The Permanent Portfolio, Investing, Finance and Random Thoughts.
Posts tagged rebalancing
Portfolio Update: Summer of Chaos!
9 months ago
Well I don’t like checking on the portfolio too much. However, I’ve been doing a lot of traveling this summer and apparently when I was not around the Euro is about to go kaput (we can only hope), the US is narrowly missing defaulting if a debt limit is not adjusted, there have been riots through the Middle East, the dollar has reached record lows against the Swiss Franc, there is a major heat wave striking most of the country and probably something else God-awful is sure to happen soon enough.
And what does this mean for the Permanent Portfolio?
It’s up about +7.5% this year according to Morningstar:
Total Stock Market: +0.61%
US Treasury Long Term Bonds: +10.3%
Gold Bullion: +16.4%
US Treasury Short Term Bonds/Cash: +1.1%
Wasn’t I reading something this year about how Long Term Bonds and Gold were going to blow up any day now? Yep, I’m pretty sure I did. And did I ignore these predictions? Yep, I did. Am I now benefitting by ignoring these market prognosticators while the stock market is hacking and wheezing on all this financial turmoil? Yep, I am.
No promises that bonds and gold won’t blow up next week, but so far they’ve been the only bright spot in the markets despite all the doomsday predictions. So if they have done well enough for you that they’ve triggered your rebalancing bands, why not take some of those profits and rebalance into stocks with that money? Sounds like a great idea to me if it’s time to do so for your own portfolio.
I hope you’ve been ignoring the market news and prognosticators. It’s bad for your financial health to try to predict the future. Enjoy your Summer!
Gold “Bubble”
1 year ago
by Craig Rowland
in Investing
There’s much discussion in the news about Gold’s new price high (about $1300). The word “bubble” is getting tossed around a lot. There are a flood of articles (and advertisements) about buying gold and an equal flood about selling gold. What to do?
Talks about gold seem to devolve into market timing arguments. But for someone holding gold as part of their total asset allocation, such as the Permanent Portfolio, it should be treated like stocks or bonds with no market timing involved.
The only reason to be timing the market with gold is if you are treating it as a speculation. In this case it’s no different than relying on various indicators to sell out of all your stocks or sell out of all your bonds, etc. So use what you feel is best because they are all equally unreliable as market timing doesn’t work.
I can recall seeing these gold conversations when it hit $600 an ounce. I recall them when it hit $850 an ounce (matching the high in 1981). I can recall them when it hit $1000 an ounce. I can recall them when it hit $1100 an ounce. And of course I am seeing them all over as gold hovers near $1300 an ounce. The price of gold could fall at any time, but then again it could just keep going up responding to world events. We have no way of knowing these things.
If you own gold in your portfolio already then be sure you keep it rebalanced and use the profits to buy your laggards. If you don’t own it already, be sure you are doing so with a logical plan in place why you are doing it and not some knee jerk reaction to what you are seeing in the news.
—
This topic is being discussed on the forum.
The Home Stretch…
2 years ago
by Craig Rowland
in Investing
In January of last year I asked what people thought would perform the best of the four Permanent Portfolio Assets (Stocks, Bonds, Cash or Gold). While I tossed my hat into the stocks camp (which have recovered sharply since last year), the gold bulls seem to be winning. Here’s the breakdown according to Morningstar using a standard ETF version of the Permanent Portfolio for ease of performance tracking:
SPDR Gold Shares (Ticker: GLD): +30.54
Vanguard Total Stock Market (Ticker: VTI): +25.44%
iShares Short Treasury Bond Fund (Ticker: SHV): +0.20%
iShares Barclays 20+ Year Long Term Treasury Bond Fund (Ticker: TLT): -17.76%
YTD Morningstar Total Returns (capital gains, interest and dividends): +13.21%
Gold has been able to beat stocks so far this year. I was pretty sure that stocks would rebound strongly but didn’t expect gold to still do so well. We still have a month to go, but looks like the gold bulls may be buying the champagne come New Year’s Eve.
Long term bonds took a beating so far, but usually it is the case that one or more assets in the portfolio may be doing poorly while one or more may be doing well. Normally what happens are the gains from the winners can offset the losses from the loser. Not always, but mostly. So even though LT bonds are down almost 20%, the stocks and gold have provided more than enough power to grow the portfolio in total. And of course that’s what really matters. Don’t look at assets in isolation, look at how they work together in the total portfolio value.
Right now is also a good time to remind taxable investors to start planning for end of year rebalancing sales to capture losses (such as the Long Term Bonds), to take gains to offset against losses, etc. If this is confusing to you, talk to an accountant for some advice as smart tax loss harvesting can significantly reduce your tax bill.
Happy Thanksgiving…
