Permanent Portfolio is a form of AIM (constant value type method) but with its 'Portfolio Control' based upon the average value of all four components (sum of stock + cash + gold + bond values divided by 4). Three components act as one components 'cash' reserve (repeated four times). When any one deviates away from the average of all four it triggers a rebalance event to reduce (or add) to/from that component. The 'Portfolio Control' as such is more dynamic.
Well I do have to admit that this is quite a distillation:
1) pure simplicity as Mr. Lichello advocated.
2) a reaffirmation of the constant value investing method as championed by Praveen Puri (though in a different way than his book suggests, (he advocating multiple stocks rather than four holdings like this)).
3) From somewhere beyond, no doubt Harry Browne is smiling, knowing that his investment ideas are still being considered. Probably sharing a truly heavenly beer with Mr. Lichello.
In rummaging around a bit someone's got a mutual fund to handle this - the Permanent Portfolio Fund, symbol PRPFX. A little more broadly based than Mr. Browne's four holdings, the fund does address my concern of being too simplified such that there are other asset classes (foreign equities, for example) that a broad-based US focused fund like the Vanguard Total Market, symbol VTI would miss out on. Their allocations are as such:
Gold 20%
Silver 5%
Swiss Franc Assets 10%
U.S. and Foreign Real Estate and Natural Resource Stocks 15%
Aggressive Growth Stocks 15%
U.S. Treasury Bills, Bonds and Other Dollar Assets 35%
Of course, whilst owning this fund may be the ultimate in true simplicity, feeding it money now and then, you are deferring the shifts is asset allocations off to someone else rather than at a time of your own choosing, where your decisions of percentages may or may not agree with what the fund manager thinks.
Morningstar says it's good to keep pace with inflation, but that's about all. So I wonder if they're dissing the whole PP idea in the first place? Might be as they've a commercial interest in promoting mutuals, rather than to simply encourage people to simplify.
I am perched somewhere between the horns of simplicity on one side, and an interest in making sure I've a finger in as many investment pies as possible, on the other, (within reason, of course, and constrained by the funds available). I know that some will perform very well, others, not so much, and the rebalancing will serve to level the playing field a bit.
The perennial quest for balance...
Best,
AIMster
