We counsel diversification and balance at Retirement Watch. It’s hard to forecast markets consistently, and it’s risky to make a bet and be wrong. Here’s a profile of a mutual fund that practices real diversification, not the pseudo-diversification of most “balanced” mutual funds. Read to learn how balance works over the long run and why you should focus on the long run and ignore short-term stumbles. Every strategy has them.
Still, Cuggino is quick to caution that the diversification and safety he preaches isn’t always in favor. After holding up far better than the equity market in 2008 (the fund lost just 8.4% that year) and admirably keeping up with the 2009 recovery, Permanent Portfolio trailed the big bull market that followed.
“We’re like the snake that ate the rat,” Cuggino says. “Three to five years of underperforming a bull market weighed on performance.” But keeping up with the year-in, year-out fluctuations of stocks isn’t the game he’s playing and when flashpoints like the Brexit produce temporary market derailments, his investors benefit from that discipline.