This potpourri portfolio aims at covering financial pitfalls
San Francisco — Terry Coxon says he doesn't want to be in the ''financial-wizard business.'' Instead he's in the mutual fund business. Mr. Coxon has begun a mutual fund, called the Permanent Portfolio Fund, which he says is designed so an investor can ''walk away from'' the investment, sleep at night, and, he hopes, not wave goodbye to his cash. He is supposed to be able to sleep no matter what happens - runaway inflation, Great Depression, or Prosperity for All.
The concept of this ''permanent portfolio'' is simple: Diversify the holdings so broadly so that no matter what economic scenario develops, investor risk is limited. Thus, the pie that makes up the portfolio looks like this:
Obviously, it does not take a great deal of expertise to invest in most of these areas. Mr. Coxon, interviewed over dinner in San Francisco, agrees that ''there is very little you can't do here on your own.'' But he says, ''We make it easy for you.''
So far, a lot of investors are investing and walking. Since the no-load mutual fund became effective on Dec. 1, it has attracted $32 million. Currently, where Mr. Coxon lives and works.
The results to date are nothing to get excited about. The fund was issued at percent. On an annualized basis that would be 18.2 percent. By way of comparision, the Wiesenberger Investment Companies Service reported the average mutual fund designed for maximum capital gains was up 30.8 percent for the six months ending April 30, and 54.9 percent for the year ending April 30.
Coxon, however, is not uneasy. ''We are probably the world's most boring mutual fund,'' he candidly states. ''There is very little risk of an abrupt change of value of the fund.'' The average rate of return is projected at 15 percent a year - providing very little excitement along the way.
In theory, this is how Permanent Portfolio is supposed to work. If inflation returns, the gold and silver parts of the fund are supposed to benefit. (It will hold gold and silver in either bullion or coin form.) The same is true of the Swiss franc part of the fund, which will be invested in accounts in Swiss and non-Swiss banks.
The 15 percent of the fund invested in United States and foreign real estate and natural resource companies is also supposed to protect the investor from inflation, while the ''specially'' selected stocks are geared to benefit from ''a soft landing'' economic scenario. The soft landing envisions an economy that grows slowly with reduced inflation and interest rates. The bond portfolio is supposed to benefit if ''deflation'' should cause interest rates to continue to fall.
Naturally, different parts of the portfolio react in different ways. Gold and silver, for example, will often move in different directions, since silver is more attuned to the economy. And, as Mr. Coxon notes, the individual stocks in the portfolio may react differently - not as a group. Since the fund was started , the specially selected stocks are up 22 percent and the real estate and natural resource stocks are up 25 percent.
In buying stocks, Mr. Coxon looks for companies that produce capital goods, have had financial problems but are now on the mend, and react quickly to changes in market direction. A sampling of his stock selections includes troubled companies such as Air Florida and Banner Industries and more volatile issues such as Coachmen Industries Inc., Financial Corporation of America, Aydin Corporation, and Control Data.
Despite his positions in gold and silver, Mr. Coxon is not overly bullish on the precious metals. The big bull market in gold which some people have forecast has not begun yet, he says. And he believes the supply and demand for silver is balanced between $10 and $20 per troy ounce.
Mr. Coxon got his idea for the fund from Harry Browne, who is best known for his books, ''How You Can Profit From the Coming Devaluation'' and ''You Can Profit From a Monetary Crisis.''
Even though the fund has been designed to operate no matter what the economic climate, Mr. Coxon has hired Mr. Browne as a consultant, along with two other ''crisis'' authors, Douglas R. Casey (''Crisis Investing'') and James Benham, head of the Capital Preservation Fund. Maybe Mr. Browne's next book will be ''You Can Profit From Consulting.'' Of course, the fund must perform well or there will be no profits or investors.
Will the concept work?
Without having seen a prospectus, Justin Heatter, a financial counselor and author of a new book, ''The Small Investor's Guide to Large Profits in the Stock Market,'' says the concept ''sounds interesting.'' Although he has some small disagreements with how the fund is divided up, he says, ''Everyone needs some diversification, and it looks like he (Mr. Coxon) is providing it.'' Mr. Heatter is not certain that it would fit in with the objectives of someone in his early years, who might like more aggressive growth, or someone in his later years, who might want more income.