The Permanent Portfolio – Harry Browne′s Long–Term Investment Strategy

<p>Foreword xi</p>
<p>Preface: Life Is Uncertain xv</p>
<p>Acknowledgments xix</p>
<p>CHAPTER 1 What Is the Permanent Portfolio? 1</p>
<p>A Simple Idea 1</p>
<p>A Simple Allocation 3</p>
<p>Simply Great Results 3</p>
<p>CHAPTER 2 The 16 Golden Rules of Financial Safety 5</p>
<p>Rule #1: Your Career Provides Your Wealth 6</p>
<p>Rule #2: Don t Assume You Can Replace Your Wealth 6</p>
<p>Rule #3: Recognize the Difference between Investing and Speculating 6</p>
<p>Rule #4: No One Can Predict the Future 7</p>
<p>Rule #5: No One Can Time the Market 7</p>
<p>Rule #6: No Trading System Will Work as Well in the Future as It Did in the Past 8</p>
<p>Rule #7: Don t Use Leverage 8</p>
<p>Rule #8: Don t Let Anyone Make Your Decisions 9</p>
<p>Rule #9: Don t Ever Do Anything You Don t Understand 9</p>
<p>Rule #10: Don t Depend on Any One Investment, Institution, or Person for Your Safety 10</p>
<p>Rule #11: Create a Bulletproof Portfolio for Protection 11</p>
<p>Rule #12: Speculate Only with Money You Can Afford to Lose 11</p>
<p>Rule #13: Keep Some Assets Outside the Country in which You Live 11</p>
<p>Rule #14: Beware of Tax–Avoidance Schemes 11</p>
<p>Rule #15: Enjoy Yourself with a Budget for Pleasure 12</p>
<p>Rule #16: Whenever You re in Doubt about a Course of Action, It s Always Better to Err on the Side of Safety 12</p>
<p>Investing and the Rules of Life 12</p>
<p>Recap 13</p>
<p>CHAPTER 3 Permanent Portfolio Performance 15</p>
<p>Growth, No Large Losses, and Real Returns: The Holy Trinity 16</p>
<p>Only Real Returns Matter 24</p>
<p>Looking at Total Performance Over Time 26</p>
<p>Recap 30</p>
<p>CHAPTER 4 Simple, Safe, and Stable 33</p>
<p>Simplicity 33</p>
<p>Safety 34</p>
<p>Stability 35</p>
<p>Making the Most of Your Investments 36</p>
<p>Expect the Unexpected 44</p>
<p>Recap 46</p>
<p>CHAPTER 5 Investing Based on Economic Conditions 47</p>
<p>When Diversification Fails 48</p>
<p>A Different Way to Diversify 55</p>
<p>Four Economic Conditions 57</p>
<p>Four Economic Conditions &thorn; Four Assets &frac14; Strong Diversification 60</p>
<p>How the Portfolio Works with Economic Conditions 62</p>
<p>Recap 64</p>
<p>CHAPTER 6 Stocks 65</p>
<p>Benefits of Stocks 65</p>
<p>Risks of Stocks 66</p>
<p>Volatility 67</p>
<p>Owning Stocks 68</p>
<p>Recommended Stock Index Funds 69</p>
<p>Which Type of Index Fund to Use? 70</p>
<p>Why Use an Index Fund? 70</p>
<p>Avoid Actively Managed Stock Funds 74</p>
<p>Indexing Is a Marathon 78</p>
<p>Beware of Trading Costs 79</p>
<p>Large–Cap and Small–Cap Stocks 80</p>
<p>International Stock Funds 81</p>
<p>A Warning About Company Stock 84</p>
<p>No Index Funds What to Do? 85</p>
<p>Recap 85</p>
<p>CHAPTER 7 Bonds 87</p>
<p>Benefits of Bonds 87</p>
<p>Risks of Bonds 89</p>
<p>Volatility 90</p>
<p>Bonds and Deflation 92</p>
<p>Owning Bonds 93</p>
<p>Bonds to Buy 94</p>
<p>Buying Bonds 94</p>
<p>Other Bond Risks The Case for Treasury Bonds 98</p>
<p>Bonds to Avoid 103</p>
<p>Flight to Safety 108</p>
<p>Earning Money Multiple Ways 111</p>
<p>Bond Risk Matrix 112</p>
<p>Bond Funds and Retirement Plans 114</p>
<p>Recap 114</p>
<p>CHAPTER 8 Cash 117</p>
<p>Benefits of Cash 117</p>
<p>Risks of Cash 120</p>
<p>Volatility 121</p>
<p>Owning Cash 123</p>
<p>Cash Risks The Case for Treasury Bills 128</p>
<p>Cash to Avoid 132</p>
<p>Cash Risk Matrix 140</p>
<p>Cash and Retirement Plans 140</p>
<p>Recap 141</p>
<p>CHAPTER 9 Gold 143</p>
<p>Benefits of Gold 144</p>
<p>Risks of Gold 145</p>
<p>Volatility 147</p>
<p>Causes of Inflation 148</p>
<p>Gold Protects During Extreme Events 149</p>
<p>No Interest, No Dividends, No Problem 152</p>
