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This was inspired by an article on tweaking Harry Browne's Permanent Portfolio (I cannot find that article... )
This is v.01 so it's not 100% checked and verified.Please report any errors or mistakes.
The basic PP portfolio is equal weight in 4 assets:
25% Equity
25% Bond
25% Gold
25% no-risk cash
We use SPY,TLT,GLD,SHY
We rebalance monthly.
Layer1: Added a rule to only buy if price is above the 220-day simple average. Sell if below.
Layer2: On rebalance day
a. If an asset's volatility > max volatility , decrease the size of that asset.
b. If an asset has performed well in the last few days, decrease size by 5% of equity and distribute the funds to the other assets. We assume short term Mean Reversion will decrease the asset's price to the average
c. If an asset has underperformed in the long run, decrease size by 15% of equity and distribute funds to all other assets.
Feel free to give feedback, correct mistakes and experiment.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.