow reserves. I'm fairly aggressive in this regard, maintaining only about 3 to 4 months of runway in my clearing accounts. Any cash beyond this overflows into the Permanent Portfolio. I mentally calculate the Permanent Portfolio as covering x months or years of living expenses, so I always know how much runway I have in reserve.

So far, this system has worked flawlessly. I've never needed to dip into the 'cistern' reserves. During periods of heavy expenses, I simply allow income to refill the 'rain barrels' gradually before letting any excess flow back into the Permanent Portfolio.

If I ever had to draw from my reserves, I would start by using the T-Bill portion until it reached the 15% allocation mark. Then, I would rebalance the portfolio by selling down the winning assets, repeating this process as needed.