How do you invest the gold portion?

Discussion of the Gold portion of the Permanent Portfolio

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mdwilson1991
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Re: How do you invest the gold portion?

Post by mdwilson1991 » Tue Mar 24, 2020 11:32 pm

ochotona wrote:
Sat Oct 19, 2019 7:49 am
...

If you use a Market On Close MOC order, you don't get exposed to this spread... You just exactly get the closing price, like a mutual fund. Thanks to my friend Paul Novell for edumicating me on that.
FYI, You may want to reconsider that. Or maybe you are right...

I'm not going to attempt to explain why, because I can't, but I will quote a guy who seems like an authority, as he wrote this "War and Peace" on ETF costs http://www.etfconsultants.com/Reducing_ ... _Costs.pdf

"Using MOC Orders Routinely to Buy or Sell ETFs Looks Like a Terrible Idea
The majority of investor ETF market-on-close orders are not likely to be executed at or
“better” than NAV, and many MOC executions will not even be close to NAV. MOC orders can
be executed at a much greater distance from the NAV than the reported premium and discount
data indicate to investors. Anyone trading ETFs should understand how these orders work and
how ETF MOC orders differ from stock MOC orders. If you compare a fund’s NAV and closing
price for a few days, you will probably conclude that you do not want to use an MOC order –
unless your comparisons suggest that, for some reason, other investors are predominantly selling
when you buy or buying when you sell. At the least, you will conclude that the cost to trade
most index ETFs is more than a few basis points."
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Re: How do you invest the gold portion?

Post by vnatale » Wed Mar 25, 2020 1:02 am

CT-Scott wrote:
Tue Mar 24, 2020 9:53 pm
Hi Vinny,

I did read your earlier post, but I also read some recommendations of AAAU from 2-3 others. Vinny, you cite the fact that GLD has "far and away the most assets." I apologize for being so ignorant, but what does that really mean, and why might that be a major reason for choosing GLD over the other options?
I'll make an analogy. When I was in the process of choosing a SIMPLE IRA for my organization I had someone assisting me.

Vanguard was one of the other choices. I was favoring someone else. But it made both of us nervous that the someone else was so tiny compared to Vanguard. Did we want to trust our retirement plan to an organization that was just so tiny compared to Vanguard and only had 63 employees? Tiny organizations compared to their much larger counterparts may not be there when you need them to be.

Vinny
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Re: How do you invest the gold portion?

Post by CT-Scott » Wed Mar 25, 2020 7:38 am

Well, I briefly talked to my wife last night about shifting some of our retirement funds over to gold and she was on-board. So, final call for anyone who wants to make a case for which digital/paper gold fund I should choose? I know where Vinny stands.

I'll also try to determine whether I can adjust my Vanguard Roth IRA to accommodate this, or if I'm going to just be able to do it inside of our [side-business] TD Ameritrade 401k accounts.
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Re: How do you invest the gold portion?

Post by ochotona » Wed Mar 25, 2020 8:20 am

mdwilson1991 wrote:
Tue Mar 24, 2020 11:32 pm
FYI, You may want to reconsider that. Or maybe you are right...

I'm not going to attempt to explain why, because I can't, but I will quote a guy who seems like an authority, as he wrote this "War and Peace" on ETF costs http://www.etfconsultants.com/Reducing_ ... _Costs.pdf

"Using MOC Orders Routinely to Buy or Sell ETFs Looks Like a Terrible Idea
The majority of investor ETF market-on-close orders are not likely to be executed at or
“better” than NAV, and many MOC executions will not even be close to NAV. MOC orders can
be executed at a much greater distance from the NAV than the reported premium and discount
data indicate to investors. Anyone trading ETFs should understand how these orders work and
how ETF MOC orders differ from stock MOC orders. If you compare a fund’s NAV and closing
price for a few days, you will probably conclude that you do not want to use an MOC order –
unless your comparisons suggest that, for some reason, other investors are predominantly selling
when you buy or buying when you sell. At the least, you will conclude that the cost to trade
most index ETFs is more than a few basis points."
Thanks, I'll let Novell have his say about that. I'm not sure what the alternatives are, though... you still have to trade.

If NAVs are off from ETF share prices at the close, they'll be off all day long, which leads you to the conclusion - don't trade unless it's going in your favor? But if it's going in your favor, from a momentum signal point of view, you probably don't need to trade!

Sort of like - sell your car before just before you have a major mechanical issue, but no sooner. Nice idea - impossible to implement.

Does it mean that trading friction is more than anticipated? Surely. But backtests use ETF share prices, so the NAV to share price slop is already cooked into the backtest.

Nothing is free - ETF market makers do a valuable service. I don't want to trade 100s of shares at a time.
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Re: How do you invest the gold portion?

