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
"I only regret that I have but one lap to give to my cats."
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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?
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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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