Gyroscopic Investing

MediumTex wrote: I would use TLT to start with.

Over time, you may want to look into various PP "hacks", but I would just get started with a normal PP and get your mind started with the transition process from gambler (which is what most investors actually are) to investor (which is what the PP is all about).

It can be harder than it sounds to get used to a smooth ride after experiencing nothing but random bumpiness for a long time.

I'm probably spoiled since I got lucky when I started investing and put 100% of my money into a stock fund in April 2009.  I'm only used to seeing gains of 20+% each year!  While it feels good to see my portfolio go up so much, I've tried to imagine what a sustained string of losing years would feel like.  I don't think I'd feel as comfortable as I thought I would losing 50% of what I worked so hard to save.

i didn't see any bullion coin mentioned in the pp setup you posted, at some point along the way in your becoming a pp investor, having at least one or two gold coins is a fun and possibly important thing to do, IAU just isn't  the same thing as having gold in hand...

Also, I just assumed that my Roth IRA was the correct place to hold gold to avoid a 28% tax, but should I consider putting this in taxable instead?  I don't really see why I'd put cash in my tax-deferred accounts over gold since the amount of interest I actually earn on cash is miniscule.  Also, since I plan on slowly selling my taxable funds to transfer them to tax-deferred accounts, I don't want to buy gold only to end up having to sell it again in the near future.

On a related note, under current tax law there are no long-term capital gains taxes for those in the 15% bracket.  Does this apply to gold as well, or do you pay 28% no matter what?

 more experienced pp users can correct me if i am wrong, but i believe the SOP is to have most of your gold as physical in hand or in a safety deposit box, and keep a percentage of your gold holding in your Roth IRA as GTU or another ETF like IAU for re-balancing reasons,
 the way people hold there gold will vary a lot from person to person, gold is one of the assets people often have trouble getting used to in the pp.  but the reality of having some gold in your possession with no paper between you and it, is something worth doing at least for one coins worth to help you understand why the pp calls for gold in hand as a part of the formula... (others may be able to explain this and the tax rules to you better than i can..)

rhymenocerous wrote: Also, I just assumed that my Roth IRA was the correct place to hold gold to avoid a 28% tax, but should I consider putting this in taxable instead?  I don't really see why I'd put cash in my tax-deferred accounts over gold since the amount of interest I actually earn on cash is miniscule.  Also, since I plan on slowly selling my taxable funds to transfer them to tax-deferred accounts, I don't want to buy gold only to end up having to sell it again in the near future.

On a related note, under current tax law there are no long-term capital gains taxes for those in the 15% bracket.  Does this apply to gold as well, or do you pay 28% no matter what?

For your answer, look at the tax table for collectibles at this link: http://www.ask.com/wiki/Capital_gains_t ... ted_States

rhymenocerous wrote: Also, I just assumed that my Roth IRA was the correct place to hold gold to avoid a 28% tax, but should I consider putting this in taxable instead?

What we are talking about here is more of a psychological thing.  It's hard to really get what owning gold is all about if you don't actually own any.  If you own a small amount of bullion and you are committed to the PP strategy, this is bullion that is likely to be a truly permanent holding (since you can use your ETF shares for rebalancing purposes).

Trust me when I say that if you haven't owned physical bullion before, it's a new experience.  At first you will feel strange, then maybe a little dumb, and then you might start feeling like a Conquistador or a pirate or someone like that from history as you gaze on the strange shiny metal and it awakens a part of you that you may not have even known was there.  You will know what I am talking about when it happens.

rhymenocerous wrote:I'm probably spoiled since I got lucky when I started investing and put 100% of my money into a stock fund in April 2009.  I'm only used to seeing gains of 20+% each year!  While it feels good to see my portfolio go up so much, I've tried to imagine what a sustained string of losing years would feel like.  I don't think I'd feel as comfortable as I thought I would losing 50% of what I worked so hard to save.

That reminds me of an interesting graphic someone posted here earlier in the year...

In Investing, It’s When You Start and When You Finish - Graphic - NYTimes.com

As you can see, there haven't been too many ideal times to start investing, but you were indeed lucky to start when you did. And now you have the PP to protect you from future down years, if and when they come. If you had started investing a few years ago, you'd be in a very different situation. I'm extremely impressed that you discovered the Permanent Portfolio without even having experienced one of the dark red years first hand. Well done!

rhymenocerous wrote: I don't really see why I'd put cash in my tax-deferred accounts over gold since the amount of interest I actually earn on cash is miniscule.

It's miniscule now but that may not always be the case (see 1981).

Remember, this is taxed as interest not as capital gains.

rhymenocerous wrote: Also, I just assumed that my Roth IRA was the correct place to hold gold to avoid a 28% tax, but should I consider putting this in taxable instead?  I don't really see why I'd put cash in my tax-deferred accounts over gold since the amount of interest I actually earn on cash is miniscule.  Also, since I plan on slowly selling my taxable funds to transfer them to tax-deferred accounts, I don't want to buy gold only to end up having to sell it again in the near future.

On a related note, under current tax law there are no long-term capital gains taxes for those in the 15% bracket.  Does this apply to gold as well, or do you pay 28% no matter what?

Save your tax-sheltered space by purchasing and holding your own physical gold...10-20% if you can stomach it.  Store the gold either at home, in a bank safe (~$15.00/year), or both. This way, you can easily transition your paper gold (IAU, GLD, GTU) from taxable to an IRA, and won't have to worry about large gains consequences.  While you pay a premium for bullion at a dealer you'll easily recoup it by avoiding fund fees and trading commissions.

Try just buying one coin to start and you'll soon see all your gold related worries dissolve. 

I just wanted to say that I've finally moved 100% of my portfolio to the classic PP (25% of each asset class), and I'm loving it so far.  I love watching how the volatility of the individual asset classes counteracts each other.  When stocks are down for the day, I like seeing my long-term bonds with a sizable increase, rather than the $0.01 increase that the Total Bond Market usually has.  I can already tell that this is a very stable strategy that I can stick with at all times.  Thanks everyone for your help.

rhymenocerous wrote: I just wanted to say that I've finally moved 100% of my portfolio to the classic PP (25% of each asset class), and I'm loving it so far.  I love watching how the volatility of the individual asset classes counteracts each other.  When stocks are down for the day, I like seeing my long-term bonds with a sizable increase, rather than the $0.01 increase that the Total Bond Market usually has.  I can already tell that this is a very stable strategy that I can stick with at all times.  Thanks everyone for your help.

Once you get set up with the PP, greed will pull you away from it before fear will.

MediumTex wrote: Once you get set up with the PP, greed will pull you away from it before fear will.

Boom!

My biggest fear with the PP is a couple more years of great stock gains... cuz the PP is much more conservative in nature than where I came from before.

If we have hyperinflation, I'm not going to kick myself for only having 25% gold in my portfolio, I'm going to pat myself on the back.

If we have rampant prosperity, or even just a big run-up in the stock market, I will probably kick myself for listening to MT's pursuasive PP quotes and getting caught up in the hysteria, drop it, and proceed to lose 40% of my wealth in the market collapse that follows.