Post by mdwilson1991 » Wed Mar 25, 2020 8:44 am

ochotona wrote:
Wed Mar 25, 2020 8:20 am
[... I'm not sure what the alternatives are, though... you still have to trade.
I believe, according to that guy and some others I have seen, limit orders are the way to go.

That doesn't guarantee NAV but it guarantees you get the price you want ( I think!) But I am hardly an authority on this.
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Re: How do you invest the gold portion?

Post by vnatale » Wed Mar 25, 2020 9:14 am

CT-Scott wrote:
Wed Mar 25, 2020 7:38 am
Well, I briefly talked to my wife last night about shifting some of our retirement funds over to gold and she was on-board. So, final call for anyone who wants to make a case for which digital/paper gold fund I should choose? I know where Vinny stands.

I'll also try to determine whether I can adjust my Vanguard Roth IRA to accommodate this, or if I'm going to just be able to do it inside of our [side-business] TD Ameritrade 401k accounts.
Not yet. I've still yet to make my gold investment so what you read previously is where I had been with my research to that point. The gold investment is the most difficult of the three as the other three seem far more clear-cut what to do.

Vinny
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Re: How do you invest the gold portion?

Post by ochotona » Wed Mar 25, 2020 10:15 am

I've decide to increase my strategic gold allocation up from 10% (Desert Portfolio levels) to 15%, because of all of the money-printing taking place and what that will do to fiat currencies eventually. My allocation had already naturally drifted up to 13%, so I pushed some funds into AAAU today.

Sprott - 10%-15% bullion exposure for family offices under normal circumstances, 20% for "sophisticated investors" (how do you define "sophisticated?". Isn't it already sophisticated by the time you have your own family office?)

John Hathaway, Tocqueville Asset Management - at least 5%, but you could go up to 10% or 15%

Jim Rickards - 10% for most investors, 15%-20% if you're more aggressive
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Re: How do you invest the gold portion?

Post by dualstow » Wed Mar 25, 2020 10:21 am

ochotona wrote:
Wed Mar 25, 2020 10:15 am
I've decide to increase my strategic gold allocation...so I pushed some funds into AAAU today.
Is that because it’s hard to get physical coins right now, or you wanted AAAU anyway?
RIP Marcello Gandini
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Re: How do you invest the gold portion?

Post by ochotona » Wed Mar 25, 2020 10:48 am

dualstow wrote:
Wed Mar 25, 2020 10:21 am
ochotona wrote:
Wed Mar 25, 2020 10:15 am
I've decide to increase my strategic gold allocation...so I pushed some funds into AAAU today.
Is that because it’s hard to get physical coins right now, or you wanted AAAU anyway?
75% of mine is physical, I did want more AAAU anyway.
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 8:56 pm

ochotona wrote:
Tue Oct 08, 2019 2:50 pm
25% of my gold is ETF. Now that Schwab is fee-free, if I buy more it will likely be AAAU.

75% is physical
half of that in a Roth IRA with Goldstar Trust Co; the bullion is with Delaware Depository
other half in an insured safe deposit box somewhere in rural Texas where they encourage concealed carry into the bank (but not open)
Who is "they"? The bank or the nature of rural Texas? And, how is the encouragement conveyed to you?

Vinny
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 9:02 pm

pmward wrote:
Tue Sep 10, 2019 8:50 pm
Yes, AAAU (Perth Mint) is my ETF of choice these days. Lower ER than IAU, and shares are redeemable for physical gold shipped to the U.S. for a $30 shipping fee. So these shares are basically "as good as gold".
In this Topic I later wrote: Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

You are not bothered by AAAU's relative tiny size compared to the three ahead of it? From what I wrote above AAAU is about 1/500th of GLD's size.

Vinny
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Re: How do you invest the gold portion?

Post by pmward » Wed Apr 22, 2020 9:08 pm

vnatale wrote:
Wed Apr 22, 2020 9:02 pm
pmward wrote:
Tue Sep 10, 2019 8:50 pm
Yes, AAAU (Perth Mint) is my ETF of choice these days. Lower ER than IAU, and shares are redeemable for physical gold shipped to the U.S. for a $30 shipping fee. So these shares are basically "as good as gold".
In this Topic I later wrote: Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

You are not bothered by AAAU's relative tiny size compared to the three ahead of it? From what I wrote above AAAU is about 1/500th of GLD's size.

Vinny
Size and liquidity don't matter as much for a long term hold. For a long term hold ER is the most expensive factor. If you're going to hold something for years or even decades, getting that ER as low as possible is key.

