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Wonder if anyone has a positive opinion on what once was a "good sleep buddy" fund. Seriously underperforming other conservative funds its compared against due, I believe, in part to its allocations to Gold and LT Bonds.
Even the inventor of the permanent portfolio thought of it as a capital preservation tool and NOT a growth tool. Underperformance now can be compared to outperformance in 2008. I use it as one of my chicken ways to invest in gold as part of capital preservation . My other tool is a Canada fund.Neither has done well lately but in total its only about 5% of my portfolio so its easy to "stay the course. Bottom line if you area conservative investor something like Vanguard Wellesley VWINX and or T.R.P Capital Appreciation PRWCX (a bolder choice ) could be combined with a portion in Permanent Portfolio. There are some on this board who are interested in always doing well and trading to do that. Tax considerations encourage a buy and hold startegy in my taxable account. I try a little to market time in my 401k( though I call it rebalancing at random times) but while my fund choice in that account is fine none are the smallish funds often discussed here.
I used to have positions between the years 2004-2008. Made good money on PRPFX. Got out from it I think when it was at peak 49$ or so and never got in again.
Depends why you bought it. If you want to make money in the near term - sell it and go buy something else. (Ted has already declared that the S&P will be higher at year's end:-) But if your diversification strategy includes owning some out of favor assets to balance-off the hot investments you own, than like Jerry, myself, and others you may still want to own it. Most of the things PRPFX owns are out of favor and have been for a couple years. Let's see .... Gold for instance. Last I checked, the gold fund I bailed out of this spring, OPGSX, was off 40+% YTD - and MAY GO LOWER! Foreign currencies held by the fund have suffered this year against the mighty dollar. And longer duration Treasury bonds? We all know the story there.
I don't have the skills, capital, temperament or desire to go out in the market and buy gold bullion, silver, Swiss Francs, global real estate, aggressive growth stocks, and long duration U.S. Treasury bonds. Yet I'd like some exposure there to balance my more traditional equity and domestic bond holdings. So the fund works for me whether it makes money or not. However, not everyone would agree with holding this fund - or the assets I've mentioned separately for that matter.
We've been round and round on the board about the issue of assigning funds to "peer groups." Bob C has had a lot to say on that. Frankly, I find such comparisons always difficult - but especially difficult and suspect for something as uniquely structured as PRPFX.
Although I did own the Permanent Portfolio in the 1980s, I abandoned it a long time ago because of what I perceived as a too rigid formulaic investment policy. Given its rather passive and defensive strategy, it was never designed to be a barn burner in a bull market. It was specifically assembled to provide downside protection when markets headed south. It does an admirable job serving in that capacity.
I have no idea how well the Permanent Portfolio fund would fit into your portfolio or would satisfy your long-term investment goals. Therefore, I make no judgments with respect to its inclusion in anyone’s portfolio. Certainly the fund’s commitment to both gold and long-term bonds are a drag on its recent performance. The fund remains loyal to its overarching policy.
But I did come across an AAII article that clearly defined the logic that Harry Browne used when formulating the Permanent Portfolio asset allocation. Not much has changed since those earlier days since the current management still seems committed to Browne’s wealth protection policies.
For what it’s worth, here is an indirect Link to that AAII article using a Seeking Alpha article as an entry point. You will need to click on the highlighted “article “ in the third paragraph of the Seeking Alpha piece since direct entry requires AAII membership:
The Permanent Portfolio management have always been bulldogs at adhering to Harry Browne’s original general asset allocation into 4 major groupings. That strategy will never compete optimally in a bull market.
Given that reality, I’m reminded of the quote written by Damon Runyon in his Guys and Dolls musical: “It may be that the race does not always go to the swift, nor the battle to the strong, but that is the way to bet.” Remember that the markets have a strong pull towards a reversion-to-the-mean. Patience is an essential element for successful investing.
Enjoy the article. I hope it contributes to your overall portfolio decision making.
Bee, no need to feel badly about letting it go, as you see above, I am doing the same with PAUIX. I had PRPFX through the market when it did very well and let most of it go early this year. I think that we have had an extraordinary market past couple years and earned far more than ever expected, so letting one go is not hard. Even the best of managers can't be the best all the time.
