Striving for Optimal Growth
Disclaimer: Past returns do not guarantee future returns. The Goldstar Portfolio is an example portfolio. It is for informational purposes only and does not constitute an offer or solicitation to buy or sell any security or asset discussed herein or in any jurisdiction where such would be prohibited. Please see rest disclaimer at the bottom of this page.
We achieve optimal growth by applying the 'Kelly Criterion' and allocating capital based on our estimated risk/reward ratio's. The higher the risk/reward ratio the more we allocate to that position.
This can be scary as the highest potential rewards are found often where there is high risk as well. Also the Kelly criterion will lead to the highest optimal returns but comes at the price of also the greatest volatility.
Generally we start buying when prices have been going down for a while and the risk/reward ratio is becoming more attractive, and we start selling only when prices have gone up parabolically and the risk/reward is becoming bad short term.
We prefer to work in several small steps instead of 1 big step. We try to offer liquidity by putting up buy and sell offers close to the market price, hoping for those offers to be filled and earning the spread, instead of executing our offers immediately, taking liquidity and having to pay the spread.
The Permanent Portfolio serves as a cash position when we cannot find enough great investments/investors.
- Bitcoins, popular exchanges are bitstamp.net, btc-e.com and kraken.com. Popular storage/wallets are Blockchain.info their online wallets as well as the Armory Client (private key offline so that hackers can't steal them). As always invest at your own risk, rest disclaimer see bottom website.
- NXT, a new cryptocurrency launched end 2013. Most popular exchange is bter.com and ccedk.com. Client can be downloaded via NXT.org, or you can start an online wallet at mynxt.org. The forum can be found at nxtforum.org.
- Roland Vandamme his portfolio as published since 2000 in his payed dutch newsletter. With an average performance of 16% from 2000 until 2013 he has proven to be a top investor. His portfolio consist mostly of physical gold (65%), some physical silver (10%), some stocks & turbo's (25%) and no cash. (Update January 2014, he just bought tons of mining stocks, highly recommended!)
- Stocks from Cyprus where the market has collapsed a staggering 98%.
- Small cash position, EUR, if position is big then it goes into the European Permanent Portfolio.
Assets European Permanent Portfolio
*Note, PP was removed in April 2014, liquidated for Bitcoins @ $500.
- 25% Stocks:
- 20% iShares EURO STOXX 50 (Acc) - ISIN: IE00B4L5YV07
- 5% iShares DAX ETF (DE) - ISIN: DE0005933931 (We added this because the EURO STOXX 50 does not hold enough German companies (only 30%, less then French companies with 35%) and by adding this we hold now 41% German companies in our 25% stocks and only 28% French so that the link with the German stock market is the biggest now, as it should be since it is by far the biggest economy in the Eurozone and our bonds are also only German.
- 25% Bonds:
- Long term German bonds with a duration of 32 years when launched. We hold those that expire on 04.01.2037 and were launched in 2005 (ISIN: DE0001135275). They give 4% interest anually and today in 2012 they have a duration of another 25 years. If you buy new ones you want to buy more recent ones as they have a longer duration. For example in 2012 they released DE00011354812 and they expire in 2044, so they still have a duration of not 25 years but 31 years, which means they will go up more in value if interest rates drop. For a list of all long term German bonds see: Laufzeiten und tägliche Rendite börsennotierter Emissionen
- Why we take only bonds from Germany and not other countries is that they are the strongest government bonds in the Eurozone and that is exactly what Harry Browne wanted the 25% bonds part to hold: the strongest bonds from the region.
- We bought these via Maxblue, the online broker of Deutsche Bank Deutschland and transfered them to Finanzagentur Gmbh, the debt agency of Bundesrepublic Deutschland, for safekeeping. If Deutsche bank goes broke we don't have any problems as our bonds are not stored with Deutsche Bank but directly with the German Government. Finanzagentur is the same as 'TreasuryDirect' as they have in the USA.
- 25% Gold:
- 15% Physical gold, Krugerrands bought via KBC Bank and Napoleons bought via Gold4ex.be
- 10% Paper gold via Bullionvault.com because it is much more liquid than actual physical gold and we trust them and they have the cheapest rates around. This gold is stored in Switzerland. Since Bullionvault's headquarters are in the UK we do agree that from a government confiscation standpoint it is not very secure and better can be found. The new book by Craig Rowland and J.M. Lawson about the permanent portfolio as well as his podcast Gold in the Permanent Portfolio describes better more trustworthy solutions for gold than Bullionvault.
- 25% Cash:
- Short term German government bonds (ISIN DE0001030070), also called 'Tagesanleihen', which is a bond of only 1 day duration, meaning you can take it out every day without any costs, same as a regular savings account, or T-Bills in USA.
- Just like our long term German bonds, these 'Tagesanleihen' are also stored directly with Finanzagentur, the debt agency of the German Government. And in contrast to the long term bonds, these short term ones can be bought directly with Finanzagentur, so no bank transfer of short term bonds is needed.
Update 24 september 2012: Last month politicians have decided to shutdown Finanzagentur. As of 2013 you will still be able to open accounts but you will NOT be able to buy any new bonds anymore directly from Finanzagentur and this means NEW tagesanleihen are also cancelled as this was something exclusively released by Finanzagentur. You will however still be able to store your old tagesanleihen and bonds AND you will still be able to transfer bonds that you bought via a bank or broker, that are released before august 2012, to your Finanzagentur account, meaning that you can actually still use the account for another 10-20 years.
To know exactly which bonds you can buy and still transfer go to Bundesbank.de website, click Service - Bundeswertpapiere - Emissionskalender des Bundes - and click on Jahresvorausschau. This opens a pdf file with a list of recently released bonds in 2012, if there is written in the kolom 'Art' - 'Neumission', this means you cannot transfer them to Finanzagentur, but if there is written 'Aufstockung', you can still transfer them to Finzagentur the coming years. So if you want to buy more ST bonds in 2013 for instance, you can still buy DE0001137388 and DE0001137396 (that run till September 2014) and transfer them to Finanzagentur. And ofcourse all bonds realeased before 2012 can also still be transfered. So you could buy 30 year bonds in 2013 that expire in 2014, and this way have actually a short term bond every year. You could do this cheaply too we think as buying bonds via online brokers such as maxbluie is cheap, and Finanzagentur is paying interest and at expiration the whole amount without any costs, also storage has no costs, but not 100% sure of this. If you checked this please let me know in comment below or via email.