Hi everyone, hope you're doing well.
I’ve been revisiting some aspects of my Permanent Portfolio (25% stocks, 25% long-term bonds, 25% gold, 25% cash), and there’s one issue I keep coming back to — one that I think is seriously underestimated: the tax impact of rebalancing
.Rebalancing keeps everything aligned — selling the outperformers, buying the laggards.
But here's the catch: taxes.
Every time I sell a portion of an asset that has appreciated — even if it’s just to maintain the 25% allocation — I’m immediately taxed on those capital gains, even though I have no intention of “cashing out.”
And that tax can easily eat up nearly a third of the gain
.What’s worse: if the asset later drops in value (as often happens with gold, long bonds, or even stocks), I’ve already paid tax on a profit that no longer exists.
In other words, I’m handing over part of the portfolio’s growth to the government — even when that growth vanishes.Alternative approaches (some a bit stupid and wrong):
-Rebalancing only with new contributions
-Allowing wider deviation bands before triggering a rebalance
-Using cash as a buffer for small adjustments
-Rebalancing less frequently (e.g. annually, or opportunistically)
I’d really like to hear how others using the Permanent Portfolio are handling this.Do you adjust your rebalancing strategy to reduce the tax hit?
Looking forward to hearing your thoughts. Take care, and happy investing!
Rebalancing is not a minor detail—it’s a fundamental component of the strategy.
