Gyroscopic Investing

According to NerdWallet.com (which tracks 74 online brokers), there are quite a few that charge around $1 to $3 for a basic equity trade.  Even though the Permanent Portfolio trades every two or three years for rebalancing, every little bit helps when reducing transaction costs.

http://video.foxbusiness.com/v/19695889 ... ur-broker/

I'm not sure how accurate this information is (or perhaps I do not understand it).  The online broker I use charges $10 a trade, and supposedly has $100 a month in total costs.  The per-trade information is correct, but I do not pay $100 a month in costs.

The other factor is my perceived enterprise risk of the online broker.  I like to go with a name I know and trust, rather than a broker I've never heard of before.  Perhaps I'm paying extra to get this warm fuzzy feeling, but that is the way I am.

Good stuff. I like TDAmeritrade because of their wide assortment of PP-friendly commission-free ETFs (VTI, IVV, TLT, EDV, SHY). They charge $10 for other trades, though. eTrade is nice too because through then you can trade PERM commission-free.

Pointedstick wrote: Good stuff. I like TDAmeritrade because of their wide assortment of PP-friendly commission-free ETFs (VTI, IVV, TLT, EDV, SHY). They charge $10 for other trades, though. eTrade is nice too because through then you can trade PERM commission-free.

Hi,

when you trade PP funds instead of each asset individually?

What are the advanges?


Thank you.

frugal wrote:

Pointedstick wrote: Good stuff. I like TDAmeritrade because of their wide assortment of PP-friendly commission-free ETFs (VTI, IVV, TLT, EDV, SHY). They charge $10 for other trades, though. eTrade is nice too because through then you can trade PERM commission-free.

Hi,

when you trade PP funds instead of each asset individually?

What are the advanges?

Simplicity. Personally, I treat my PERM holdings as a high-volatility savings account. From http://gyroscopicinvesting.com/forum/ht ... 210#p46210:

Pointedstick wrote: The wide spreads are indeed annoying. Every block I buy is down 0.2% - 0.3% immediately. 

Again, I'm personally willing to tolerate these issues because I don't consider my PERM funds really a part of my PP; I consider it to be my super-duper savings account. Even if after the ER, the spreads, and any possible end-of-year taxable distributions, I've underperformed a 4x25 HBPP by several percentage points, I'm betting it will probably still be better than the 0.75% I would have made had I kept the money in my savings account.

You could probably use a "total return" fund for the same purpose.

Pointedstick wrote: I treat my PERM holdings as a high-volatility savings account.

I do the same.  I keep a large cash reserve to get through the rough patches of life.  Much of this cash is in online savings accounts that yield between 0.5 to 1.0 percent depending on the rate set by the bank.  The FDIC guarantees the principal.  But some of this "cash" is in PRPFX to get "almost stock market returns" at "half the stock market volatility."  PRPFX dropped 25 percent during the financial meltdown when the stock market dropped 50 percent.  The HBPP versus stock market return is shown on the Permanent Portfolio Performance and Historical Returns page (http://crawlingroad.com/blog/2008/12/22 ... l-returns/).

The cash reserve serves a different purpose in my financial life than my investments, so I consider them to be separate entities.

Here is an article on how to do due diligence on the brokerage firms you choose for your HBPP.  I didn't know, for example, that when you have a margin account, the property in your account is considered part of the firm's collateral if the firm has a capital shortfall (in other words, it has a rogue trader on its staff).

Protecting a Small Account: What the Spate of Brokerage Blowups Means for Investors
http://online.wsj.com/article/SB1000142 ... 88492.html