April 18, 2012: How Much to Start?

Thanks to extreme competition in the discount brokerage industry, it is surprisingly easy to start a Permanent Portfolio. I have been using the PP for a while now, but I was curious to see what options are available to new investors.
It is extremely important to focus on commissions and luckily the discount brokers have been in a race to the bottom, offering free trades on certain ETFs. This is nice for a new PP investor because the strategy is so passive, meaning ETFs are a good vehicle for gaining exposure to the asset classes. When looking for a broker to illustrate this point, TD Ameritrade really stood out because they have no account minimums. Combined with their free  trades for certain ETFs, investors encounter little friction getting started.
Example:
  • Stocks- $500 in VTI
  • Long Bonds- $500 in TLT
  • Short Bonds (Cash)- $500 in SHY
  • Gold-$500 in GLD
Through TD Ameritrade, all of these instruments can be bought with no commission with the exception of GLD ($10 commission). The larger the portfolio is the less that $10 commission is going to sting, so I think a self-imposed $2,000 dollar minimum is prudent. If available, tax advantaged accounts (Roth or Traditional IRA) would be best for this PP especially because GLD has some tax complications if held in a taxable account.
Two thousand dollars is nothing to scoff at, but that is an extremely low minimum for how sophisticated of a portfolio you are constructing. The PP has the ability to perform well in a variety of economic/financial crises while still churning out respectable returns in times of prosperity. Many investors turn to hedge funds for this kind of performance and those vehicles require millions of dollars to get started. Realistically, you are likely getting a better portfolio than the average hedge fund and at far less cost.

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