Permanent Portfolio: Global ETF Version

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Includes: EEM, EFA, FXF, GLD, IGE, IYR, LQD, SHY, SLV, TLT, VEU, VTI, VWO
by: MyPlanIQ

Permanent portfolios have attracted investors' attention due to their stable performance in the past 15 years. One of the criticisms or suggestions is that the portfolios are U.S. centric: the lack of international and emerging market stock exposure. In this article, we present a global ETF version.

In our previous article, we discussed an ETF version of Permanent Portfolio Fund PRPFX. In the new plan called Permanent Global Portfolio Fund PRPFX ETF Plan, we added two more ETFs: Vanguard International Stock VEU and Vanguard Emerging Market Stocks VWO to the aggressive growth stock category. Each of VTI, VEU, VWO is allocated 5% of the portfolio. The following are the allocations of the global portfolio Permanent Global Portfolio Fund PRPFX ETF Version.

Gold 20% (NYSEARCA:GLD)

Silver: 5% (NYSEARCA:SLV)

Swiss Franc Assets: 10% (NYSE:FXF)

U.S. Real Estate: 5% (NYSEARCA:IYR)

Natural Resource Stocks 10% (BATS:IGE)

Aggressive Growth Stocks 15%
- U.S. stocks: 5% (NYSEARCA:VTI)
- International stocks: 5% (NYSEARCA:VEU)
- Emerging market stocks: 5% (NYSEARCA:VWO)

U.S. Corporate Bonds: 3% (NYSEARCA:LQD)
U.S. Treasury Long Bonds: 16% (NYSEARCA:TLT)
U.S. Treasury Short Bills: 16% (NYSEARCA:SHY)

Refer to the plan description page for more Permanent Portfolio background if you are not familiar.

The global plan now consists of 11 funds. These funds cover 6 major assets: U.S. Equity, Foreign Equity, Commodity, Emerging Market Equity, REITs, Fixed Income.

Asset Class Permanent Global Portfolio Fund PRPFX ETF Plan
REITs 1
Fixed Income 3
Commodity 2
Sector Fund 1
Foreign Equity 1
Emerging Market Equity 1
US Equity 1
Other 1
Total 11

The following shows the comparison among Permanent Portfolio Fund PRPFX, the original ETF portfolio, the global ETF portfolio, an equal weight (among risk assets) Strategic Asset Allocation portfolio and a tactical asset allocation portfolio using the eleven funds:

Portfolio Performance Comparison

Portfolio/Fund Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
PRPFX 21% 222% 9% 62% 11% 77%
Permanent Portfolio ETF Version 21% 231% 9% 72%
Permanent Global Portfolio ETF Version 21% 242% 10% 73%
Permanent Global Portfolio ETF Plan Tactical Asset Allocation Moderate 12% 110% 9% 69% 13% 91%
Permanent Global Portfolio ETF Plan Strategic Asset Allocation Moderate 18% 152% 7% 36% 8% 45%

The following shows the five year charts:


(Click to enlarge)

For more comparison, refer here.

Some observations:

  • The global version outperformed the U.S. version in the 3 year performance (about extra 1% annual return)
  • The Strategic Asset Allocation one trailed both the original U.S. and global versions, indicating solid allocations in these permanent portfolios.
  • The Tactical Asset Allocation had 13% annualized returns in the past five years, compared with the Permanent Portfolio PRPFX's 11%.

In conclusion, the global permanent portfolio can increase diversification in both strategic and tactical asset allocation.

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Disclosure: I am long GLD, SLV, IYR.