Gave up on "pure" Permanent Portfolio in EU

[europeanwizard]

As an EU citizen, I've always had my doubts about the bonds portion of the PP and that was five years ago. And I tried but two years later, I gave them up. One of the friendly people here asked me for an update of my portfolio. It's doing fine. Roughly, my portfolio is now looking as follows:

Gold 17%
Total world stock 58%
Art via masterworks 6%
Cash 11%
Bitcoin 8%

I plan to increase the art portion to about 10%. Gold is fine and I won't increase it. Having so much in world stock, it worries me but I don't know any other way. I love the EU for the political block it provides, but I hate its central bank. In the meantime, I'm going to keep my head down and keep stashing

[Hal]

Your allocation reminds me of Jim Rickards suggestion....
Think he had land as well.

[I Shrugged]

I think if one likes HB's thinking about the bond component, it would be good to use US Treasuries no matter where in the world one resides. Because they are the world's safe haven investment. So far anyway.

Thoughts/rebuttals?

[frugal]

Hi,

"Art via masterworks"

what is this? How do you invest on it?

Regards!

[Mark Leavy]

Hi,

"Art via masterworks"

what is this? How do you invest on it?

Regards!

Hi frugal. Let me google that for you.

[Hal]

I think if one likes HB's thinking about the bond component, it would be good to use US Treasuries no matter where in the world one resides. Because they are the world's safe haven investment. So far anyway.

Thoughts/rebuttals?

+1
Also gold is negatively correlated to US Bonds. Inflation goes dramatically up, US bonds down, gold up. Gold is not correlated to what happens in very small economies. I think Smithy's GoldSmith portfolio is a good example of getting exposure to US treasuries if you don't live in the US.

[Vil]

Art via masterworks 6%

Sounds like a snake oil business, but I guess you have done your due diligence.. I am afraid of investing in such a fancy things, tried some P2P lending platforms (Mintos, Peerberry, Iuvo and Klearlending to be precise) for a while and then exited. Not that I am able to accurately estimate (if there is such possibility at all) the risk hidden behind investing in P2P, but I assume most of the risk is held by the investors. Recent events with Peerberry (for which the UA and RU markets were substantial part of the business) made my feelings come true - couple of days ago received some mail notification from Peerberry informing they are planning to repay their customers in batches in the course of the next 24 months ....

[ppnewbie]

Art via masterworks 6%

Sounds like a snake oil business, but I guess you have done your due diligence.. I am afraid of investing in such a fancy things, tried some P2P lending platforms (Mintos, Peerberry, Iuvo and Klearlending to be precise) for a while and then exited. Not that I am able to accurately estimate (if there is such possibility at all) the risk hidden behind investing in P2P, but I assume most of the risk is held by the investors. Recent events with Peerberry (for which the UA and RU markets were substantial part of the business) made my feelings come true - couple of days ago received some mail notification from Peerberry informing they are planning to repay their customers in batches in the course of the next 24 months ....

@europeanwizard or anyone else with experience in Masterworks. This would be a great thread for the VP. I've been curious about this platform and users experience with it. Or your thoughts here would also be welcome.

[snedgar]

Seemed too good to be true to me.

Once I read this review, scratched it off my list: https://wantfi.com/masterworks-review.html

" ... If you can get beyond the shady business practices, marketing, founder’s past business activities, fee grab where they act as an art hedge fund, and unique art risks, then Masterworks investing offers that opportunity to buy a fractional ownership in “blue chip” fine art..."

[ppnewbie]

Seemed too good to be true to me.

Once I read this review, scratched it off my list: https://wantfi.com/masterworks-review.html

" ... If you can get beyond the shady business practices, marketing, founder’s past business activities, fee grab where they act as an art hedge fund, and unique art risks, then Masterworks investing offers that opportunity to buy a fractional ownership in “blue chip” fine art..."

Thanks for the link. That was an excellent summary. I subscribed to his newsletter.

[Vil]

The surest way to benefit from the roaring inflation, mediocre results of the stocks and abysmal drowning of the bonds is to start a platform for anything that promise >4-5% real. I think very soon even promising to just beat the inflation might be very well accepted by the audience. In any case - promises are for free and have wide range of flexibility

[europeanwizard]

Gold 17%
Total world stock 58%
Art via masterworks 6%
Cash 11%
Bitcoin 8%

Small update. Like many, I've done well in 2023/24. The portfolio changed as follows:
Gold 19%
Total world stock 53%
Art via masterworks 4%
Cash 5%
Bitcoin 19%

I planned to increase the art portion, but after thinking about it, didn't do so. I've got a part of four artworks. One was sold and did 3,5% per year. The rest do something between 4 and 7% yearly. Not bad. They did make it easier to invest, they have a bank account accessible for EU and UK citizens. But the secondary market is only for Americans, so it's 100% illiquid.

Personally I believe in Bitcoin (not crypto) and it's now equal to my gold portion. I know it's very contentious among the PP folks. I've also lowered my cash position, my need for liquidity changed. And I believe for an EU citizen, staying in cash is just not a good deal compared to our friends in the USA.

[Smith1776]

Going to look into this Masterworks thing. I've always been curious about investing in art, but I've also always wondered how much of the spectacular returns you always hear about were just money laundering. How much does that skew the return statistics?

[frugal]

Hi europeanwizard,

Thanks for sharing your portfolio update. It’s always interesting to see how others adjust their allocations over time.

