First of all only allocate 25 percent to stocks to Permanent Portfolio. The Actual portfolio uses 4 different asset classes and primary limit exposure to 25 percent in each asset class. Then rebalance the full portfolio when any asset class hits a 35 percent or 15 percent rebalancing trigger. Stocks are our hedge for prosperity but we have hedges for deflation, inflations and recession in actual Portfolio. The different asset classes to be used are bounds, stocks, gold and cash and these asset classes feedback differently depending on what is happening in the economy. So using actual Portfolio we will forever have at least one asset class that is doing perfect.
Here are the conditions for investing in stock for our actual Portfolio:
- Reject individual stocks due to their dangers and trading costs involved. Firm stock is also an individual stock so restrict danger exposure there as well. Also get rid of the need to do individual firm research and stock selection which frees up a lot of our personal time to do the things we love. The actual Portfolio is real low maintenance.
- Also reject actively managed mutual funds because over 80 percent of them cannot even beat their benchmark index.
- Use a market cap weighted full stock market index fund with low fees. Since there are so many firms represented in these funds, we get amazing diversifications and lower danger than single firm stocks. Since small trading is going on in the fund we also get best tax efficiency.
- Any dividends got from our fund we allocate to our cash allocation so we turn off any DRIPs or dividend reinvestment plans. This is a consistent with actual portfolio plan of buying assets low and selling top.