The Permanent Portfolio

I am not sure what makes this portfolio (PRPFX) permanent other than the marketing gimmick, “the only investment allocation mix you will ever need,” but the mix is easy to grasp and anyone can set up their own fund for themselves. Here’s the formula:

• 15% Aggressive growth stocks
• 35% U.S. government bonds, bills, and notes
• 20% Gold
• 5% Silver
• 10% Swiss Franc assets
• 15% Real estate and natural asset stocks

Source: Permanent Portfolio Funds.

This is a conservative mix which outperforms other mutuals in bad times but lags behind in good times.

The problems are: 1) the 35% in government bonds and 2) the 25% in gold and silver.

Bonds usually get a lower rate of return than stocks. You pay for the security. If you believe the future to be mostly bad, then by all means invest in bonds. Despite the recent downturn, the past history of the 20th. century and the first decade of the 21st. have been mostly good.

Gold simply does not keep pace with either stocks or bonds. Despite all the booming in conservative circles, the numbers don’t lie. Between 1802 and 2006, the value of gold has barely doubled. That’s pathetic.

To sum up, last October, when the financial markets imploded, and you saw on your TV John McCain wanting to cancel a Presidential Debate in order to deal with “the crisis”, it would have been a good time to have dumped your regular funds and bought into this one. Once it looks like the economy is coming out of the recession, then it may be a good idea to move your money back.

Source: The Motely Fool.