Going to Permanent Portfolio (from cash+TSM), via DCA

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Joypog
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Going to Permanent Portfolio (from cash+TSM), via DCA

Post by Joypog »

We've built up a ridiculous cash position (with a decent holding in TSM) hoping to change homes soon. Unfortunately, everyone else in the Vegas wants a new house more than we do. So I think we're going to settle back into our current home and start investing in the market.

We're very cautious (another reason we built up a huge cash position). I also work for the government so if I can hang for another 15 years, I will have a healthy pension if the State doesn't go bankrupt. As such, I don't need to kill it in the market, just avoid big losses.

After reading a bit online and Craig Rowland's book, I'm ready to move into the Permanent Portfolio (PP). As Dr. Berstein noted, the biggest danger of the PP strategy is the investor. However, I'm really digging the core concept of the PP strategy and my psychology fits well with the PP stance of of valuing loss avoidance much more than missing out on potential gains. In boardgames I always take the slow and steady strategy to invarably end up in second place (aka first loser :P ). Also, the hefty cash position in the PP would let us quickly drop a down payment on a house if something comes up.
http://www.efficientfrontier.com/ef/0adhoc/harry.htm

Even though a DCA approach is not considered optimal, I'm thinking about using this tactic given our cautiousness. I'm pretty sure a sudden crash in gold after a quick entrance would be exponentially more painful than slowly chasing a constantly rising gold market. Heck we're already comfortably enjoying a death by a thousand cuts with our cash holdings.

As such, I think we'll just start buying $10k in gold and $10k in 30-year T Bonds every month. By the end of the year I'll have a $320k "permanent portfolio" (80k per asset class x 4) and by the middle of 2023 we'll have moved all our savings into the PP. (Except for an extra 30k cash emergency fund outside of the PP.)

General Question: Does this sound like a good investment plan to get fully vested in to the PP?

Gold Question: Where should I locate the Gold ETF - Taxable or Roth IRA? Craig Rowland recommends taxable accounts for gold, but the 28% collectible tax concerns me...especially if we do a sudden downward rebalance when we finally stumble across the perfect home. My gut feeling is to start with Roth IRA and get comfortable with holding the asset class in there before buying in taxable accounts.

College Question: Outside of the PP, I'm thinking about using about $200k to build a TIPS ladder as a "prepurchase" for our kids' college costs (in about 10 years)...beyond the 6k/year we're contributing to the kid's 529's (vanguard educational target funds). It feels like the TIPS ladder would be no risk anti inflation insurance policy to hold this money (aside from lost opportunity cost). Is there some risk I'm not thinking of?

Thanks!
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