6 years in: How has Karl’s Permanent Portfolio performed compared to the DOW or S&P500?

It was August 21, 2015, when I published a buy and hold portfolio which is designed to weather both good times and bad while being static (no trading). The purpose of publishing the portfolio is for educational purposes only, and readers should review the disclosures at the top of the portfolio’s page. I do not make any money on publishing this and even this blog brings me zero income. This is simply information for the public to do with as they wish or to throw in the digital trash. The portfolio has been called “eclectic” because of its diversification and inclusion. With standard-bearers such as Berkshire Hathaway and gold, it also includes Bitcoin and various foreign currencies. I designed it to be static — true buy and hold. The only change was regarding the ending of CurrencyShares Singapore Dollar Trust earlier this year, and I converted that to actual Singapore Dollars. I designed the portfolio to have little tax and fee consequences during its growth.

One can start with $1,000 and add to the portfolio periodically as they wish or not. This is not an ETF, though in retrospect, perhaps I should have created a fund; but this is something anyone can do or follow. The portfolio began with NVR, BRK.b, and PayPal as its top three holdings and a few of its smallest holdings started with Bitcoin and the Singapore Dollar. Since there is no periodic rebalancing of the portfolio, there have been many changes to the top three and bottom three holdings.

It has now been six years, let’s see how it’s done! Over the last six years, the DOW has gone up 113% and the S&P 500 has risen 125% while my permanent portfolio has risen 790% (an average of 131% per year). This return does not consider dividends, etc. Had you invested $10,000 in what the portfolio put forth, it would have increased in value to $79,000 (exclusive of dividends, etc.) Bitcoin has been the highest performing in the portfolio, along with PayPal, NVR, and the iShares Gold Trust, respectively. The worst performing was the Swiss Franc going down almost 3% over the last six years. I do not expect future returns to be anywhere near as rosy as 131% per year (that is unsustainable), although it has always outperformed the DOW and S&P 500. Prior years have shown the following CUMULATIVE returns: YR1 12%, YR2 79.4%, YR3 125%, YR4 159%, YR5 252.3%, YR6 790%.

You can thank the financial mismanagement by our federal government for these above-average returns as “quantitative easing,” raging federal deficits, federal debts, etc have helped to propel this portfolio to new highs. So long as our government acts irresponsibly, my version of a Permanent Portfolio will continue to excel.

June 2019 permanent portfolio update

Here we are with another update of the Permanent Portfolio and it has been performing well. Overall, it has increased in value of 159% with an annualized return of 27.47% (inclusive of dividends). During the same time frame, the DOW has increased in value by 50.7% and the S&P has increased by 39.6%. The relatively small original investment in Bitcoin (3%) has taken over a disproportionate percentage (41.1%) of the portfolio due to its dramatic rise over time. The portfolio’s worst performers have been investing in the Swiss Franc (a loss of almost 9%) and silver (a loss of over 6%). Besides Bitcoin, the best performers in the portfolio are NVR (108%), PayPal (over 213%), and the New Zeland Dollar (over 51%).

As said in the intro, this portfolio is designed to remain static (no trading) while also keeping one’s tax bill and fees to the lowest levels. I feel it would have been prudent to have trimmed the Bitcoin investment so it didn’t “take over” the portfolio with its wild swings. But we’re in for the long haul on this one, so it will be interesting to see its progression. Next update will be on the four-year mark – August 21, 2019.

See the portfolio page here.

“Railroaded | E1: The Targeting & Caging of Ross Ulbricht” on YouTube

Three Year Update to Permanent Portfolio

So, although the portfolio is doing well overall, I almost feel like Warren Buffett during the late 90s runup of tech stocks. The portfolio has taken a hit over the last six months, while the overall market is running on all cylinders. NVR and Bitcoin are notable hits and the overall portfolio wiped out 50% of gains over the last six months. It is still up over 125% since I posted it three years ago which is an average of over 42% per year. That sounds great, but the original 3% of funds to buy Bitcoin messes with the numbers a bit as it has now grown to be 37% of the portfolio. Not that that is bad, as it was originally a speculative investment, but in the real world I would have sold off a large chunk of it. The four main contributors to the growth of the portfolio have been PYPL, Bitcoin, VSMAX, and NVR. As well, there have only been two securities which have turned in a loss, and those losses are tiny (around $5,000 of a $1 million portfolio). This portfolio is meant to be truly static so Bitcoin will remain whether it goes to zero or to $500k a piece. The portfolio has not fully been tested and for that we will need to wait over time and/or a serious challenge to the traditional markets, not just a correction.

