The first half of the year is over, time to check the Swiss permanent portfolio performance. As per the definition set by Harry Brown, the permanent portfolio should consist of 4 pillars:
Using the above template as basis and as explained in here, I split my investment within 3 funds:
Just looking at the first three asset classes during the first six months. We can see that both equities and gold performed well, summing up to 16.46%:
This is somehow weird behavior as normally Gold and Equities are correlated reversely to each other, i.e. Gold tends to rise when Equities fall and vice versa. For me it shows that the market is not really certain what is going on, from one side rise of the equities is a good sign of stability and growth, but on the side gold appreciation shows a mood of uncertainty and worries.
The beauty of the permanent portfolio is it's ability to generate positive revenue independently of the market behavior. There will always be a part which benefits of the current financial atmosphere. Growth environment will push the equities part upwards, inflation affects the gold and deflation affects positively the bonds. I created the Swiss version mentioned above since I want to remove the currency risk out of the equation.
I love this setup as it is so easy to build and maintain. Basically, you need to make sure there is always equal parts of your capital split between the assets. Once in every three months invest your saved capital and re-balance the portfolio, that`s about it.
Disclaimer: I am an amateur investor. I don
- Equities
- Bondsbonds.
- Gold
- Cash
Swiss Permanent Portfolio Version
Using the above template as basis and as explained in here, I split my investment within 3 funds:
- AUCHAH - The fund aims to primarily reflect gold's performance, after deduction of the running costs. The fund's assets are exclusively invested in physical Gold.
- CSBGC0 - The fund invests exclusively in bonds and other fixed or variable-rate debt instruments and rights, denominated in Swiss francs, of the Swiss Confederation, which are included in the Swiss Bond Index Domestic Government 7+.
- SPICHA - The fund's investment objective is to replicate the price performance and returns of the Swiss Performance Index SPI(R). The SPI(R) comprises the about 230 largest stocks in the Swiss equity market.
- Cash - Using my own proprietary algorithm to trade with Darwinex.
January - June Performance
Just looking at the first three asset classes during the first six months. We can see that both equities and gold performed well, summing up to 16.46%:
This is somehow weird behavior as normally Gold and Equities are correlated reversely to each other, i.e. Gold tends to rise when Equities fall and vice versa. For me it shows that the market is not really certain what is going on, from one side rise of the equities is a good sign of stability and growth, but on the side gold appreciation shows a mood of uncertainty and worries.
In Summary
The beauty of the permanent portfolio is it's ability to generate positive revenue independently of the market behavior. There will always be a part which benefits of the current financial atmosphere. Growth environment will push the equities part upwards, inflation affects the gold and deflation affects positively the bonds. I created the Swiss version mentioned above since I want to remove the currency risk out of the equation.
I love this setup as it is so easy to build and maintain. Basically, you need to make sure there is always equal parts of your capital split between the assets. Once in every three months invest your saved capital and re-balance the portfolio, that`s about it.
Disclaimer: I am an amateur investor. I don
t have financial adviser license or any other financial license. The contents of this post are not professional guidance or recommendation to do any action with any financial instrument and you cant use them instead of consulting a professional who knows your specific needs. If you choose to use this information, you are doing it on your account and responsibility.
Hello, why aren't there further updates?
ReplyDeleteSecond question: the Bond section according to Brown should be long (ca. 25 ys), the ETF you choose is 7 yrs, why?
Thank you
Dear Fran,
ReplyDeleteThank you for these important questions.
I didn't provide any updates as this portfolio was done as an example showing that Brown theory can be used in any market. Nevertheless, I am still having the same setup, using the same funds.
I chose the 7 years ETF as this fund has the most volume in the ETFs I am dealing with in Switzerland, if I had a fund with longer maturity which is also liquid, I would chose it for sure.
The cash part is also invested differently than Brown suggested, I put it on an FX algorithm trading 24/5 as shown here - https://www.darwinex.com/darwin/GFA.4.21. This is the algorithm I wrote which is open for investors as well as my own funds.
Hope it helps, for any other questions don't hesitate to reach out to me.
Regards,
Roy
Dear Roy, thank you for your accurate answer.
ReplyDeleteSince the idea of the PP is that always one or two assets are going to underperform while others are thriving, I was thinking to start buying the underperforming (now the stocks and gold) and wait for a better deal regarding bonds, even if the suggestion I always read is to buy all together (I'm an early retired, so all my capital is already waiting in cash). An alternative would be a Dollar-cost averaging (in my case a CHF-cost averaging) but I find it more stressful. Do you have an opinion about that?
Also I'm having some doubts about which platform to use.
One year ago I did an experiment confronting a swiss bank to an italian one, building the same portfolio in both. What I found out was that both were cheating a bit, adding expenses that were not included in the initial agreement (I found out and eventually got the money back).
The main difference are the custody fees: none for the italian bank and 0.167% for the swiss bank. Also both banks are reluctant to write down a formal contract so they could change their fees in every moment.
So I started exploring the online brokers universe and the best reviewed is Interactive Brokers (cfr. for example the swiss mustachian forum) but is abroad (England, Brexit chaos...) and the amount of money as I said is conspicuous... I was thinking about CornerTrader but keeping the cash portion in the 'normal' swiss bank. Again, any opinion to share?
Thank you