I have to say, I’m also not happy with holding cash, even in short-term bonds. In the EU, real interest rates remain unattractive, and keeping liquidity in euros doesn’t seem like a great deal compared to the US, where T-Bills offer at least some decent returns. I noticed you reduced your cash position—where do you currently invest it? Are you keeping it in a high-yield savings account, money market funds, short-term government bonds, or something else?

Regarding art investment, how do you evaluate its impact on your portfolio diversification? The returns you mentioned seem reasonable, but how does it behave in terms of volatility and correlation with your other assets? Also, since you mentioned liquidity issues, has that been a real concern for you? Alternative investments are always an interesting topic, but without a proper secondary market, the illiquidity risk could outweigh the potential returns.

As for Bitcoin, I understand your reasoning for holding it alongside gold, but I’ve always considered it more of a variable portfolio asset rather than part of a core permanent portfolio strategy. Its volatility and cyclical nature make me think it’s better suited as a speculative addition rather than a long-term store of value. What made you comfortable giving it equal weight to gold?

That said, it looks like you’ve had solid results, and it’s always great to see a well-thought-out portfolio being adjusted to market conditions.

All the best and happy investing!

[frugal]

Going to look into this Masterworks thing. I've always been curious about investing in art, but I've also always wondered how much of the spectacular returns you always hear about were just money laundering. How much does that skew the return statistics?

Hi

Can you please introduce and tell us more about your pragmatic portfolio ?


Regards

[europeanwizard]

Are you keeping it in a high-yield savings account,

If you can call 3% "high-yield", then yes

Regarding art investment

I haven't really evaluated it thoroughly, no math or something. But I did learn some stuff. The lack of liquidity hasn't been an issue for me, since it's such a small part of my portfolio. I think it really doesn't belong in the PP. It could be part of the VP, and it doesn't seem to be correlated with anything, really. The whole art market is a world on its own. And the costs are atrocious. It's obvious this is the first serious attempt to financialize art investment, and it shows in that respect.

As for Bitcoin, I understand your reasoning for holding it alongside gold, but I’ve always considered it more of a variable portfolio

Yeah, agreed. If I'd split it:

My version of a PP (77 % of wealth):
World ETF: 69%
Gold: 25%
Cash: 7%

VP (23% of wealth):
Bitcoin: 84%
Art: 16%

What made you comfortable giving it equal weight to gold?

It just grew... and I love investing in it. It gives me a thrill, to be honest, and I'm not sticking to rebalancing, apparently. I should re-read the book and think about that.

[frugal]

Are you keeping it in a high-yield savings account,

If you can call 3% "high-yield", then yes

Regarding art investment

I haven't really evaluated it thoroughly, no math or something. But I did learn some stuff. The lack of liquidity hasn't been an issue for me, since it's such a small part of my portfolio. I think it really doesn't belong in the PP. It could be part of the VP, and it doesn't seem to be correlated with anything, really. The whole art market is a world on its own. And the costs are atrocious. It's obvious this is the first serious attempt to financialize art investment, and it shows in that respect.

As for Bitcoin, I understand your reasoning for holding it alongside gold, but I’ve always considered it more of a variable portfolio

Yeah, agreed. If I'd split it:

My version of a PP (77 % of wealth):
World ETF: 69%
Gold: 25%
Cash: 7%

VP (23% of wealth):
Bitcoin: 84%
Art: 16%

What made you comfortable giving it equal weight to gold?

It just grew... and I love investing in it. It gives me a thrill, to be honest, and I'm not sticking to rebalancing, apparently. I should re-read the book and think about that.

Hi

Where you get 3% ?

Is it online banking?


Regards

[frugal]

Are you keeping it in a high-yield savings account,

If you can call 3% "high-yield", then yes

Regarding art investment

I haven't really evaluated it thoroughly, no math or something. But I did learn some stuff. The lack of liquidity hasn't been an issue for me, since it's such a small part of my portfolio. I think it really doesn't belong in the PP. It could be part of the VP, and it doesn't seem to be correlated with anything, really. The whole art market is a world on its own. And the costs are atrocious. It's obvious this is the first serious attempt to financialize art investment, and it shows in that respect.

As for Bitcoin, I understand your reasoning for holding it alongside gold, but I’ve always considered it more of a variable portfolio

Yeah, agreed. If I'd split it:

My version of a PP (77 % of wealth):
World ETF: 69%
Gold: 25%
Cash: 7%

VP (23% of wealth):
Bitcoin: 84%
Art: 16%

What made you comfortable giving it equal weight to gold?

It just grew... and I love investing in it. It gives me a thrill, to be honest, and I'm not sticking to rebalancing, apparently. I should re-read the book and think about that.

Hi

Bonds are not in your PP?

Also % is above 100

[europeanwizard]

Where you get 3% ?
Is it online banking?

Advanzia, a bank in Luxembourg, offers this rate.

Bonds are not in your PP?

No... I started with those in 2017 but when zero interest rate policies hit, they became very dangerous to hold. Perhaps it's time start thinking about it, once more.

[frugal]

Where you get 3% ?
Is it online banking?

Advanzia, a bank in Luxembourg, offers this rate.

Bonds are not in your PP?

No... I started with those in 2017 but when zero interest rate policies hit, they became very dangerous to hold. Perhaps it's time start thinking about it, once more.

Hi

Is that bank a solid bank?


Can I open account remotely?


Why you don’t have long term bonds?

Regards