It’s a go. With a couple of quick calculations and a few clicks I’m back in. In the first week of July I deployed the first of three installments of my allocation to the Permanent Portfolio. I went as simple as possible using ETFs and took an equal weight position of 25% in each SPY, GLD, TLT, SHY. This portion of the allocation finished +1.11% in July and is currently +.26% in August.
So far all is as expected with Gold hanging around and Stocks and Bonds following their modern pattern of divergence.
The decision to make an allocation to the Permanent Portfolio was easy. Deciding how much to allocate to it proved to be much more of a challenge and has lead me to start the development of a comprehensive approach to managing my capital. I have come up with five main categories or types of portfolios with the following allocations:
Basic Permanent Portfolio in simple form: Equal weight allocation of 25% to each SPY, GLD, TLT, SHY. The goal of this portfolio is to gain exposure and take part in the wealth creation of the market while having some protection against the high volatility and distortions created by the political forces. Currently I have a 13.3% allocation to this portfolio and will be taking that up to the 40% level by the end of the year.
Made up of more active trading strategies, mainly trend and rotational portfolio strategies. I currently have a 0% allocation to this portfolio as it will take me a few months to combine the strategies I have in mind into a cohesive system. I will be sharing these strategies here as I finalize them.
Made up of investments in which my decisions and actions have a direct influence on the results obtained. This may included starting new businesses, investing in tools and materials for ongoing concerns, or providing micro-lending to small businesses and people I know and trust. The goal of this portfolio is to provide diversification, expand my knowledge and skills, and grow my network through commerce.
Held in cash or money market accounts. This portfolio will act a safety buffer and source of funds during periods of aligned poor performance from the three portfolios above. Can also be used as a source of temporary funds to aid in rebalancing individual portfolios. Can also be a source of funds for unexpected expenses or opportunities that require funds quickly.
Made up of physical assets which can be used to seed the rebuilding of capital in case of a doomsday type event. The requirements I have for assets to be included in this portfolio is that they must be widely recognized and useful to other people or be directly useful to me without additional inputs. Some examples are: gold and silver bullion, recognizable coins that can be purchased at or below the metal value they are made from (nickels and pre 1982 pennies are easy to procure), seed kits, food products with long unrefrigerated shelf life, hand tools and materials for constructing things, hand tools for farming, tools for defense, and wood for an energy source.
If trading was not such a passion of mine or if I didn’t think it would be profitable I would probably eliminate the Variable Portfolio and distribute its allocation to the Permanent Portfolio and Direct Portfolio.
One asset I have yet to properly work into this framework is real estate. I see owning versus renting a residence as a pretty even trade off, both of which should be treated as a living expense. Beyond a residence though, it does seem like a good time to start thinking about adding some real estate as part of my total portfolio. Currently farm land is very interesting to me as I am a big proponent of the real food movement, a la Polyface Farm, and think there are a lot of opportunities in this area.