A.I.M. Users Bulletin Board

[ls7550]

Hi K

PP=Permanent Portfolio

Harry Browne suggested the most volatile choice for stocks and long dated treasury (longest dated). For me, UK, the FT250 midcap is small cap in US scale and somewhat value'ish. Rather than 50% in short and long dated treasuries a central 10 year treasury fund can suffice just as well IMO.

US data (PV) example

With a 5.7% real (after inflation) since the 1970's and relative stability, considered as 'CASH' and for some just holding 'cash' might be considered good-enough.

Can be surprising just how much additional risk needs to be taken to add relatively little reward. For a 25 year horizon, age 65 to 90, a UK investor who split their wealth three ways between owning a home, gold, hard US$ currency who drew a 3% SWR (3% of initial portfolio value amount, where that amount was uplifted by inflation each year) had a good prospect of their money outliving them, and in the average case still had half of the inflation adjusted wealth amount still intact after the 25 years. And that excludes the imputed rent benefit, the rent that would otherwise have had to be found/paid - that historically averaged 4.2%, so 1.4% when proportioned to a third of the portfolio value (effective SWR of 4.4%). And that's with no counter party risk, your own home, with gold and US$ bills stuffed under the mattress. If the US$ were deployed/invested, such as into a PP, then for each 3% nominal that made that added 1% to overall portfolio rewards.

A somewhat nice/unique (as far as I know) feature of US$ bills is that they never expire. May go out of general use but still can be submitted for their value. When UK bills go out of circulation you only have a limited/small window for when they can be submitted/converted.

As a deep foundation/fallback thirds each in : domestic currency invested in land, US$ bills/hard currency, physical gold, is a good choice to avoid the risk of the likes of bank runs. A negative is anti-laundering, having to keep accurate records to avoid possible confiscation from not partaking of the 'depository' system and instead being custodial based. The state would rather you give your cash to banks for them to speculate with in return for a promise to return your money upon demand, maybe, and maybe with a small amount of interest added.

Largely much of risk taken is for the benefit of others, higher surplus rewards that means more being left for heirs/charity/state. Or risk having to be taken due to not having accumulated enough to retire with relative financial safety.

Regards.

Clive.