On the back of a post here in the Gold thread, I did some more digging on Harry Browne
Interesting fellow was old Harry and he wrote several books
Harry says that you should divide your investment money into two categories:
For that money you cannot afford to lose he prescribes his “permanent portfolio” for safety, stability, and simplicity as per the below
I'd read other pieces where the precious metals was a combination of gold & silver, others just mention gold.
Once a year, if any part of the portfolio has dropped to less than 15% or grown to over 35% of the total, you re-balance the portfolio to ensure weightings of 25% in each asset allocation.
There's a thread here on the Permanent Portfolio's Performance and Historical Returns
PS: For the money you can afford to lose, Harry suggests a “variable portfolio”, with which you can do anything you want
A couple of charts (with sources) track the portfolio
Source
Source
There's an actual US Permanent Portfolio Fund: PRPFX
As I said, interesting reading
Interesting fellow was old Harry and he wrote several books
The Permanent Portfolio was created in 1981 by Harry Browne, an American investment adviser, writer and politician who died in 2006.
It’s dead simple. You put your money into four equal buckets: stocks, long-term government bonds, cash, and yes, gold.
In the 30 years since Browne first wrote about it, the Permanent Portfolio has delivered an annualized return of more than 8%.
Even since 2000, the start of the worst decade for stocks since the Depression, it has hovered around that 8% mark. No wonder it’s attracted a new generation of disciples.
The logic behind this is the perception that the economy is always in one of four states:
- Prosperity
- Inflation
- Recession
- Depression
In each of these environments, one class of investments will over-perform enough to compensate for the underperformance of the others.
I think it has historically tracked the stock market, apparently without the volatility. There is also an annual rebalancing of the portfolio to ensure an equal balance of investment funds within those 4 buckets
Harry Browne
Source
There is an actual US Fund called the Permanent Portfolio Fund that in 2001 had funds of around $52 million and in 2011 of $15.5 Billion (flight to safety?) this fund is made up of:
35% Bonds
30% Stocks (US)
20% Gold
10% Swiss francs/ Swiss government debt
5% Silver
Harry says that you should divide your investment money into two categories:
- Money you cannot afford to lose.
- Money you can afford to lose.
For that money you cannot afford to lose he prescribes his “permanent portfolio” for safety, stability, and simplicity as per the below
- 25% in U.S. stocks, to provide a strong return during times of prosperity. For this portion of the portfolio, Browne recommends a basic S&P 500 index fund
- 25% in long-term U.S. Treasury bonds, which do well during prosperity and during deflation (but which do poorly during other economic cycles).
- 25% in cash in order to hedge against periods of contraction or recession. A money market fund.
- 25% in precious metals (gold, specifically) in order to provide protection during periods of inflation. Browne recommends gold bullion coins.
I'd read other pieces where the precious metals was a combination of gold & silver, others just mention gold.
Once a year, if any part of the portfolio has dropped to less than 15% or grown to over 35% of the total, you re-balance the portfolio to ensure weightings of 25% in each asset allocation.
There's a thread here on the Permanent Portfolio's Performance and Historical Returns
PS: For the money you can afford to lose, Harry suggests a “variable portfolio”, with which you can do anything you want
A couple of charts (with sources) track the portfolio
Source
Source
There's an actual US Permanent Portfolio Fund: PRPFX
As I said, interesting reading