For a short term trader, who is going to hold a position for hours, days, or weeks... ER doesn't matter and liquidity is king. The spread is going to cost them much more than they will ever pay in ER. GLD is the vehicle meant for short term traders. It's not a coincidence that it has the highest ER since traders don't care about ER.

AAAU is perfectly fine for a long term hold. I have both AAAU and IAU.
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 9:13 pm

CT-Scott wrote:
Wed Mar 25, 2020 7:38 am
Well, I briefly talked to my wife last night about shifting some of our retirement funds over to gold and she was on-board. So, final call for anyone who wants to make a case for which digital/paper gold fund I should choose? I know where Vinny stands.

I'll also try to determine whether I can adjust my Vanguard Roth IRA to accommodate this, or if I'm going to just be able to do it inside of our [side-business] TD Ameritrade 401k accounts.

Where do I stand!!!??? I'm still trying to determine that myself!

The only thing I've stated is that I'm wary of AAAU's relative tiny size. At this point if I had to answer now SGOL might be my choice - based upon size, return, expense ratio.

Vinny
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 9:19 pm

CT-Scott wrote:
Tue Mar 24, 2020 9:53 pm
Hi Vinny,

I did read your earlier post, but I also read some recommendations of AAAU from 2-3 others. Vinny, you cite the fact that GLD has "far and away the most assets." I apologize for being so ignorant, but what does that really mean, and why might that be a major reason for choosing GLD over the other options?
I was just making an observation. And, in general, larger organizations are going to be more stable, less chances of going under. However, it was later explained to me in this Topic that they were the largest because, for some reason, they are favored by traders, which is NOT Permanent Portfolio. Therefore, I switched my focus to the next three.

I stated a few minutes ago that SGOL would be my choice while in an earlier post in this Topic I stated that IAU would be the winner! Therefore, going with the recommendation of some to spread it out between two, maybe I buy both split 50/50 between them!

Thanks for asking the question to help me clarify my thinking.

Vinny
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 9:22 pm

mdwilson1991 wrote:
Tue Mar 24, 2020 11:32 pm
ochotona wrote:
Sat Oct 19, 2019 7:49 am
...

If you use a Market On Close MOC order, you don't get exposed to this spread... You just exactly get the closing price, like a mutual fund. Thanks to my friend Paul Novell for edumicating me on that.
FYI, You may want to reconsider that. Or maybe you are right...

I'm not going to attempt to explain why, because I can't, but I will quote a guy who seems like an authority, as he wrote this "War and Peace" on ETF costs http://www.etfconsultants.com/Reducing_ ... _Costs.pdf

"Using MOC Orders Routinely to Buy or Sell ETFs Looks Like a Terrible Idea
The majority of investor ETF market-on-close orders are not likely to be executed at or
“better” than NAV, and many MOC executions will not even be close to NAV. MOC orders can
be executed at a much greater distance from the NAV than the reported premium and discount
data indicate to investors. Anyone trading ETFs should understand how these orders work and
how ETF MOC orders differ from stock MOC orders. If you compare a fund’s NAV and closing
price for a few days, you will probably conclude that you do not want to use an MOC order –
unless your comparisons suggest that, for some reason, other investors are predominantly selling
when you buy or buying when you sell. At the least, you will conclude that the cost to trade
most index ETFs is more than a few basis points."
In ALL the posts I have read in this Forum now (at least 1,000's) these two posts are the only two I've seen make reference to Market On Close (MOC) order.

Two totally opposite opinions here....any others want to chime in?

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: How do you invest the gold portion?

Post by vnatale » Wed Apr 22, 2020 9:24 pm

sophie wrote:
Sat Oct 19, 2019 9:32 am
Quick note about AAAU - this is also my ETF of choice, because its backed up by a mint whose job it is to hold gold, rather than an investment corporation who is probably loaning it out behind the scenes, and thus may not be able to come up with it in a "black swan" scenario.

However - I only use it in tax-advantaged accounts. If your plan is to hold gold long-term, it makes no sense to use it in taxable, because you can simply invest with the mint directly for a ZERO ER (unallocated) plus buy and sell fees. For a portion of your gold holdings, this should be a big win as it's unlikely you'll be selling it often enough for the buy/sell fees to outweigh the ER of an ETF.
You, too, do not seem to be bothered by AAAU's relative tiny size, only being about 1/500th the size of GLD?

Vinny
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Re: How do you invest the gold portion?

Post by pmward » Thu Apr 23, 2020 11:57 am

MangoMan wrote:
Thu Apr 23, 2020 10:46 am
pmward wrote:
Wed Apr 22, 2020 9:08 pm
vnatale wrote:
Wed Apr 22, 2020 9:02 pm
pmward wrote:
Tue Sep 10, 2019 8:50 pm
Yes, AAAU (Perth Mint) is my ETF of choice these days. Lower ER than IAU, and shares are redeemable for physical gold shipped to the U.S. for a $30 shipping fee. So these shares are basically "as good as gold".
In this Topic I later wrote: Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

You are not bothered by AAAU's relative tiny size compared to the three ahead of it? From what I wrote above AAAU is about 1/500th of GLD's size.