See here: https://karldickey.wordpress.com/karl-dickey-investment-portfolio/

Karl’s Permanent Portfolio – 2 year update

So it has now been exactly two years since I made my version of the Permanent Portfolio public and it has outpaced the DOW and the S&P. The net return has been 79.4% while the DOW has had a return of 31.9% and the S&P 23.2% during the same time period. And, for the naysayers regarding my small investment in Bitcoin for the portfolio then one would have to say the same about NVR and PYPL, etc. But if one was to remove Bitcoin from the mix completely, the investment would have been within a point of the DOW’s return without any of the risks in holding just 30 equity stocks or a single ETF for the DOW. This portfolio is eclectic, to say the least, but is designed to weather some heavy financial storms as well. It also has a minimum 10-year horizon, so at two years, it is still in its infancy.

See the full page here: https://karldickey.wordpress.com/karl-dickey-investment-portfolio/

 

Lyn Ulbricht says Bilton’s book on her son Ross Ulbricht has glaring factual errors

You may have heard that a book about Ross Ulbricht has come out called American Kingpin. The author, Nick Bilton, asked Ross’s mother, Lyn, to participate in the project but she was warned away by a trusted advisor who said, considering those involved, it would be a regurgitation of the government’s narrative.

Sure enough, he was right.

According to Lyn, Bilton bases his story of murder-for-hire as if it’s fact. Yet these allegations were never proven, prosecuted or even charged at trial and no murders occurred. Former Federal Judge Nancy Gertner joined Ross’ appeal saying it is wrong to use uncharged crimes against a person. Yet Nick Bilton has no compunction in doing this.

Nick Bilton says Ross is dangerous. yet all his convictions were non-violent and he has no record of hurting anyone. No victims came forward at trial to claim that Ross had harmed them in any way. Rather, Ross is widely known as peaceful and compassionate. You can read what 100 people who actually know him have to say.

Ross cannot defend himself or his reputation against this media onslaught. He is helpless to stop the feeding frenzy; sensationalizing, fictionalizing and profiting from his life. He’s just trying to survive each day, living in a cell, hoping that the appellate courts care more about the truth than the media does.

You can help counteract this by commenting on articles about the book and sharing/liking the #FreeRoss posts on social media. The facts speak for themselves. Bottom line: it has never been proven that Ross was involved in murder-for-hire. Even the government didn’t have the confidence to charge him with this at trial.

https://www.facebook.com/freerossulbricht/

https://twitter.com/Free_Ross

Free Ross Youtube Channel

Karl’s Permanent Portfolio / Net Worth Allocation

This is a combined asset allocation model culminated from Harry Browne, Tony Robbins, Jim Rogers and my own experience. I have excluded most specifics with relation to my personal situation and generalized the plan for the general public. This, in my opinion, is a balanced and safe approach to managing one’s net worth. I am NOT a financial adviser and if you consider anything from below, you should consult with a tax adviser, investment adviser and/or your attorney to see if it is right for you.

UPDATE: I have created a permanent investment portfolio at this link.

Definitions:

1. Financial Security: the amount of money that covers food, housing, cars, travel, and basic entertainment.
2. Financial Independence: where one doesn’t have to work and everything is covered.
3. Financial Freedom: where one doesn’t have to work and EVERYTHING ONE CAN THINK OF is covered.

There are essentially FOUR “Buckets” where you will have your net worth. Your Security Bucket, Growth Bucket, Dream Bucket, and your Maintenance Budget. More on the buckets in a bit.

MUSTS:

• Build 24 months of cash reserve in your security bucket
• Have durable Power of Attorney
• Have a Will & Living Will & Advanced Medical Directive complete, signed & accessible
• Have a decent amount of life insurance to cover expenses should you die (if needed)
• Have enough medical insurance to cover your needs
• Have Auto, Home & Insurance plus an umbrella liability policy
• Sign up w/ Legal Shield and/or have excellent legal representation & consult a good tax advisor

Example of what to do with your extra income and money received unexpectedly: $1,000 received – put $500 in Security Bucket, $250 in the growth bucket, $185 in the maintenance budget, $65 in the dream bucket. Spend less than you earn and you will have money left over for this plan. Skip the $12 martini and the $6 latte and put that money to work for you the rest of your life.
Reinvest all dividends, profits & non-earned income from the following buckets & distribute the income equally to each bucket.

50% of Assets go into your Security Bucket
This is the place where you put money into investments that are secure by their nature. They won’t give you huge compounded return, but if you do it long enough, even if the initial return is small, in the long run that compounded return grows and is kept secure. Your first investments MUST be put into your security bucket. These assets are either owned Joint Tenants in the Entirety if married, or in another secure, asset protection vehicle such as a trust.

