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Permanent Portfolio (PRPFX) - Q: Fund performance in light of Gold allocation
I wonder how PRPFX performs this year in light of gold's slide? Do other assets within the fund's mix make positive moves, such as LC growth or LT Treasuries, to offset it's gold position? What would this mananger sell to keep a 25% allocation in PM?
Here's PRPFX verses Vanguard Wellesley (VWINX) over the last 30 years:
The fund rebalances pretty mechanically. At the end of the month whichever asset class has higher holding than its target would be sold. That worked well in the past but manager has shortened the duration of treasuries recently so the move in gold silver will not be countered there as in the past. So, while he might still sell treasuries as it will probably stay relatively stable when gold plunges the fund overall performance will probably not as good as its long term results.
I'm not, as you might have noted, particularly adept at embedding charts in these posts so I'll merely suggest that you might be interested in a chart of PRPFX against PERM, the GlobalX Permanent ETF. I did a side-by-side of PRPFX, PERM and the Midas Perpetual Portfolio a while back. In many ways, PERM is the passive sibling of PRPFX and the charts might give you a sense of asset allocation versus execution.
Short version: to my reading, over the 14 months that PERM has been open, it's been less volatile, less expensive and about as profitable as PRPFX.
OK, we have heard many of the negative aspects of this fund. I would like to to know whether or not there are still people holding this fund, and if so, what are their reasons. After yesterday's 3.51% drop, and gold predicted to keep falling, I am very tempted to sell.
Sure, PRPFX will take a hit with the fall in the POG but by design, other holdings are supposed to counteract it. I'm still holding it in most of my accounts in the ~7-10% range.
And I'll keep holding it. And just for disclosure sake, I'm still holding my gold and silver and bought some physical silver yesterday. Note that I'm taking possession.
Paraphrasing Babe Ruth, "You can't win today's game with yesterdays home run."
Back when this fund was created and up until recently you could pretty much count on bonds and gold to hold this fund together when equities took a hit and vice-versa. I'm not so sure that still holds in today's market environment. Both stocks and gold where taken to the woodshed yesterday and that seems to be the trend. Also, if you look at the history of this fund, it doesn't seem to do much of anything unless gold is in an uptrend. To each their own but I've never found a reason to buy it.
Reply to @Soupkitchen: Hi Soupkitchen. We continue to hold PRPFX in many of our conservative client accounts. It provides some ownership in assets that these folks otherwise would not have, such as gold, silver, foreign currency, real estate. We have captured most of the gains clients have netted over the last decade and are happy to hold the remaining shares. We never bought this fund to shoot out the lights. And I would be very surprised if it truly disappointed. The allocation is unlikely to allow that. I do not compare it to VWINX, since they are not at all similar. The treasuries in PRPFX have shorter durations than they have in the past. And no one expects the fed to increase the fed funds rate in the next 12-18 months. The fund has been a fairly boring, but very steady holding. That is not likely to change very much.
You may be correct, Mark. Only time will tell. I still like the concept for a core holding, but to some degree each of us builds this sort of approach into our asset allocation. We want to have growth but security and want to optimise our returns in all seasons.
Are you back from the sun to the frozen north? We don't have the snow but the river is flooded and they're calling for more rain all week. Thank God there's no global warming.
I endorse Mark's views completely. Harry Browne's PP theory may have merit but we have other cheaper options available as pointed by David. This fund company showed poor fiduciary responsibility throughout its history and the manager did not show any skill the stock portion. I think all these things were pointer by other posters in the past.
I have looked at PERM as a substitute for PRPFX. The expenses are not much different (PRPFX is 0.69%, PERM is 0.49%), certainly not a deal breaker, and PRPFX has lowered its costs in each of the last 5 years. The red flag for me is that PERM allocates 50% to Treasuries, while PRPFX has only 35%. There is no incentive for us to move from PRPFX to PERM. We will continue to trim back our PRPFX position, but maintain it at a basis level.
Reply to @rono: Hey dude, just got back from sunning to be greeted by rain, sleet, snow the whole shebang. I am so sick of winter and it looks like it isn't going anywhere until mid-May at this point. No one listens when I complain or whine so I guess I'll just have to suck it up, again. New granddaughter on the way and I have spotted some idiot bulbs peeking through the snow pack and frozen ground so maybe the sun will be coming out eventually.
On PRPFX, you're holding has always intrigued me and it's quite probably the only reason I check periodically to see if I'm missing something. Fort Knox, China and you are the 3 largest physical gold owners in the world and I know you're also fond of silver and the miners so lets say you have that covered. As someone else noted the managers equity selection is nothing to write home about so that leaves us with treasury's and Swiss francs which can be had in any number of ETF's and, if not, are probably already components of other funds you own. Like I said earlier to each their own and as you mentioned there may be a place for it depending upon how one has constructed their portfolio. For me it would just be a short leg on the stool.
