Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Discussion of the Gold portion of the Permanent Portfolio

Moderator: Global Moderator

Post Reply
SmallPotatoes
Senior Member
Senior Member
Posts: 141
Joined: Fri Jun 04, 2010 10:25 am

Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Post by SmallPotatoes » Tue Jun 08, 2010 12:20 am

Hello again, everyone.  I've found this forum so helpful that I've little need to post anything, but I'm curious about which gold coins are they preferred purchase among Permanent Portfolio people?

It seems like a mix of 1 and 1/10 oz. coins would be ideal since ETF share usually trade 1 share per 1/10th troy oz., which would make rebalancing potentially easier.  One could also track one's investment by following one of the ETF such as GLD or IAU. One.  Of course, more storage space is necessary, but nothing in the realm of ridiculous.

It may seem as though I'm answering my own question, but I would greatly appreciate the wisdom of the Crawling Road forum if any flaw, pitfall, drawback or avoidable regret may exist with this strategy.
User avatar
craigr
Administrator
Administrator
Posts: 2540
Joined: Sun Apr 25, 2010 9:26 pm

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 o

Post by craigr » Tue Jun 08, 2010 1:49 am

One ounce coins are the most common and therefore have the lowest markups over the price of gold they contain. Smaller coins have much higher markups as they are less available. I'd therefore recommend anyone looking to buy gold bullion focus on getting the 1 oz. coins first. These would be American Eagles, Canadian Maples or Krugerrands which are the most well known and widely minted. You will also be getting more gold for your money.

If you want some smaller coins for emergencies, then some "junk" pre-1965 US silver coins are a good option. However silver does not take the place of gold in the portfolio for inflation purposes.
User avatar
MediumTex
Administrator
Administrator
Posts: 9096
Joined: Sun Apr 25, 2010 11:47 pm
Contact:

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Post by MediumTex » Wed Jun 09, 2010 12:04 am

If you are going to buy coins smaller than one ounce seriously consider British sovereigns.  British sovereigns are .2354 of an ounce and probably the most minted gold coin in history.  If you shop around you can get them for about the same premium you will pay for one ounce coins.

As far as the 1/10 ounce gold coins, I wouldn't mess with those. BIG markup.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
SmallPotatoes
Senior Member
Senior Member
Posts: 141
Joined: Fri Jun 04, 2010 10:25 am

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 o

Post by SmallPotatoes » Fri Jun 11, 2010 12:45 am

Great advice guys.  I guess I was just thinking for rebalancing purposes, since my portfolio is relatively small right now (planning on investing mid-upper 5-digits).
User avatar
MediumTex
Administrator
Administrator
Posts: 9096
Joined: Sun Apr 25, 2010 11:47 pm
Contact:

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Post by MediumTex » Fri Jun 11, 2010 8:50 am

IMO, you would be better to build a core bullion position of one ounce coins, and fill out the last 10-20% of your gold holding with a PM ETF.  To me, that is a much lower cost approach to your situation than messing around with smaller weight coins.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
SmallPotatoes
Senior Member
Senior Member
Posts: 141
Joined: Fri Jun 04, 2010 10:25 am

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Post by SmallPotatoes » Fri Jun 11, 2010 6:02 pm

MediumTex wrote: IMO, you would be better to build a core bullion position of one ounce coins, and fill out the last 10-20% of your gold holding with a PM ETF.  To me, that is a much lower cost approach to your situation than messing around with smaller weight coins.
Agreed.  ATM I'm doing the PRPFX/EDV 90/10% until I can invest more into my tax-sheltered space.  At that point it will be cost efficient and possible to do the 4x25 approach with ETF's/Index funds (I prefer Index funds over ETFs for simplicity).  5% of gold will be in the form of an ETF at that point.

Any recommendations on ETF's vs. Indexs?
User avatar
craigr
Administrator
Administrator
Posts: 2540
Joined: Sun Apr 25, 2010 9:26 pm

Re: Which weight is preferred purchase among PP'ers? ( Gold coins:1/10, 1/4, 1 oz.)?

Post by craigr » Fri Jun 11, 2010 6:16 pm

SmallPotatoes wrote:
MediumTex wrote: IMO, you would be better to build a core bullion position of one ounce coins, and fill out the last 10-20% of your gold holding with a PM ETF.  To me, that is a much lower cost approach to your situation than messing around with smaller weight coins.
Agreed.  ATM I'm doing the PRPFX/EDV 90/10% until I can invest more into my tax-sheltered space.  At that point it will be cost efficient and possible to do the 4x25 approach with ETF's/Index funds (I prefer Index funds over ETFs for simplicity).  5% of gold will be in the form of an ETF at that point.

Any recommendations on ETF's vs. Indexs?
Many ETFs mirror an index. Some, like Vanguard's ETFs, are share classes of their open-ended funds. For instance the VTI ETF and VTSMX fund are identical. The ETF shares are used by Vanguard to increase efficiency of the underlying fund. They even have a patent on the idea.

Other companies like, iShares ETFs, replicate the S&P 500, total stock market Russell 3000, or whatever.

The main difference between an ETF and open ended fund version of the index are primarily costs. ETFs are usually a little cheaper, but open ended ETFS have no transaction fees for new deposits or withdrawals. ETFs could theoretically be more tax efficient if you get into a situation where many people are selling. An open ended fund however may have to dump capital gains onto shareholders from redemptions if they get too high.

So there are differences and if I was a taxable investor I may consider the ETFs just to avoid the redemption issues if you can keep the transaction costs down. However if you are not taxable then they are largely the same in how they move in the markets.
Post Reply