So, it was August 21, 2015 when I made public my permanent portfolio so we will do a full five-year review along with why I chose each investment. The portfolio page can be found here along with all its lengthy financial disclosures, more details, etc. The portfolio was put out publicly for educational purposes.
The foundation for the portfolio was Harry Browne’s Permanent Portfolio; however, I made some adjustments based on my experience. I designed the portfolio to protect against inflation with an eye on capital appreciation and very low annual income tax exposure. The portfolio is static, so there is no trading involved unless you do what I recommend and dollar cost average into the portfolio with consistent contributions. This is a buy and hold portfolio with some esoteric investments. The figures below do not include dividends, which are minimal anyway, but would boost the total return slightly higher.
So, let’s get right into it.
From August 21, 2015-2021:
DOW was up 69.69% (16,459 to 27.959)
S&P was up 72.4% (1,970 to 3,397)
Karl’s Permanent Portfolio was up 252.3% ($1,000,000 to $3,522,744)
Now for the individual stocks and investment assets:
PayPal Holdings (PYPL) is a solid company, and I am surprised someone like BRK hasn’t swallowed them up. It was originally around 10% of the portfolio and is now just shy of 17% of the portfolio after growing 462% over the last five years. I like this company because of its solid track record, no dividend, and felt it had great growth potential.
Berkshire Hathaway (BRK.b) does not produce a dividend but does produce capital appreciation. While everyone has been naysaying Buffett about how he’d lost his touch and was too old to run such a large company, he has recently showed them. Since the 1960s BRK has been an excellent investment vehicle that does not offer a dividend but reinvests its profits. I went with the “B” shares rather than the “A” shares as I felt the “B” shares are priced for the everyday person whereas the “A” shares are now priced at over $300,000 per share. BRK started in the portfolio at almost 14% of the portfolio and is now 5.8% of the portfolio after rising 51.4% over the last five years. This is mostly because of some heavy negative hits; however, it seems to be getting its mojo back.
Dow Jones New Zealand Index (NZDOWD) is a way to diversify away from the U.S. Dollar. As noted in previous posts, it would be better to physically have New Zealand Dollars; however, for the portfolio, I went with the next best thing. I never expected this to be a growth play, but a protection against a falling U.S. dollar. With recent trillions being added to the U.S. balance sheet, owning foreign currency has proven to be a smart move. NZDOWD started off as around 3% of the portfolio and is now 1.6% growing 83% over the last five years.
Singapore Dollar is another small protection against a fall of the U.S. Dollar. The portfolio started with 2.84% of its value invested in FXSG; however, it is no longer publicly traded, so we converted to the actual Singapore Dollar. It has only gained 2.8% over the last five years.
Guggenheim Currency Shares Swiss (FXF) is based on the Swiss Franc. Again, better to hold the physical Swiss Franc and I chose FXF to be an easy vehicle for most to invest as a protection against a falling U.S. Dollar. FXF used to be called Guggenheim; however, is now Invesco. Held over the last five years, the investment has been flat after recovering recently from losses. It had a loss of .01% over the last five years, though over the last three months it has risen over 6% because of worries of the U.S. adding trillions to its debt.
The NYSE Bitcoin Index (NYXBT) is perhaps the most controversial investment in the portfolio. Again, better to own the actual digital Bitcoin, and it has taken over the portfolio. Like the foreign currencies, it started out as only 3% of the portfolio, and it is now 43% of the portfolio with extraordinary gains of 4,912% over the last five years. Although I felt Bitcoin would appreciate in value, I never expected this level of rise. As people demand a decentralized currency, Bitcoin and a few of its popular alternatives will continue to rise in value as it has a set number that will be issued unlike the U.S. Dollar which our government continues to abuse.
iShares IBoxx $ Invest Grade Corp Bond Fund (LQD) is an investment I almost kept out of the portfolio as I am not a lover of bonds, either government or corporate. I feel you can get better growth through equities and other vehicles. But in the interest of diversity, I put 1.74% of the original portfolio in LQD and it has risen 17.6% over the last five years (not inclusive of dividends).
Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX) is a convenient way to own mid-cap stocks, and I put a little over 10% of the portfolio in it. It has given back over 44% over the last five years. Vanguard is one of the lower fee mutual fund companies with a long, solid history. So in adding mutual funds to the portfolio, I chose Vanguard for the three positions.
Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) is a convenient way to invest in small capitalization stocks. Initially putting 8.25% of the portfolio in VSMAX has produced over a 36% return.
Vanguard Global ex-U.S. Real Estate Index Fund Admiral Shares (VGRLX) is another diversity play which invests in foreign real estate stocks. Originally just under 10% of the portfolio, it has done horribly as it is down 5.4% in its return over the last five years. You’d have done better throwing the money away at a local bank certificate of deposit. This, and the Swiss Franc are the only positions that lost money, and the Franc was only down .01%.
iShares Gold Trust ETF (IAU) is another investment, though I would recommend people own the physical gold. For the portfolio, I used IAU as a logical alternative. Originally 7.4% of the original portfolio, it has returned just under 66% for the last five years. This investment didn’t do much until this year when the U.S. starting “printing” trillions of Dollars and is now up 26.49% year-to-date.
iShares Silver Trust ETF (SLV) is the same situation as with the above IAU. Starting at 7.47% of the portfolio it has risen more than IAU and over the last five years has returned 71%.
NVR, Inc. (NVR) is one of two real estate investments in the portfolio. NVR has a unique real estate business model that I appreciate and it does not through off a dividend which I also appreciate. It is also a solid company. Starting as 15% of the original portfolio, it is now representing about 12% of the portfolio and has returned over the last five years over 174%.
So that is it. The portfolio over the last five years. Some of these investments have been consistent during that time, others would require some Pepto-Bismol if you watched it every day. And that is the purpose of this portfolio, to buy it and forget it. Buy and hold. Brokers don’t like it because there is no trading profits for them.
I will keep the portfolio page up and perhaps do yearly updates. A true long-term investor would look at 10 year returns, though 5 years is a good gauge as to a portfolio’s strength — especially in the turbulent times we have endured over the last five years.