Permanent Portfolios

I spent the early part of my investment career researching strategies to beat the Dow. I was intrigued by the book Beating The Dow by Michael O’Higgins and John Downes. Then, I relished further work by The Motley Fool to improve upon the strategies.

Each of the Dow strategies involves using dividend yield to select a portion of the 30 Dow stocks that have historically been most primed for recovery. All are large, market-leading stocks like Boeing, Coca-Cola, Intel, Microsoft, and Wal-Mart. That they will recover is almost never in question. What is in question is which ones are most undervalued at this moment and should, therefore, perform better in the short term than the whole Dow itself.

In my own further research, I discovered a strategy better than anything ever attempted before. It’s more volatile than the Dow, but because the Dow generally rises over time, it comes out ahead of the Dow — and all other strategies intended to beat the Dow — over time. I call my strategy Double The Dow.

After putting it to work, I continued looking for better ways to beat the Dow and was pleased to discover that the best way is not with its own components, but with an entirely different index. We can still use the Dow as a benchmark, but if another index exists that loses less than the Dow in bad markets while gaining more in up markets, that index should be a better hunting ground for our investment dollars, right? Of course.

I found such an index: the S&P; Midcap 400. Then I further researched how to beat it over time. That strategy is called Maximum Midcap, and like its predecessor, Double The Dow, it has done remarkably well in both backtesting (the way I researched both) and in real life since I began using it at the end of 2002.

From December 31, 2002 to last Friday, here’s the growth of $10,000 in the Dow Jones Industrial Average (via the Diamonds Trust, symbol DIA) and in each of my permanent portfolios:

  • The Dow $14,828
  • Double The Dow $19,661
  • Maximum Midcap $27,886

Pretty exciting, wouldn’t you say?

Best of all, these strategies are completely automated. Each month, I remind Kelly Letter subscribers the day before the last trading day of the month to make their monthly investment the next day. That’s all there is to it. In each issue of The Kelly Letter, I show both the growth of the initial $10,000 in each strategy along with the growth of $100 invested on the last day of each trading month. It’s right there in print (in pixel, actually) for subscribers to follow along and watch their own money grow with the letter’s.

Double The Dow and Maximum Midcap are my permanent portfolios. They go down at times just like everything else, but they eventually come back up. Our $100 invested at the end of each month takes advantage of the down times to add more money at cheaper prices. Then, when the eventual recovery takes shape, we profit off of it instead of just getting back to even.

This is not revolutionary. It’s called dollar-cost averaging and happens automatically by just sending more money every month. It’s best suited to a volatile investment that eventually recovers, and both of my permanent portfolios are perfectly suited to this approach — by design.

I tell you this today because tomorrow is the last trading day of January and I just reminded subscribers to get ready to send their monthly contribution tomorrow.

If you give The Kelly Letter a try for a month, you’ll see exactly what the permanent portfolios buy. Do it now, and you’ll be able to make your first investment along with us tomorrow.

The cost for a month? A penny. “No way,” you say. Really.

For just a penny, you’ll receive every note I send until the end of February and have complete access to all of my research and portfolio positions on my subscriber-only website.

If you like The Kelly Letter (which you will, I’m sure), then do nothing and I’ll charge your PayPal account just $5.48 per month. If you ever want to stop (for shame!), you simply click either at PayPal or at the bottom of any note I send and both the letter and the monthly charges will stop immediately.

It’s true what The Kelly Letter has been called in the press: the last honest place on Wall Street.

To read more about The Kelly Letter, Double The Dow, and Maximum Midcap, and sign up for your one-cent trial in time to invest in the permanent portfolios with us tomorrow, please visit:

It’s a pleasure having you visit my site, and you’re welcome to keep coming back forever for free. I would simply like you to see what a wee bit of money can do for your long-term portfolio performance.

I hope to welcome you soon!

Yours very truly,

Jason Kelly

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