I have a 403b account with Fidelity that I am trying to replicate the Permanent Portfolio with as best I can. I know it is impossible to do this exactly.
Fidelity has a gold miner sector fund (FSAGX). Miner’s is not gold – and are much more volatile. Peak to trough miners lost twice as much as gold in 2008-9. Gold was up in 2008, but fell sharply in early 2009. Miners act like a cross between stocks and a levered gold play.
To reduce this volatility - my thought is to increase other assets and reduce gold … a 30/30/30/10 split stock / long treas. / 2 year / miners
Using Simba’s data, back to 1985 (& Vanguards Precious Metal Fund) & having some international stocks as done in my PP Roth (LCB & Tot. Dev. Int.) I found:
........................CAGR / SHARPE / SORTINO / down 2008
4X25 w/GLD........ 8.49 / .66 / 1.48 / -1.3
30/30/30/10........ 9.60 / .67 / 1.46 / -8.6
30*/30/30/10........ 9.48 / .74 / 1.65 / -6.4
*stock portion in FFNOX (a 4 in one index of LCB(500), extended market, int., bonds). FFNOX has bonds, being 30% in FFNOX only increases direct stock holdings to 25.5%. I think this is important because miners are
stocks. It will also be slightly easier to manage. It is my favorite option.
Similar results are found if I use total international w/ emerging markets and TSM (not LCB) but w/ higher returns.
One side thought related to another thread – Bernstein’s comment that the correlation between stocks and gold will approach one because gold is now tradable is not borne out by the annual correlation between stocks and miner stocks (that have always been tradable) that sits at around .24 since 1985. Thus I think miners are as much a levered gold play as anything else (stocks and gold same period is -.17 annual correlation) …
I am not a big fan of holding the hard asset outside the 403b as rebalancing is complex. My 403b account is frozen to new investments (my school switched to new plan sponser) and cannot be rolled out except to the new plan sponser.