PRPFX Alternatives

[rantsalot]

I have a small Roth IRA portfolio at Vanguard Brokerage Services allocated to 3 (commission-free :-)) Vanguard ETF's and IAU for the gold portion.  I've been adding approximately $200 a month to it, allocating it to keep the 4x25 ratio as closely as possible.  This is getting to be a little tedious because it's rarely possible to buy more than a few shares at a time and commissions on IAU are unwieldy for small purchases.

So I've considered just dumping the ETF strategy altogether and going with a single mutual fund like PRPFX.  Although PRPFX is a no-transaction-fee fund through VBS, they have a $1,000 minimum for subsequent investments.  It would be necessary to wait as long as 5 months between funding opportunities, thereby missing some potentially good investment periods.

Can someone suggest a (preferably NTF) mutual fund or an alternative strategy that would have similar characteristics to PRPFX without the $1,000 minimum for subsequent investments or the dreadful Vanguard commissions for small purchases of non-Vanguard ETF's? The portfolio is currently at $3,000 and growing.

Thanks.
rantsalot

[Lone Wolf]

This doesn't answer your precise question, but have you considered pushing your monthly $200 into your cash\t-bill holdings, and then just reshuffle everything when you strike a rebalancing band?  (Such as any single holding climbing to 35% or dropping to 15% of your total holdings.)  It sounds like your trades in cash\t-bills are commission-free so this shouldn't cost you anything.

Just another alternative to consider that would eliminate some of the tedium for you.

[LNGTERMER]

Since you are dealing with small chunks of money, I would simply accumulate the $200 monthly savings as cash till I reach the $1000 limit then place that in a trade-able asset. I think the management and time spent on small amount of money has more down side than up side, but that is just my opinion. You can invest them as the bands are breached or simply DCA them as you see fit.

[EuroPP]

I agree,
save up until you have $1000 or even more to put it in the PP. The more money you can move around the lower your transaction costs will be.
You could for example rebalance once a year... you save up during the entire year, and then you move your savings in the PP to get the necessary distribution.

[rantsalot]

The PRPFX fund requires only a $100 minimum subsequent investment.  It appears that VBS is forcing the $1,000 minimum amount for subsequent investments.  If VBS didn't have this restriction, my question would be moot.

It sounds like saving up the $1,000 in Vanguard Prime MM before deploying it may be the way to go.  I'm still wondering, though, whether there are other mutual funds similar to PRPFX that wouldn't have the $1,000 restriction.

rantsalot

[KevinW]

I agree with the others that suggested putting all contributions into cash, and rebalancing whenever something is outside the 15/35 bands, most likely whenever cash tips over 35%.  If I were in your shoes, I'd do that.

If you have your heart set on a single mutual fund, you might try holding PRPFX through a different brokerage.  Yahoo Finance lists the minimum subsequent investment for PRPFX as $100, so the $1000 limit appears to be imposed by Vanguard.

If you want to limit yourself to Vanguard funds, you might look at their conservative single-fund offerings.  My personal favorite is Target Retirement Income, which holds several assets classes: US stocks, Int'l stocks, nominal bonds, inflation-indexed bonds, and cash.  Browne's backup advice for people who didn't want to implement the PP for whatever reason was to buy treasury bonds, so you might consider putting everything into a Short- or Intermediate-term Treasury bond fund until your portfolio is larger.  None of these options are as bulletproof as a PP, though.