At risk of repeating merits BobC and Hank have highlighted, I will just mention I use PRPFX as a dull and predictable small allocation diversifier usually in combination with other hybrid accounts.
Although I am not an investment manager, I am for certain purposes, for better and worse, the family investment chooser. Therefore I prize investments that meet certain criteria: an easy-to-explain relatively transparent strategy, stable management (preferably not dependent on one "star" manager), comfortable-to-ignore (if other things in my life take priority, or if I am removed from the picture). Relative low volatility ends up being one of the desiderata as a corollary of these pragmatic criteria.
So: for my psychological and practical goals it can be easier to deal with hybrid funds.
PRPFX certainly meets my criteria.
I use it in combination with VWIAX and/or EXDAX, FPACX and/or MNBAX, with a small dose of MACSX, to get fairly diversified, quite conservative (if one chooses), portfolios with very small numbers of funds. (Note to Bee: when I've run little performance simulations, I've never run PRPFX in competition with VWIAX, I've always run it as a - smaller - element of a portfolio with it, since I saw it as serving a mostly different role.)
And the important bit is I can explain what I am doing in small numbers of words and be able point to other resources (including MutualFundObserver) that suggest that I have not made mad choices. Thus folks in the family will be able to use these other resources to help themselves figure out what they want to do (if they have to figure it out without me).
For what it's worth, I started down this path some years back when MJG posted an article to the old FundAlarm site about very simple (2 fund) portfolios of balanced funds, which at first I thought was very strange. But it did get me thinking...
Comments
Short version: to my reading, over the 14 months that PERM has been open, it's been less volatile, less expensive and about as profitable as PRPFX.
For what it's worth,
David
Sure, PRPFX will take a hit with the fall in the POG but by design, other holdings are supposed to counteract it. I'm still holding it in most of my accounts in the ~7-10% range.
And I'll keep holding it. And just for disclosure sake, I'm still holding my gold and silver and bought some physical silver yesterday. Note that I'm taking possession.
peace,
rono
Back when this fund was created and up until recently you could pretty much count on bonds and gold to hold this fund together when equities took a hit and vice-versa. I'm not so sure that still holds in today's market environment. Both stocks and gold where taken to the woodshed yesterday and that seems to be the trend. Also, if you look at the history of this fund, it doesn't seem to do much of anything unless gold is in an uptrend. To each their own but I've never found a reason to buy it.
Howdy,
You may be correct, Mark. Only time will tell. I still like the concept for a core holding, but to some degree each of us builds this sort of approach into our asset allocation. We want to have growth but security and want to optimise our returns in all seasons.
Are you back from the sun to the frozen north? We don't have the snow but the river is flooded and they're calling for more rain all week. Thank God there's no global warming.
peace,
rono
This fund company showed poor fiduciary responsibility throughout its history and the manager did not show any skill the stock portion. I think all these things were pointer by other posters in the past.
On PRPFX, you're holding has always intrigued me and it's quite probably the only reason I check periodically to see if I'm missing something. Fort Knox, China and you are the 3 largest physical gold owners in the world and I know you're also fond of silver and the miners so lets say you have that covered. As someone else noted the managers equity selection is nothing to write home about so that leaves us with treasury's and Swiss francs which can be had in any number of ETF's and, if not, are probably already components of other funds you own. Like I said earlier to each their own and as you mentioned there may be a place for it depending upon how one has constructed their portfolio. For me it would just be a short leg on the stool.
Although I am not an investment manager, I am for certain purposes, for better and worse, the family investment chooser. Therefore I prize investments that meet certain criteria: an easy-to-explain relatively transparent strategy, stable management (preferably not dependent on one "star" manager), comfortable-to-ignore (if other things in my life take priority, or if I am removed from the picture). Relative low volatility ends up being one of the desiderata as a corollary of these pragmatic criteria.
So: for my psychological and practical goals it can be easier to deal with hybrid funds.
PRPFX certainly meets my criteria.
I use it in combination with VWIAX and/or EXDAX, FPACX and/or MNBAX, with a small dose of MACSX, to get fairly diversified, quite conservative (if one chooses), portfolios with very small numbers of funds. (Note to Bee: when I've run little performance simulations, I've never run PRPFX in competition with VWIAX, I've always run it as a - smaller - element of a portfolio with it, since I saw it as serving a mostly different role.)
And the important bit is I can explain what I am doing in small numbers of words and be able point to other resources (including MutualFundObserver) that suggest that I have not made mad choices. Thus folks in the family will be able to use these other resources to help themselves figure out what they want to do (if they have to figure it out without me).
For what it's worth, I started down this path some years back when MJG posted an article to the old FundAlarm site about very simple (2 fund) portfolios of balanced funds, which at first I thought was very strange. But it did get me thinking...
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