12% of Security Bucket – CASH (equivalent to 24 month’s expenses, though some may only want to have 6 months reserve)

• 20% New Zealand Dollars
• 20% Singapore Dollars
• 20% Swiss Franc
• 20% U.S. Dollars kept in a money market account OR physically in a secure location
• 20% Bitcoin (annonymous, secure, portable)

20% of Security Bucket – Your personal home

15% of Security Bucket – Life Insurance (and make certain you have HSA health insurance covered as well)

48% of Security Budget into your IRA / SEP / Tax Free Retirement Vehicle(s)

5% Fixed Income Investments: Corporate Bonds, other taxable but high yielding investments

90% Rest in Misc. Investments: Real Estate (REIT or direct), BRK.a or BRK.b

25% of Assets go into your Growth Bucket
These assets should be held in an LLC or other asset protected (privacy) vehicle

• 10% of Growth Bucket goes into an Aggressive Growth Mutual Fund(s)
• 20% of Growth Bucket goes into Real Estate – Direct Investment into commercial, residential or land (if not enough money available, then a REIT)
• 45% of Growth Bucket goes into Collectibles: 10% of the 45% in Art / 90% of the 45% in Gold/Silver via Scrap-Coins-Bullion (kept in secure location)
• 25% of Growth Bucket is your own small business (reap the tax benefits while increasing its value and enjoying its income)

6.5% of Assets go into your Dream Bucket

These assets can be anything from cars, boats, planes, etc. This is literally your dream bucket when you put money aside to buy or you already own the toys in your life.

18.5% of Assets go into your Maintenance Budget/Bucket
This is your maintenance bucket which is to pay ALL of your expenses during the year for when you do not work or for when you retire. If you are retired, then this is the bucket which must generate enough income for you to live. This needs to generate income (preferably tax-free) to pay up to at least $X per year in expenses such as food, property taxes, travel, etc, etc.

Karl's Permanent Portfolio / Net Worth Allocation

This is a combined asset allocation model culminated from Harry Browne, Tony Robbins, Jim Rogers and my own experience. I have excluded most specifics with relation to my personal situation and generalized the plan for the general public. This, in my opinion, is a balanced and safe approach to managing one’s net worth. I am NOT a financial adviser and if you consider anything from below, you should consult with a tax adviser, investment adviser and/or your attorney to see if it is right for you.

Definitions:

1. Financial Security: the amount of money that covers food, housing, cars, travel, and basic entertainment.
2. Financial Independence: where one doesn’t have to work and everything is covered.
3. Financial Freedom: where one doesn’t have to work and EVERYTHING ONE CAN THINK OF is covered.

MUSTS:

• Build 24 months of cash reserve in your security bucket
• Have durable Power of Attorney
• Have will & living will & Advanced Medical Directive complete, signed & accessible
• Have a decent amount of life insurance to cover expenses should you die (if needed)
• Have enough medical insurance to cover your needs
• Have Auto, Home & Insurance plus an umbrella liability policy
• Sign up w/ Legal Shield and/or have excellent legal representation & consult a good tax advisor

Example of what to do with your extra income and money received unexpectedly: $1,000 received – put $500 in Security Bucket, $250 in the growth bucket, $185 in the maintenance budget, $65 in the dream bucket. Spend less than you earn and you will have money left over for this plan. Skip the $12 martini and the $6 latte and put that money to work for you the rest of your life.
Reinvest all dividends, profits & non-earned income from the following buckets & distribute the income equally to each bucket.

50% of Assets go into your Security Bucket
This is the place where you put money into investments that are secure by their nature. They won’t give you huge compounded return, but if you do it long enough, even if the initial return is small, in the long run that compounded return grows and is kept secure. Your first investments MUST be put into your security bucket. These assets are either owned Joint Tenants in the Entirety if married, or in another secure, asset protection vehicle such as a trust.

12% of Security Bucket – CASH (equivalent to 24 month’s expenses, though some may only want to have 6 months reserve)

• 20% New Zealand Dollars
• 20% Singapore Dollars
• 20% Swiss Franc
• 20% U.S. Dollars kept in a money market account OR physically in a secure location
• 20% Bitcoin (annonymous, secure, portable)

20% of Security Bucket – Your personal home

5% of Security Bucket – Life Insurance (and make certain you have HSA health insurance covered as well)

63% of Security Budget into your IRA / SEP / Tax Free Retirement Vehicle(s)

• 10% Fixed Income Investments: Corporate Bonds, other taxable but high yielding investments
• 90% Rest in Misc. Investments: Real Estate (REIT or direct), BRK.a or BRK.b

25% of Assets go into your Growth Bucket
These assets should be held in an LLC or other protected vehicle

• 10% Aggressive Growth Mutual Fund(s)
• 20% Real Estate – Direct Investment into commercial, residential or land
• 45% Collectibles: 10% of the 45% in Art / 90% of the 45% in Gold/Silver via Scrap-Coins-Bullion (kept in secure location)
• 25% Your own small business (reap the tax benefits while increasing its value and enjoying its income)

6.5% of Assets go into your Dream Bucket

These assets can be anything from cars, boats, planes, etc.

18.5% of Assets go into your Maintenance Budget/Bucket
This is your maintenance bucket which is to pay ALL of your expenses during the year for when you do not work or for when you retire. This needs to generate income (preferably tax-free) to pay up to at least $X per year in expenses such as food, property taxes, travel, etc, etc.