I am retired and take educated guesses on all things financial.

May 14, 2010

May 14, 2010: Time For A Permanent Portfolio Using ETFs?

With investors held hostage to government whimsy both here and abroad, coupled with the vagaries of trying to game the market only to be disappointed time and again with one's best laid investment plans going haywire, it may be time to structure a Permanent Portfolio with wealth that is both precious and essential to your long term expectations.

The Permanent Portfolio concept was explained to the average investor in the 1970's by the late Harry Browne. Having a Speculative Portfolio for making educated guesses on the market and a Permanent Portfolio, designed to hold long term investments theoretically assembled to account for the unexpected while producing tangible gains is a seasoned idea which at present merits your consideration.

Inspired by Browne and the steady success of his portfolio successor Michael Cuggino, here is a proposal to construct a Permanent Portfolio on your own, using Exchange Traded Funds.

The premise is to have five categories of investment which will rise or fall independently.This portfolio should be rebalanced every six months to retain the ratio of one category to the others. The goal is to have the portfolio retain absolute value and rise approximately 2% better than the Citigroup 3-month U.S. Treasury Bill Index annually.

Precious metals: 25%

iShares Comex Gold Trust ETF (IAU)15%
iShares Silver Trust ETF (SLV)5%
First Trust Global Platinum Index ETF (PLTM)5%

Swiss Franc Assets: 10%

Currency Shares Swiss Franc Trust ETF (FXF) 5%
iShares MSCI Switzerland Index ETF (EWL) 5%

Worldwide Real Estate and Natural Resources: 20%

iShares North America Natural Resource Index ETF (IGE) 5%
Vanguard Energy ETF (VDE) 5%
iShares FTSE EPRA/NAREIT Developed World Real Estate ex-U.S. ETF (IFGL)5%
Vanguard REIT ETF(VNQ) 5%

Agressive Growth Stocks: 15%

iShares Morningstar Small Company Growth Index Fund ETF (JKK)10%
ProShares Credit Suisse 130/30 ETF (CSM)5%

U.S. Treasury Bills, Bonds and Other Dollar Assets: 30%

Vanguard Total Bond Market ETF (BND)10%
Vanguard Short Term Government Bond ETF (VGSH) 10%
Vanguard Intermediate Term Government Bond ETF (VGIT) 10%

I have attempted to propose ETFs from established companies that are actively traded (the Swiss Franc ETF excepted) and have low transaction costs and management fees. The percentage allocations to ETF's within a category is not a mandate.

Permanent Portfolio purists have generally invested in gold and silver coins and bars rather than through funds, have used Swiss Confederation Bonds as SF currency and have laddered U.S. government obligations individually.


Links to this post:

Create a Link

<< Home