Gyroscopic Investing

Hello Everyone.

I am trying to implement Permanent Portfolio across 401K and Roth.
50% of all investments are in 401K and 50% - in Roth.

The better investment choices in 401K are:
SPARTAN 500 INDEX
FUSEX Expense Ratio 0.1
Fidelity Money Market Trust Retirement Money Market Portfolio
FRTXX Expense Ratio 0.42
Fidelity Investment Grade Bond Fund
FDNDX Expense Ratio 0.45

FRTXX has very low yield.

There are 2 questions.

1. Is it good to use FUSEX as a stock portion of permanent portfolio and FRTXX - as a cash portion?

2. When calculating portfolio balance is it necessary to subtract say 30% from 401K portion to take into account future taxes?

Thank you,

qnx2000

I'm in your shoes - have to deal with limited choices in my 401(k) and having to put over 50% of my annual retirement contributions there.

Sorry if I deviate from your questions, but since the ultimate goal of yours is to establish PP using 401(k) and IRA I will share my experience. I assume by "better investment choices" you mean these are the only stock and bond index funds available. if there are others, please let us know. For example, if you have access to FTBFX (Fido Total Bond) it might be a better choice as a core of the bonds portion.

FUSEX is a great choice for the equity portion of PP: although this is a growthy fund it still pretty much reflects the behavior of the whole US equity market. It also captures the earning from the foreign stocks as it contains a plenty of multinational firms. So I don't see a reason to not use it. If you are inclined to add some pure international exposure you could do so in your IRA. Personally, I'm using some emerging markets value funds in my IRA in addition to FSTMX (Fido TSM Index) in my 401(k).

Talking about bonds: FBNDX is an intermediate don fund and hence it won't work as a replacement to LTT. What you can do is to split your bonds bucket roughly 50/50 between FBNDX in 401(k) and EDV in your IRA. I do use this approach to "beautify" the FTBFX position in my 401(k). I can't thank MediumTex enough for this suggestion.

Here's how your PP could look like:

401(k):
    25.0% FUSEX
    12.5% FBNDX 
    12.5% FRTXX 

IRA:
    25.0% IAU (or SGOL, PHYS, GTU)
    12.5% EDV
    12.5% SHY

This is just a strawman to get you started. There are many ways to slice-n-dice, for example you could keep your cash in I bonds (or CDs, or a savings account, even HSA  ). The same holds true for the other 3 buckets.

foglifter, thanks a lot for a very informative answer.

No there is nothing like FTBFX.
There is also Fidelity Freedom Income (MUTF:FFFAX), which is totally strange for me.
Other funds are Fidelity Target funds

What do you think about 30-35% skew towards 401K to offset future taxes?

qnx