It is one of very, very few equity or allocation funds that has NEVER lost money (ignoring inflation or cost of money) over any 3 year period for the past 20 years. See article on Permanent Loss of Capital in David's current commentary:
Reply to @Charles: Hi Charles. Wow, that reference was interesting (I had missed it). Guess this is one people buy (or sell) for a lot of different reasons. I'm not very much into Harry Brown and his teachings, nor do I care much about the fund's past performance. Really just trying to get a little exposure to some of the asset classes it holds. Do, however, think it's remarkable it manages to stay afloat as well as it does in the face of the headwinds coming from gold, PMs & commodities.
Re your question - the biggest wild card there is gold. Based on past cycles it should continue falling. But, with the unprecedented central bank interventions around the world - this time really could be different. fwiw Regards.
This fund is not really any different than when it was out-performing just a short time ago. It is down a tiny bit this year. Given what has happened to long-term treasuries, commodities, real estate and gold this year, its performance is actually pretty decent. We captured profits in accounts holding this fund last year. It remains a solid holding for very conservative accounts.
I greatly disliked referencing the AAII Permanent Portfolio article using an indirect source. So I continued the search for a direct route and found it. Here is a direct Link:
It seemed a bit foolish to submit with only this innocuous addition so I did a short calculation to add some gravitas to my posting. One obvious question is just how effective are the Permanent Portfolio’s four major groupings in providing diversification recently?
In the referenced Rowland and Lawson article, the authors suggested a very simple (likely the simplest) implementation of the Harry Browne asset allocation philosophy. Using the Vanguard family of funds as a low cost source, the four major diversification categories would include VTSMX (stocks), VUSTX (bonds), VFISX (cash equivalent), and VGFMX (gold). Rowland and Lawson actually preferred a pure gold holding over the mixed Vanguard gold product that I listed; they recommended a Canadian gold trust ETF position, GTU.
To test the robustness of these candidate portfolio holdings in terms of their diversification benefits, I calculated their correlation coefficients relative to the Vanguard total equity mutual fund. I used the buyupside.com website to access the data and to do the calculation. I completed the analysis for the most recent 3-year period using monthly closing price data.
Obviously, since VTSMX is the reference standard, it has a correlation coefficient relative to itself of 1.00. Relative to the VTSMX baseline, the other funds have the following 3-year correlation coefficients: VUSTX = 0.27, VFISX = 0.60, VGFMX = -0.84, and GTU = -0.61.
Note the negative correlation protection provided by the two gold products. For the last three years they have supplied the zigzag relationship relative to the equity marketplace that heavyweight diversification seeks. Keep in mind that correlation coefficients are dynamic entities. When market conditions change, so do these correlations.
You might consider visiting buyupside.com. That website features many fine investment calculation tools.
CrawlingRoad forum has been discussing and fiddling with the Permanent Portfolio for some time now; as well as the Boglehead web site, which has had numerous discussions with methods of constructing one's own Permanent Portfolio. I have not reviewed either site for several years. The apparent problem with the PP mix is the static nature of the holdings; and/or how much a percentage change is allowed for the mix. This, I do not know. My 2 cents worth; and we have not held PRPFX in our funds mix. Regards, Catch
Comments
Bottom line if you area conservative investor something like Vanguard Wellesley VWINX and or T.R.P Capital Appreciation PRWCX (a bolder choice ) could be combined with a portion in Permanent Portfolio.
There are some on this board who are interested in always doing well and trading to do that. Tax considerations encourage a buy and hold startegy in my taxable account. I try a little to market time in my 401k( though I call it rebalancing at random times) but while my fund choice in that account is fine none are the smallish funds often discussed here.
I don't have the skills, capital, temperament or desire to go out in the market and buy gold bullion, silver, Swiss Francs, global real estate, aggressive growth stocks, and long duration U.S. Treasury bonds. Yet I'd like some exposure there to balance my more traditional equity and domestic bond holdings. So the fund works for me whether it makes money or not. However, not everyone would agree with holding this fund - or the assets I've mentioned separately for that matter.
We've been round and round on the board about the issue of assigning funds to "peer groups." Bob C has had a lot to say on that. Frankly, I find such comparisons always difficult - but especially difficult and suspect for something as uniquely structured as PRPFX.
