Quick Answer
The Golden Butterfly Portfolio holds five equal 20% slices: Large Cap stocks, Small Cap Value stocks, Long-Term Bonds, Short-Term Bonds, and Gold. Created by Tyler (PortfolioCharts.com), it targets all economic seasons with a small-cap value tilt for extra growth. Historical CAGR ~9.0%, max drawdown ~-17%.
Golden Butterfly Allocation
The Golden Butterfly divides a portfolio into five perfectly equal slices of 20% each:
Rebalance once per year back to these equal 20% weights. No market timing, no signals — purely mechanical.
What is the Golden Butterfly Portfolio?
The Golden Butterfly was created by Tyler, the author behind PortfolioCharts.com, one of the most respected independent portfolio research sites. It is an evolution of Harry Browne's Permanent Portfolio, adding a small cap value factor tilt to increase long-term growth without dramatically increasing volatility.
The philosophy: each of the five assets thrives in a different economic environment. When one asset class struggles, at least one or two others will provide ballast. The combination creates a portfolio with "all-weather" characteristics while capturing the documented small cap value premium over long time horizons.
Why Each Asset Is Included
| Asset | Thrives When | Role in Portfolio |
|---|---|---|
| Large Cap Stocks | Economic prosperity, bull markets | Core growth engine |
| Small Cap Value | Long-run bull markets (size/value premium) | Enhanced long-term return driver |
| Long-Term Bonds | Deflation, recession, flight to safety | Crisis hedge, negatively correlated to equities |
| Short-Term Bonds | Rising rates, tight monetary policy | Stability, near-cash, duration buffer |
| Gold | Inflation, currency crises, geopolitical stress | Inflation hedge, zero-correlation diversifier |
ETFs for the Golden Butterfly (European Investors 2026)
Pure US Small Cap Value ETFs are not readily available as UCITS products. The closest European-accessible alternatives are listed below:
| Allocation | ETF Name | ISIN | TER |
|---|---|---|---|
| 20% Large Cap | iShares Core S&P 500 (CSPX) | IE00B5BMR087 | 0.07% |
| 20% Small Cap Value | iShares MSCI World Small Cap (IS3S)* | IE00BF4RFH31 | 0.35% |
| 20% Long Bonds | iShares $ Treasury Bond 20+yr (DTLA) | IE00BDGMZM53 | 0.10% |
| 20% Short Bonds | iShares $ Treasury Bond 1-3yr (IBTS) | IE00B14X4S71 | 0.07% |
| 20% Gold | iShares Physical Gold ETC (SGLN) | IE00B4ND3602 | 0.12% |
* IS3S is MSCI World Small Cap, not a pure US Small Cap Value fund. Pure US SCV UCITS ETFs (like SPDR MSCI USA Small Cap Value Weighted) are available but less liquid. Check availability on your broker before purchase.
Historical Performance: Backtest Results
| Metric | Golden Butterfly | All Weather | Permanent Portfolio | S&P 500 |
|---|---|---|---|---|
| CAGR (1970–2026) | ~9.0% | ~7.7% | ~6.8% | ~10.5% |
| Max Drawdown | -17.3% | -21.0% | -19.4% | -55.2% |
| Sharpe Ratio | 0.74 | 0.66 | 0.59 | 0.55 |
| Worst Year | -11.4% | -14.6% | -12.4% | -43.3% |
| Positive Years % | 87% | 84% | 82% | 73% |
Golden Butterfly vs All Weather
Both portfolios are designed for all economic seasons, but they differ in key ways:
- Small Cap Value tilt: Golden Butterfly explicitly bets on the size + value factor premium. All Weather does not.
- Bond allocation: All Weather puts 40% in long-term bonds (higher duration risk), Golden Butterfly splits 20/20 between long and short bonds.
- Equity weight: Golden Butterfly is 40% equities (20% large + 20% small). All Weather is only 30% equities.
- Historical CAGR: Golden Butterfly ~9.0% vs All Weather ~7.7% — but the gap narrows in periods of strong bond performance (1980–2020).
Full comparison: Golden Butterfly vs All Weather →
Side-by-side data, risk metrics, and which portfolio suits each investor type.
Is the Golden Butterfly Right for You?
Good fit if you…
- ✓ Want a passive, set-and-forget portfolio
- ✓ Prioritise avoiding large drawdowns
- ✓ Believe in the long-run factor premium
- ✓ Can tolerate modest underperformance in raging bull markets
- ✓ Have a 10+ year investment horizon
Not ideal if you…
- ✗ Need to maximise CAGR above all else
- ✗ Cannot access Small Cap Value UCITS ETFs
- ✗ Have a short (<5 year) time horizon
- ✗ Expect extraordinary bull market (100% equities beats this)
Explore More
Ready to build the Golden Butterfly?
Explore the interactive strategy page, compare to other portfolios, or run a growth projection.