Vinny
Size and liquidity don't matter as much for a long term hold. For a long term hold ER is the most expensive factor. If you're going to hold something for years or even decades, getting that ER as low as possible is key.

For a short term trader, who is going to hold a position for hours, days, or weeks... ER doesn't matter and liquidity is king. The spread is going to cost them much more than they will ever pay in ER. GLD is the vehicle meant for short term traders. It's not a coincidence that it has the highest ER since traders don't care about ER.

AAAU is perfectly fine for a long term hold. I have both AAAU and IAU.
Even for a buy & hold investor, the low volume should be a concern (not specifically the 'size' or shares outstanding, but one leads to the other). On the day you want to sell, it doesn't matter that you held it for 35 years if the price is vastly different than the NAV or the spread is wide.
It depends on the size of the order you need to sell. I'm personally not worried about it for long term hold. Like I said, I use both AAAU and IAU in my PP holdings, if I had to rebalance I would likely do it out of the IAU bucket. In other words, I likely will never sell the AAAU. Diversification in ETF's is not a bad thing. In my VP I stick to GLD for short term, or IAU for medium term trades.
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Re: How do you invest the gold portion?

Post by mdwilson1991 » Fri Apr 24, 2020 9:43 am

vnatale wrote:
Wed Apr 22, 2020 9:22 pm


In ALL the posts I have read in this Forum now (at least 1,000's) these two posts are the only two I've seen make reference to Market On Close (MOC) order.

Two totally opposite opinions here....any others want to chime in?

Vinny
I can only give my point of view on the two opposite opinions -

I had heard in more than one place that MOC orders were the way to go - I would say it seems to be a widely held opinion.

Then I discovered the document I linked above which appeared to be written by someone with a vast understanding of ETFs, which proved to be a much more complex subject than I initially thought.

I don't know for sure what is right, but I will use fill or kill orders now.

After reading that, I changed my view on MOC orders.
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Re: How do you invest the gold portion?

Post by vnatale » Wed Sep 01, 2021 4:33 pm

vnatale wrote:
Wed Oct 09, 2019 11:11 am

This was great!

I totally subscribe to Jack Bogle regarding costs!

And, many thanks for introducing me to eftdb.com.

I've been there and have the following observations:

Of the four I've most seen mentioned either in the Craig / Tex book and in this forum - GLD, IAU, SGOL, and AAAU - GLD has far and away the most assets - nearly triple what the second IAU has. And, IAU is almost 16 times what the 3rd place one is - SGOL. Finally, AAAU is only 1/10 SGOL.

IAU and SGOL have the highest returns, with AAAU next, and GLD last.

The Expense Ratios are as follows:

GLD-0.40%
IAU-0.25%
SGOL-0.17%
AAAU-0.18%

Assuming that the returns are AFTER the Expense Ratios that would mostly explain the difference in returns.

Going by your criteria below it seems like IAU would be the winner?


Question I have is with IAU ALWAYS having the better return for any time period compared to GLD why does GLD have almost 3 times as many assets?

I initially thought it could be because they were the first Gold ETF. But IAU showed up on the scene only two months later.

Finally, I'm also guessing you chose paper gold? If so, which are you using.

Thanks again for pointing me in the right direction, which is greatly simplifying my decision process regarding the gold portion of the Permanent Portfolio.

Vinny

Kbg wrote:
Tue Oct 08, 2019 9:05 am

I do have a strong opinion on the gold aspect of the PP. The choice is basic: You are going to go physical or paper gold. I have no opinion on which is the better option as there are strong arguments on both sides that are both good, accurate and compelling (a mix of both is also a good choice, though I think the arguments made for physical gold on serious analysis don't hold up very well unless the holdings are extensive and you have a permanent residency card in the country your gold is being held in. They clearly and objectively don't hold up historically in the US.)

However, if you are going to go with paper gold then ultimately you are relying on someone's accounting and I would go with a firm that is reputable, has large AUM and has the lowest mngt fee. A search using etfdb.com will provide all the information you need to make a good decision. Jack Bogle's advice is good here, costs matter and to me they are the most important factor for paper gold.



I've not yet gone back to update my above research...but for you do actively use any or all of the above four funds....has anything materially changed regarding the expense ratios of each or the rankings of the size of each fund? Would IAU still appear to be the winner?

Not asking anyone to update my research for me. Just looking for top of the head responses from actual experiences.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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