Mad Money Machine

Something to Crow About

The divergence between the Permanent Portfolios and the other Lazy Portfolios might actually cause me to turn on the microphone and fire up a new podcast. Wow, lovin’ the PP.

Feeling Better Mid-Year

I was feeling a little left out earlier this year… on my portfolio returns that is. But now I am feeling pretty good. Not that feelings should have anything to do with it! Table as of 10 August 2011.

MMM-183: Fifty? Fifty!

• The big 5-0. Golf and Arnold Palmer Zeros
• The Arnold Palmer Invitational
• The Cars have a new album coming out
• My new iPad 2
• GURU: Richard Russell, after 50+ years, now recommends the Permanent Portfolio:
• http://www.marketwatch.com/story/investing-without-making-any-forecasts-2011-02-11?reflink=MW_news_stmp
• http://www.technologyinvestor.com/?p=5790
• PRPFX expense at 0.82%. But you can get your own as low as 0.02%
• TOOL: Sony Blu-Ray player plays videos from your VUZE server. Vuze.com
• Bonus tool: Simba’s spreadsheet is updated for 2011 at Bogleheads.org. search for it
• Our hail storm and our new roof
• What investments would I recommend right now?
• Paleo Nutrition, Primal Blueprint for nutrition and fitness. MarksDailyApple.com is the best.
• Should investors FEAR the Permanent Portfolio? NO!

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Spotting the Other Lazy Portfolios a Few Points

One-twelfth of 2011 is already behind us and it appears that the Permanent Portfolios have decided to give the other Lazy Portfolios a head start on the year. Said another way: The Permanent Portfolios are ON SALE! Here is the table of returns through January.

The individual components of the Permanent Portfolios are as follows:

VTI +2.0% – Total Stock Market

TLT -3.1% – Long Term Bonds

IAU -6.4% – Gold

SHY  +0.1% – T-bills

—-

VBR +0.6% – Small Cap Value

VWO -3.4% – Emerging Markets

And for reference, here the components of all of the Lazy Portfolios we track here.

Simba’s Spreadsheet is Updated for 2010

For those of us who love to back-test different lazy portfolios, today we can spend our snow day using Simba’s spreadsheet, newly updated with 2010 returns.

I forgot that his comparison page only goes back to 1985 and that I was the one who modified the page to go back to 1972. Guess I’ve got some work to do.

Have fun.

MMM-182: Silver and Gold

• Pre-1965 silver coins are worth 23x their face value.
• 2010 Results of the Lazy Portfolios
• TOOL: CarbonFin outliner
• Traffic Court
• The Department of Free

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MMM-182: Silver and gold [ 30:05 ] Play Now | Play in Popup | Download

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Comparing Gold ETFs

In the FWIW category, here is a chart comparing the annual performance of select Gold ETFs. What’s up with GTU?

The fund expense ratios (according to morningstar.com except GTU* ) are as follows:

GLD: 0.40%

IAU: 0.25%

GTU: 0.38%*

SGOL: 0.39%

DGL: .75%

UBG: 0.30%

Lazy Portfolios 2010 Year-End Wrap-Up

As we flip our calendars over to 2011 (or reuse our 1994 calendars), it is time to reflect upon how the various Lazy Portfolios performed for calendar year 2010. See the chart below that shows the cumulative monthly returns and the summary table of 2010 returns. The lazy portfolio that had the highest returns for 2010 was the IFA Index Portfolio 100 Bright Red with a 23% gain. But look at that swing from August through December. And also the swing from April through  June! Next, compare the gain of the Permanent Portfolio Mutual Fund (PRPFX – 18.5%) and the path it took to get there.

Cumulative Monthly Performance of Select Lazy Portfolios for 2010 (Click for big view. Data from Yahoo! Finance adjusted quotes from 12/31/09 through 12/31/10 except IFA from IFA.com and after max 0.9% advisor fee.)

The IFA 100 portfolio consists of 100% stocks and is designed to be IFA’s riskiest portfolio while the PRPFX is roughly 25% stocks and is designed to be lowest risk for return. Pretty interesting that they are the two highest returning portfolios for 2010. And they reached their peaks taking wildly different paths. The IFA 100 was erratic while the PRPFX was smooth and steady. The HBPP and PBPP were even steadier but with slightly lower returns than PRPFX.

In a fairer comparison of IFA portfolios to permanent portfolios, the IFA 50 had a 13.0% gain. The long term risk of IFA 50 is closer than IFA 100 to that of HBPP.

One of the surprises of 2010 was the relatively poor performance of the Larry Swedroe Minimum Fat Tails portfolio. Its long term risk-adjusted results for the last 30 years were quite good when compared to the HBPP. But not so in 2010. Digging into it shows that 70% of the portfolio is in TIPS or short term Treasuries. They were up 6.1% and 2.3%, respectively. The other 30% of the portfolio is 15% small cap value and 15% emerging market. They helped to bring the whole portfolio up to a 8% return for the year. I have often heard people say that investing in TIPS is protection against inflation. I think I’d rather have gold (up 29.3%) serving as intended in its inflation-protection role.

The purist Harry Browne Permanent Portfolio (ETF version) which invests one quarter in each stocks, bonds, cash, and gold had these respective gains: VTI 17.4%, TLT 9.0%, SHY 2.3%, and GLD 29.3% for a total return of 14.5%.

My variation of Harry Browne’s portfolio was up 15.8% because of a slightly riskier stock position. Instead of putting a quarter in VTI (up 17.4%), I place an eighth in small cap value (VBR up 25.1%) and an eighth in emerging markets (VWO up 19.5%) for a combined stocks gain of 22.3%.

And in a final note, I am finally fully invested in my own portfolio, with some minor variations due to legacy investments (like that amazing SCCO). So with my large cash holding through most of the year, my portfolio gained 11.3% in 2010. Considering that I am counting on an average 6% gain, I dun purty good.

Good luck in 2011. See you right here again in 365 days.

[Returns computed using Yahoo! Finance adjusted historical quotes from 12/31/09 through 12/31/10 except IFA from IFA.com and after 0.9% max advisor fee.]

Lazy Portfolios Through November 2010

The lazy portfolios did not all move in lock step during November — some went up and some went down. The PRPFX mutual fund took the lead with a monthly gain of 1.4% while the Paul Boyer PP and Harry Browne PP stayed relatively flat for the month. IFA Index Portfolio 100 gained over 1% (est.) to vault into 2nd place for 2010. The biggest loser for November was the Scott Burns’ Five Fold Portfolio losing 3.3% due to its REIT and foreign bond holdings. One more month go to and we can crown the 2010 Lazy Portfolio champion.

Click for larger graphic.

Data calculated using Yahoo! Finance historical adjusted quotes, except for IFA from IFA.com and using 11/29/10 data. There may be errors in the calculations, invest at your own risk.

MMM-181: Throwing the Bums Out

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Got Feedback? Try any one of these methods:

• email: feedback AT MadMoneyMachine DOT com
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Upton Sinclair’s Advice for Improving Your 401(k) Returns

Here’s a video I put together quickly around IFA’s Quote of the Week 79.
Upton Sinclair’s quote is, “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” The quote applies to your 401(k) plan and those who make their salary upon recommending actively-managed funds.