Reviewing The ETF Equivalent Of PRPFX

Much has been written about the creation of an ETF equivalent of the popular Permanent Portfolio fund (PRPFX). As you know from my Wednesday ETF Model Portfolio listings, a combination of PRPFX with a variety of ETFs has been my preferred mode of operation during these times of uncertainty.

From the articles covering the subject, none of them offered a graphic performance comparison to see how well an ETF equivalent would track the original PRPFX fund.

With the help of reader Richard, who is a far better chartist than I am, we created the following ETF combination and tracking chart while, at the same time, comparing the result to the S&P 500 (SPY).

Take a look:

[Click on chart to enlarge]

As you can see, the ETF equivalent tracks its mutual fund counterpart very well, although, if you look close, there are slight discrepancies. They are not large enough, however, to make this an issue to be concerned with, especially since the tracking period covers some 4-1/2 years.

Keep in mind, the idea here is to be in general directional alignment and not try to attempt to create an exact duplicate.

Let’s hone in and see how this ETF combination has fared YTD, when applying the same matrix as I use with our ETF model portfolios:

[Click on table to enlarge]

As you can see, YTD, this ETF duplication has outperformed its mutual fund cousin by some 1-1/2%. I have been comparing the 2 since early June on a daily basis and have found that the ETF version has stayed ahead by about 1%, while slipping less during market sell offs. Obviously, there is no guarantee that this will continue in the future.

Nevertheless, since I use this combination in my advisor practice, I will add this ETF equivalent to my model portfolio collection as portfolio #7 starting next Wednesday. I will also elaborate on the trailing stop loss discipline to be used.

The obvious question in your mind might be as to whether you should use the mutual fund version or the ETF equivalent. While that is a personal choice, I use both in my advisor practice. Whenever I can, my first selection is PRPFX. However, I have a number of international clients (they are not allowed to invest in mutual funds), in which case I use the ETF equivalent.

If ETFs are your preferred investment vehicle, this may offer you a different approach to deal with the global uncertainties, which seem to have become a permanent sign of the times we’re living in.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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