UPDATE: Since most brokerages are now offering fee-free trades, this article is somewhat moot. The one change I suggest is moving from the S&P 500 index fund to the Russell 3000 total-market fund (IWV).
In reviewing the timing suggested for Harry Browne’s Permanent Portfolio re-balancing, I came across an article that back-tested monthly re-balancing. Harry’s original plan was to re-balance once a year. Monthly re-balancing results in a compounded growth rate of 9.6%, much better than the 6.2% achieved when re-balancing once a year.
The problem is that trading once a month costs money. For instance, a normal trading transaction may cost $6.95 per trade. Balancing once a month times four funds, times a buy and sell for each add up. That can cost $55.85 per month. However, some brokers offer quite a few commission-free funds for trade, so below are the alternatives I’ve picked.
Of course some people are uncomfortable with most gold ETFs because they generally only represent gold futures, and the futures market is akin to a ponzi scheme with less physical gold than there are futures contracts. Therefore, a gold trust like PHYS might be your preference, even though trading in the fund incurs fees.
Logical Invest has a monthly Permanent Portfolio re-balancing algorithm that uses the back-test monthly method from the article above to suggest a re-balancing strategy.
As an aside, I had the pleasure of meeting Harry Browne in 2000. He was a towering man (intellectually and physically) and I miss his contributions to the libertarian movement.