I am opening an account with Permanent funds for a mutual fund called Permanent Portfolio (PRPFX).
The fund owns gold, silver, US bonds, swiss francs, and US growth stocks.
The purpose of this fund is to pay down our mortgage. Each year we hope to put in $1000-$3000 in this fund, then somewhere around year 20 of our mortgage, we should be able to cash in the fund and pay off the mortgage.
The fund was chosen because it diversifies what we have now (we do not own 3 of the asset classes the fund holds), it should also have low taxable distribitions (gold and silver do not pay dividends and account for close to 50% of holdings). The fund needs to beat the 5.75% rate on our first mortgage and 7.25% rate we have on our second mortgage. I am anticipating a return of close to 8% per year from this fund.
My newest investment
February 15th, 2008 at 11:26 am
February 15th, 2008 at 04:01 pm
This may be a stupid question, but since the 7.25% rate on the second mortgage and the 8% hoped for return are so close (and one is known while the other is not), why not just pay off the second mortgage directly?
February 16th, 2008 at 07:06 pm
The payments on the 7.25% mortgage are around $300/month. So investing $1000 (3X the payment) should accumulate enough to payoff the 2nd in about 10 years.
Meaning an extra payment of $1200 would pay off mortgage in 15 years (I checked this on ammortization schedule). $1000 or so to a mutual fund should also give a similar 15 year payoff.
If the fund does better than 8%, the investing wins out easily. Plus we need to pay off 1st and 2nd, and the fund will need to help with both mortgages.
In addition I could liquidate the mutual fund if I lost a job or needed the money for something else.
Plan is to accumulate enough to pay off 2nd mortgage in 10 years, then let money grow another 2-3, then pay off second mortgage, and invest the 2nd mortgage payment back into this fund, hoping to have enough 5-10 years later to pay off the 1st.
If first mortgage is paid off in 20 years, I will probably be able to retire around age 55.
February 16th, 2008 at 08:09 pm
Good luck with the new investment!
February 26th, 2008 at 11:26 am
Also, the fund doesn't have to beat the raw rate on your loans. It needs to beat the true rate after the tax deduction.
February 26th, 2008 at 11:33 am
Based on my research, than answer is yes- it owns physical bullion, which is stored and insured by the mutual fund (one of reasons for expenses is to insure the bullion which is owned, in case the bank or other entity holding it gets robbed). Again that is based on my reading the prospectus, and asking people online where bullion is kept by funds which own it.
True the fund could sell the bullion if redemptions warranted it. Myunderstanding is the fund holds around 4% in cash, this could clearly be used to meet redemptions, and it has an asset allocation model to make sure it owns a fixed % of bullion, fixed % of swiss francs and fixed % of equites. Even still the current yield is not even .5%. 7% turnover and .43% yield for 2007.
February 27th, 2008 at 04:46 am
February 27th, 2008 at 06:11 am
February 27th, 2008 at 09:29 am
It is up 11.33% YTD and 22.78 for 1 year, so there method seems to work nicely.