The Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat by Hallam Andrew

Author:Hallam, Andrew [Hallam, Andrew]
Language: eng
Format: mobi, azw3, epub
ISBN: 9781119020998
Publisher: Wiley
Published: 2014-10-13T17:00:00+00:00

Figure 10.1 Permanent Portfolio Performance, 1971–2011.

SOURCE: Craig Rowland, “Permanent Portfolio Historical Returns,” Crawling Road. Accessed May 7, 2014. www.crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/. Reprinted with permission

These results utilize a U.S. index for stocks. But investors could diversify further with a global stock index. Those from other countries may also want to utilize their own stock markets.

What Has It Done for Me Lately?

If you invest in the Permanent Portfolio and stocks soar 30 percent the following year, your money will lag the stock market's return. Even someone languishing in an expensive offshore pension could beat you for the year.

“I’ve made a mistake!” you might shriek. At this point, if you venture into the slippery world of stock market prognostications, almost certain failure lurks. You'll read about some hot new mutual fund earning triple-digit returns. You'll see scorching predictions for stocks ahead. And you'll read the “How I got rich on a single stock” stories seducing you to toss diversification into the gutter.

But fight such temptations. Whether you choose the Permanent Portfolio or the Couch Potato platform, stick to your plan. Jumping from one strategy to the next (and back when fortunes reverse) could have the same detrimental effects as buying high and selling low.

Before explaining exactly how to build such portfolios, I’ll introduce you to one more strategy. It's a Couch Potato portfolio with a twist, using a concept called Fundamental Indexing.

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