Document your international Permanent Portfolio

[christina]

Canadian PP with not that much money. I have to put my new contributions into Manulife funds to get an employer match. I have to do some funky stuff to get my allocations right.

1. Gold: IGT etf (I will switch to have some physical gold when I have more money.)
2. Bonds: Canadian longest term bonds you can get (41 years?). Bought them directly thru scotia itrade.
3. Cash: a Claymore money market fund (no transaction fees is why I got this one) + all new contributions go into a manulife money market fund. Once a year, I am allowed to transfer my funds, so I use this money to rebalance.
4. Stocks: manulife large cap index fund (one of the only index funds available to me). My employer's match goes here. I'm not allowed to withdraw this money unless I leave the company.

[Coearth]

Hi. I live in Singapore. Here is my Singapore Permanent Portfolio.

25% Stocks: ES3 - SPDR Straits Times Index ETF. Tradable on Singapore Stock Exchange.
**Alternative: G3B - Nikko AM Singapore STI ETF 100. Similar to ES3, trades in smaller lot size than ES3.

25% Bonds: PH1S. First ever Singapore Government Securities 30-Year Bonds. Tradable on Singapore Stock Exchange, similar to trading stocks. AAA rating.
**Alternative: TLT - iShares Barclays 20+ Yr Treasury Bond ETF. Back tests for 2002~2011 using TLT for bonds shows that portfolio works with average 8~9% returns.

25% Gold: UOB Gold Savings Account. Buy/sell unallocated gold at bank counter. No storage concerns. Can track portfolio gold price in Singapore dollars using Yahoo Finance "XAUSGD=x" counter.
**Alternative: Gold bullion coins. Buy at UOB Main Branch. Need for secure storage.
**Alternative: O87 (SPDR Gold ETF - GLD 10US$) Gold ETF tradable on Singapore Stock Exchange.

25% Cash: Singapore Government Treasury Bills 3-months/1-year. No insurance upper limit, since issuer is Monetary Authority of Singapore who can print money to pay back cash if necessary.
**Alternative: Money Market funds "Nikko AM Shenton Short-Term Bond (S$)" or "United SGD Fund Cl A".

I agree that best way to start a Permanent Portfolio is to buy all assets at the same time.

[escafandro]

Does anyone knows a good and accurate web to research offshore brokers?

[murphy_p_t]

http://the-international-investor.com/2 ... ck-brokers

also, http://www.internationalman.com/images/ ... stable.xls

i have no experience with using any of this.

[peterpatch]

Hi Everyone,

I have implemented a version of the Canadian PP as follows:

25% IGT (gold etf)
25% VCE (broad canadian stock market index ETF)
25% ZFL (long bond avg 20 years etf)
25% cash


I only have about 10k split roughly evenly in an RRSP and TFSA so buying a long federal bond isnt' really an option for me, although I will be investing in the 45 year federal bonds as soon as I hit around 5k in ZFL. Owning gold outright probably wouldn't be worth it yet due to the cost of the safe deposit box fees and insurance relative to the price of the gold.

My main worry is the gold, it is at a very high inflation adjusted price relative to it's historical mean. I keep reminding myself that the PP is like a molecule made of four atoms and it makes no sense to worry about how a particular atom behaves. H2O isn't going to catch on fire just because both of component atoms are , on their own, good for strengthening fires.

The cash component is inside of a questrade account and I don't want to incur fees transferring it out to a HISA so I will probably just invest it in ZFS and any further contributions will be made to an HISA. Once my cash allocation is around 50K+ I will consider moving it to a laddered short term treasury set up but I am not too worried about it in ZFS.

I also keep peeking at it, about 3 times a day, which is a useless yet difficult to stop behaviour. I would  like to only check it maybe once a quarter.


You can see my back test here, and it seems to generally be inline with the American PP performance. Backtesting obviously doesn't prove that the portfolio would perform well in all scenarios but it's one of the best tools we have to test the PP empirically. According to the backtest the Canadian PP had one negative year in 1981, otherwise all other years were positive (or essentially 0). I have back tested it using different date ranges and returns generally seem to vary between 7 and 9%

I am working on early retirement and I just want to stick my money somewhere where it will be safe and earn a reasonable return. The PP is the best passive investment idea (for my needs) that I have seen so far and I sleep pretty good at night with my money in there.

[zen]

I have a PP in the Netherlands, in the end I chose the following options:

25% Stock: EXSI - Contains the part of the Europe Stoxx 600 that is in the Euro zone
25% Bonds: IBGL - 15-30 yr Euro bonds, mostly Germany, Italy and France.
25% Gold: Physical coins - Might add an ETF or bullionvault once my PP grows a bit bigger
25% Cash: Bank account - I'm well below the 100k government guarantee. It cannot imagine our government not rescuing this bank if it would be needed (it's definitely too big to fail), and it still looks like it's in decent shape (only big Dutch bank that hasn't needed government help in recent years).

[Thomas Hoog]

A semi-permanent flying Dutchman Portfolio (i'm a bit stubborn); Netherlands

Stocks: 50 % (will become 40 %): Ishares msci world + individual stocks
Bonds: 20 % (will become 30%) : IShares € Government Bond 15-30   
Gold 20%:  SPDR Gold  & boullion vault
Cash 10%:  bankaccount +  iShares Barclays Euro Government Bond 1-3 (IBGS)     

Actual on my website: http://www.verstandig-beleggen.nl/index.php?paginaid=13 (still in Dutch)

[Gosso]

Peterpatch,

Welcome to the forum.  One criticism of the Canadian PP is that our stock market is heavily overweight banks and mining/energy.  I like the idea of splitting the stocks 50/50 between Canadian and US/International.  If you plug this into Stingy Investor you'll see that it also reduces volatility and improves CAGR.

