This article details the Permanent portfolio by Harry Browne. Here you will find asset allocation and performance for this genius portfolio.
Harry Browne designed his portfolio to do well in almost any market situation. It is easy to understand and to implement. The permanent portfolio has 4 asset classes each betting on a particular market climate. It is described in his book Fail-Safe Investing and in The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy.
Harry Browne’s Permanent Portfolio: Do Well No Matter What Happens
- 1 Harry Browne’s Permanent Portfolio: Do Well No Matter What Happens
- 2 What is the Permanent Portfolio?
- 3 Asset Allocation for Permanent Portfolio
- 4 Returns and risk for The Permanent Portfolio
- 5 Building the portfolio
- 6 Asset allocation for The Permanent Portfolio
- 7 Advantages and disadvantages of The Permanent Portfolio
- 8 Resources
- 9 Summary and your next steps
What is the Permanent Portfolio?
The permanent portfolio is made out of 4 asset classes. Each asset class protects against a certain economic climate. The asset classes are:
- Stocks – for profit during periods of general prosperity and/or declining inflation.
- Gold – for profit during periods of bad inflation; during inflationary episodes gold bullion provides protection against a falling currency and other potential problems.
- Long-Term Bonds – for profit during periods of declining interest rates; and especially during a deflation. Bonds also do reasonably well during prosperity.
- Cash – During a recession, no particular asset class is going to do well. The cash in a Treasury Money Market Fund offers stability when portfolio asset classes fall in price. It also protects purchasing power during a deflation.
Asset Allocation for Permanent Portfolio
Returns and risk for The Permanent Portfolio
|Portfolio name||Asset class count||1 year return (2019)||Year to date||10 year return||CAGR since 1989||Drawdown||Risk Level||Expense ratio||Yield|
|The Permanent Portfolio||4||16.44%||2.80%||6.39%||6.97%||-3.15%||1 - very low risk||0.14%||1.28%|
|Paul Boyer Permanent Portfolio (MMM)||5||14.47%||1.43%||5.18%||7.59%||-6.16%||n/a||0.15%||1.45%|
Building the portfolio
Below you can see which mutual funds or ETFs you can use to build the portfolio. They are the best-in-class funds and ETFs for this purpose. Low-cost index funds. Read here how we selected the best funds.
Asset allocation for The Permanent Portfolio
- 25.00% US Total Stock Market (VTI)
- 25.00% Long Term Treasuries (TLT)
- 25.00% Cash (money market fund) (BIL)
- 25.00% Gold (IAU)
Advantages and disadvantages of The Permanent Portfolio
- Very easy to understand and to implement.
- Has great downside protection – a drawdown of only -13.48%.
- You get to hold 25% of your portfolio in gold.
- Bets on every possible market scenario negate FOMO.
- Sleep safe portfolio.
- Low-risk portfolio.
- May be too conservative with its 25% in cash (short-term bonds).
- Makes a bet on gold that may not be sustainable.
- Investors may want a more fine-grained portfolio with more asset classes.
- Low-risk portfolio, you might want to take more risk if you’re young.
Go here for a rebalance excel worksheet.
There are two good books on the Permanent Portfolio. One is Harry Browne’s own book “Fail-Safe Investing”
The other book is The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy, a great and detailed read on why the strategy works.
Summary and your next steps
Harry Browne’s Permanent Portfolio is a great portfolio for you if you’re apprehensive of the wild market swings. It does well in almost any market environment and has proved very resilient to the broader market downturns.
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