With the new Jimmy Carter in office, inflation is on the rise. Vast amounts of money have been tossed into the system, people are finally leaving their houses and buying things, and interest rates are at an all-time, highly artificial low. Whether you want it to or not, inflation is coming.
The traditional ways to fight inflation — gold, real estate, and commodities — might be useful tools to protect your portfolio from inflation, but cryptocurrencies might be too. Similarly, owning cash is obviously not the best bet, but is owning stocks a good decision if you want to protect your portfolio from inflation? With all this uncertainty, it can be hard for the individual investor to know what to do.
That’s why Michael Cuggino has developed a specific mutual fund meant to help investors protect themselves from the ravages of inflation. Based on Harry Browne’s (a former libertarian presidential candidate) “Permanent Portfolio,” which is composed of equal amounts of gold, cash, long-term bonds, and stocks (and therefore supposed to protect and grow the owner’s capital in any environment), Cuggino’s fund is designed to perform well in any environment, especially an inflationary one.
While it delivered mild returns (~5%) during the growing economy of better years, Forbes reports that it has delivered a 28% return over the past year.
What is it composed of? Forbes reports:
“Cuggino has veered a bit from the original Browne recipe. In lieu of 25% cash, he has 35% in short-term, high-quality bonds. He has a 10% slot for Swiss francs, a bet against the U.S. dollar.
Instead of 25% to a diversified stock portfolio, he allocates 15% to fast-growth, high-priced companies like Nvidia (semiconductors) and Twilio (software) plus another 15% to a combination of resource producers and real estate. In the latter category are Freeport McMoran (copper and gold), Texas Pacific Land Trust (oil royalties), Rio Tinto (assorted minerals), Prologis (warehouses) and Simon Property Group (malls).
Browne’s 25% allocation to gold has been refined to 20% for gold and 5% for silver. What about bitcoin? Forget it. Says Cuggino”
Cuggino’s portfolio is expected to perform well in an inflationary environment due to the precious metals, Swiss francs, and real estate. The growth stocks help it do well in more normal monetary environments.
If you want to protect your portfolio from inflation but also avoid Cuggino’s .83% fee, you can replicate his fund’s positions on your own. Forbes helpfully provides this chart to help the average investor:
However, if you want to have it done for you, as many passive investors would prefer, the ticker for Cuggino’s fund is PRPFX.
Whatever you choose to do, make sure to protect your portfolio from inflation! Slow Joe’s policies are surely going to create an inflationary environment.
By: Gen Z Conservative