[Arturo]

..

[peterpatch]

Peterpatch,

Welcome to the forum.  One criticism of the Canadian PP is that our stock market is heavily overweight banks and mining/energy.  I like the idea of splitting the stocks 50/50 between Canadian and US/International.  If you plug this into Stingy Investor you'll see that it also reduces volatility and improves CAGR.

Thanks for the tip, I sort of already am doing that through my RRSP matching program at work. I started investing in International (non North American) and the US and CDN stock markets through it and just keep paying into it every month up to the maximum amount for matching. I may consider doing this permanently to get more diversification.

I recently switched it up to a 1/3 bond, 1/3 canadian stocks, 1/3 international stock blend. So I am a little underweight gold overall.

I used to be a pure value style investor. I had like half my money in berkshire hathaway stock. It did well because I bought well below book value and have read tons of their annual reports and articles about them. I just don't have the time to properly research the companies for that style of investing so I did some research and switched my controllable funds to the PP. So far the portfolio is down a little, but after a couple of weeks I can see how when the stock market drops people go into bonds and demand pushes bond prices up (and sometimes gold). Conversely when the stock market goes up they tend to get out of bonds (and maybe gold). Hopefully it is solid enough that one or two of the asset in the mix will be able to produce a net positive return over the assets that don't do so well.

I would like to own actual long term bonds instead of the ZFL ETF because ZFL has an average term of 20 years whereas I can get a Canadian Federal bond for 45 years which would behave better for this portfolio.

[frugal]

A semi-permanent flying Dutchman Portfolio (i'm a bit stubborn); Netherlands

Stocks: 50 % (will become 40 %): Ishares msci world + individual stocks
Bonds: 20 % (will become 30%) : IShares € Government Bond 15-30   
Gold 20%:  SPDR Gold  & boullion vault
Cash 10%:  bankaccount +  iShares Barclays Euro Government Bond 1-3 (IBGS)     

Actual on my website: http://www.verstandig-beleggen.nl/index.php?paginaid=13 (still in Dutch)

I have a PP in the Netherlands, in the end I chose the following options:

25% Stock: EXSI - Contains the part of the Europe Stoxx 600 that is in the Euro zone
25% Bonds: IBGL - 15-30 yr Euro bonds, mostly Germany, Italy and France.
25% Gold: Physical coins - Might add an ETF or bullionvault once my PP grows a bit bigger
25% Cash: Bank account - I'm well below the 100k government guarantee. It cannot imagine our government not rescuing this bank if it would be needed (it's definitely too big to fail), and it still looks like it's in decent shape (only big Dutch bank that hasn't needed government help in recent years).

me also equal to zen

i'm thinking to have a EU PP and a US PP

still don't know where? Interactive brokers, ... ?

[Gosso]

I would like to own actual long term bonds instead of the ZFL ETF because ZFL has an average term of 20 years whereas I can get a Canadian Federal bond for 45 years which would behave better for this portfolio.

Hi peterpatch.  Could you please edit the link in your original post, since it has skewed the dialogue box width.

With such a small portfolio I wouldn't bother with holding individual bonds, since the spread and commissions will really hurt.  I find the best way to deal with the bonds in Canada is to use a GIC ladder for the cash portion, and then buy ZFL for the long bonds.  You could extend the duration of the cash section out to a 1-5 year GIC ladder to help increase the overall duration of the bonds.

Just my two cents.

[peterpatch]

I would like to own actual long term bonds instead of the ZFL ETF because ZFL has an average term of 20 years whereas I can get a Canadian Federal bond for 45 years which would behave better for this portfolio.

Hi peterpatch.  Could you please edit the link in your original post, since it has skewed the dialogue box width.

With such a small portfolio I wouldn't bother with holding individual bonds, since the spread and commissions will really hurt.  I find the best way to deal with the bonds in Canada is to use a GIC ladder for the cash portion, and then buy ZFL for the long bonds.  You could extend the duration of the cash section out to a 1-5 year GIC ladder to help increase the overall duration of the bonds.

Just my two cents.

Hi Grosso,

Url corrected.


Right now all my surplus income is going towards paying off the last vestiges of my student loan. It should be paid off ,and I will be completely debt free, by July. Starting then I will be socking away 50% or more of my take home pay into the PP.  In your experience at what level should someone start considering moving the long bond allocation from ZFL to actual Canadian bonds? I know there is usually a 5k min for one bond and Canadian bonds like this have to be bought from a dealer.

[Gosso]

Hi Grosso,

That's the second time I've been called that, haha.

Thanks for fixing the link, everything looks better now.

Right now all my surplus income is going towards paying off the last vestiges of my student loan. It should be paid off ,and I will be completely debt free, by July. Starting then I will be socking away 50% or more of my take home pay into the PP.  In your experience at what level should someone start considering moving the long bond allocation from ZFL to actual Canadian bonds? I know there is usually a 5k min for one bond and Canadian bonds like this have to be bought from a dealer.

Which broker are you using?  They likely charge around a 1.5% spread, so if you rollover the long bonds every 10 years then that works out to 0.15% MER per year, which is not far from 0.20% for ZFL (plus the commish).  Personally I prefer the no hassle of ZFL.

[peterpatch]

Hi Gosso,

Questrade is my broker. I am sticking with ZFL for now, and will consider whole bonds once my portfolio is more built up.