<p>Why Do Central Banks Hold So Much Gold? 153</p>
<p>Owning Gold 153</p>
<p>Buying Gold 154</p>
<p>Buying and Storing Gold at a Bank 157</p>
<p>Gold Funds 158</p>
<p>Assets to Avoid 163</p>
<p>Limit Gold Bullion Sales Taxes 171</p>
<p>Other Considerations 171</p>
<p>Recap 173</p>
<p>CHAPTER 10 Implementing the Permanent Portfolio 175</p>
<p>Key Concepts 175</p>
<p>Four Levels of Protection 177</p>
<p>Level 1 Basic All Funds 179</p>
<p>Level 2 Good Funds, Bonds, and Gold 182</p>
<p>Level 3 Better Funds, Bonds, and Gold 185</p>
<p>Level 4 Best Funds, Bonds, Gold, and Geographic Diversification 187</p>
<p>All In, or Wait? 190</p>
<p>Other Portfolio Ideas 192</p>
<p>Final Considerations 193</p>
<p>Recap 194</p>
<p>CHAPTER 11 Portfolio Rebalancing and Maintenance 195</p>
<p>Two Primary Purposes of Rebalancing 197</p>
<p>Rebalancing Maintains Firewalls 199</p>
<p>How to Rebalance: Rebalancing Bands 201</p>
<p>Withdrawals and Rebalancing 203</p>
<p>Timing Can Influence Rebalancing 203</p>
<p>Adding New Money to the Portfolio 204</p>
<p>Allocating Dividends 204</p>
<p>Different Approaches to Rebalancing 205</p>
<p>Emotional Aspects of Rebalancing 206</p>
<p>Rebalancing and Taxable Accounts 207</p>
<p>Recap 208</p>
<p>CHAPTER 12 Implementing the Permanent Portfolio Internationally 209</p>
<p>The World Is Not Flat 209</p>
<p>Applying the Same Principles Across Countries 212</p>
<p>Various Country Options 214</p>
<p>Canada 215</p>
<p>Europe 218</p>
<p>United Kingdom 222</p>
<p>Australia 223</p>
<p>Asia, Middle East, and the Rest of the World 225</p>
<p>Developing Country Investing 226</p>
<p>Recap 228</p>
<p>CHAPTER 13 Taxes and Investing 229</p>
<p>Simplicity Is Often the Best Tax Strategy 229</p>
<p>Tax–Free Savings Vehicles 231</p>
<p>Types of Taxable Events 231</p>
<p>Ordering of Assets and Tax Planning 233</p>
<p>Retirement Accounts and the Permanent Portfolio 238</p>
<p>Individual Retirement Accounts 241</p>
<p>Pensions, Social Security, and Other Plans 243</p>
<p>Tax–Loss Harvesting 243</p>
<p>Final Thoughts on Taxes 245</p>
<p>Recap 246</p>
<p>CHAPTER 14 Institutional Diversification 247</p>
<p>What Is Institutional Diversification? 247</p>
<p>Why Institutional Diversification? 248</p>
<p>Identity Theft 251</p>
<p>Natural Disasters 252</p>
<p>Terrorism 252</p>
<p>Cyber Attack 252</p>
<p>How to Divide Your Money 253</p>
<p>Recap 254</p>
<p>CHAPTER 15 Geographic Diversification 257</p>
<p>Then and Now 257</p>
<p>What Is Geographic Diversification? 257</p>
<p>What Assets Should Be Kept in a Foreign Account? 258</p>
<p>Why Geographic Diversification? 258</p>
<p>Geographic Diversification and a Warning for U.S. Citizens 262</p>
<p>Even Politicians Do It 264</p>
<p>The Reality Risk Spectrum 265</p>
<p>Types of Geographic Diversification 267</p>
<p>Overseas Gold Storage Options 270</p>
<p>New Zealand 270</p>
<p>Australia 273</p>
<p>United States 276</p>
<p>Switzerland 278</p>
<p>Intermediaries for U.S. Citizens 283</p>
<p>Swiss Gold Storage Services for U.S. and Non–U.S. Citizens 285</p>
<p>Safe Deposit Boxes 287</p>
<p>Geographic Diversification Matrix 289</p>
<p>Disclosing Accounts U.S. Citizens 290</p>
<p>Emergency Options 292</p>
<p>Other Options 293</p>
<p>Recap 293</p>
<p>CHAPTER 16 The Variable Portfolio 295</p>
<p>Why a Variable Portfolio? 296</p>
<p>Three Rules for the Variable Portfolio 296</p>
<p>Modifying the Permanent Portfolio 299</p>
<p>Can You Really Ever Beat the Market? 299</p>
<p>Recap 300</p>
<p>CHAPTER 17 Permanent Portfolio Funds 303</p>
<p>The Permanent Portfolio Fund 303</p>
<p>Global X Permanent ETF 307</p>
<p>Recap 309</p>
<p>CHAPTER 18 Conclusion 311</p>
<p>Recommended Resources 313</p>
<p>About the Authors 317</p>
<p>Index 319</p>