Short to medium long term PP investment

Discussion of funds that implement the Permanent Portfolio strategy

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stone
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Re: Short to medium long term PP investment

Post by stone » Sun Oct 21, 2012 3:24 am

Are the trading costs of putting $15000 in and out of a HBPP really so prohibitive? The fee I'm charged in the UK is £5.95 per trade. That doesn't seem so much in the context of $15000. I guess the bid-ask spread adds a bit to that but if there is a rebalance every couple of years anyway, then you would be suffering that anyway ???
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Omsa

Re: Short to medium long term PP investment

Post by Omsa » Sun Oct 21, 2012 5:29 am

stone wrote: Are the trading costs of putting $15000 in and out of a HBPP really so prohibitive? The fee I'm charged in the UK is £5.95 per trade. That doesn't seem so much in the context of $15000. I guess the bid-ask spread adds a bit to that but if there is a rebalance every couple of years anyway, then you would be suffering that anyway ???
As Pointedstick also says, its not just about the costs of putting it in my regular PP, it partly about creating compartments of money earmarked for different purposes. My regular PP to me is permanent, so unless there is a real financial emergency that depletes all other assets I only want to take money out of it in the far future (I'm only around 30yrs old now) when I no longer have regular working income and retire.

I'll will calculate a more precise estimate of cost of putting it my regular PP and rebalance and the reverse in 2 years, to get a better idea. But its not only the costs but the time spend moving around the money when needed, versus just 1 sell order and I'm done. Only think right now that makes me somewhat hesitant for going the PERM way is, as I wrote above, the exchange rate risk of USD/EUR.
Last edited by Omsa on Sun Oct 21, 2012 5:32 am, edited 1 time in total.
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stone
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Re: Short to medium long term PP investment

Post by stone » Sun Oct 21, 2012 6:16 am

Omsa, I totally understand the point about not wanting to dip into your HBPP account from a purely "personal behaviour management" point of view- a bit like not wanting to have lots of chocolate in the house for chocoholics or whatever. I guess sometimes the wisest thing is for each of us to spot our own frailties and guard against them :) .
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sophie
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Re: Short to medium long term PP investment

Post by sophie » Sun Oct 21, 2012 9:18 am

Ah.  I didn't realize your money was in Euros.  That changes things.

It's probably not a good idea to use PERM or PRPFX in that case, since you'd be adding currency risk (USD falling against the Euro) to the equation.  Could you instead create a separate mini-PP using ETFs different from the ones in your main PP, directly purchasing the bonds, and keeping cash in a separate savings account?

This would be a bit of work to set up, but the trading costs both buying & selling shouldn't be prohibitive.  If it's too annoying, maybe the best thing would be to find the highest yielding savings account you can and call it a day.
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Re: Short to medium long term PP investment

Post by hoost » Wed Oct 24, 2012 3:21 pm

I recently was holding money with a similar short time horizon and opted to place it in a short term govt bond fund (VFIRX).  I cashed out the money a couple of months ago with a small gain and all of my principal, and did not lose any sleep over the money while it was in there.  I think if you know you'll need the money, peace of mind is a premium that may be worth giving up a bit of return.
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Re: Short to medium long term PP investment

Post by Ad Orientem » Wed Oct 24, 2012 4:49 pm

hoost wrote: I recently was holding money with a similar short time horizon and opted to place it in a short term govt bond fund (VFIRX).  I cashed out the money a couple of months ago with a small gain and all of my principal, and did not lose any sleep over the money while it was in there.  I think if you know you'll need the money, peace of mind is a premium that may be worth giving up a bit of return.
I concur with that option. A short term government bond fund would be my choice here. I don't know what options are available in Europe but I'd look for something comparable to SHY/SCHO or maybe SHV if you are really more concerned with capital preservation than appreciation.
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