Although I did own the Permanent Portfolio in the 1980s, I abandoned it a long time ago because of what I perceived as a too rigid formulaic investment policy. Given its rather passive and defensive strategy, it was never designed to be a barn burner in a bull market. It was specifically assembled to provide downside protection when markets headed south. It does an admirable job serving in that capacity.
I have no idea how well the Permanent Portfolio fund would fit into your portfolio or would satisfy your long-term investment goals. Therefore, I make no judgments with respect to its inclusion in anyone’s portfolio. Certainly the fund’s commitment to both gold and long-term bonds are a drag on its recent performance. The fund remains loyal to its overarching policy.
But I did come across an AAII article that clearly defined the logic that Harry Browne used when formulating the Permanent Portfolio asset allocation. Not much has changed since those earlier days since the current management still seems committed to Browne’s wealth protection policies.
For what it’s worth, here is an indirect Link to that AAII article using a Seeking Alpha article as an entry point. You will need to click on the highlighted “article “ in the third paragraph of the Seeking Alpha piece since direct entry requires AAII membership:
http://seekingalpha.com/article/1088961-harry-brownes-permanent-portfolio-and-market-stages
The Permanent Portfolio management have always been bulldogs at adhering to Harry Browne’s original general asset allocation into 4 major groupings. That strategy will never compete optimally in a bull market.
Given that reality, I’m reminded of the quote written by Damon Runyon in his Guys and Dolls musical: “It may be that the race does not always go to the swift, nor the battle to the strong, but that is the way to bet.” Remember that the markets have a strong pull towards a reversion-to-the-mean. Patience is an essential element for successful investing.
Enjoy the article. I hope it contributes to your overall portfolio decision making.
Best Regards.
http://www.mutualfundobserver.com/2013/11/november-1-2013/
I guess the 6 Million Dollar Question: Will the fund's strategy work as well for the next 20 years, like it has done for the past 20 years?
Re your question - the biggest wild card there is gold. Based on past cycles it should continue falling. But, with the unprecedented central bank interventions around the world - this time really could be different. fwiw Regards.
I greatly disliked referencing the AAII Permanent Portfolio article using an indirect source. So I continued the search for a direct route and found it. Here is a direct Link:
http://www.aaii.com/journal/article/the-permanent-portfolio-using-allocation-to-build-and-protect-wealth.pdf
It seemed a bit foolish to submit with only this innocuous addition so I did a short calculation to add some gravitas to my posting. One obvious question is just how effective are the Permanent Portfolio’s four major groupings in providing diversification recently?
In the referenced Rowland and Lawson article, the authors suggested a very simple (likely the simplest) implementation of the Harry Browne asset allocation philosophy. Using the Vanguard family of funds as a low cost source, the four major diversification categories would include VTSMX (stocks), VUSTX (bonds), VFISX (cash equivalent), and VGFMX (gold). Rowland and Lawson actually preferred a pure gold holding over the mixed Vanguard gold product that I listed; they recommended a Canadian gold trust ETF position, GTU.
To test the robustness of these candidate portfolio holdings in terms of their diversification benefits, I calculated their correlation coefficients relative to the Vanguard total equity mutual fund. I used the buyupside.com website to access the data and to do the calculation. I completed the analysis for the most recent 3-year period using monthly closing price data.
Obviously, since VTSMX is the reference standard, it has a correlation coefficient relative to itself of 1.00. Relative to the VTSMX baseline, the other funds have the following 3-year correlation coefficients: VUSTX = 0.27, VFISX = 0.60, VGFMX = -0.84, and GTU = -0.61.
Note the negative correlation protection provided by the two gold products. For the last three years they have supplied the zigzag relationship relative to the equity marketplace that heavyweight diversification seeks. Keep in mind that correlation coefficients are dynamic entities. When market conditions change, so do these correlations.
You might consider visiting buyupside.com. That website features many fine investment calculation tools.
Best Wishes.
Thanks, interesting and fun too.
The apparent problem with the PP mix is the static nature of the holdings; and/or how much a percentage change is allowed for the mix. This, I do not know.
My 2 cents worth; and we have not held PRPFX in our funds mix.
Regards,
Catch