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.

Karl's Permanent Portfolio / Net Worth Allocation

dollar-gold-money

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.

Karl’s Permanent Portfolio / Net Worth Allocation

dollar-gold-money

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.