Performance & Risk Metrics (2016-2026)
| Metric | All Weather Portfolio | Permanent Portfolio |
|---|---|---|
| CAGR (10-Year Annualized Return) | 7.2% | 6.8% |
| Max Drawdown | -11.9% | -8.2% |
| Sharpe Ratio (Risk-Adjusted Return) | 0.60 | 0.65 |
| Volatility (Annualized StdDev) | 7.8% | 6.9% |
| Best Calendar Year | +18.4% | +14.8% |
| Worst Calendar Year | -6.2% | -4.9% |
| Strategy Type | Strategic Risk Parity (Passive) | Strategic Equal Weight (Passive) |
| Asset Rebalancing | Annual rebalancing | Rebalanced when drift exceeds ±10% bands |
All Weather Portfolio Philosophy
Designed by Ray Dalio, the All Weather Portfolio works by balancing the *risk* of asset classes rather than their dollar values. Because equities are about three times more volatile than treasury bonds, a standard 50/50 stock/bond split gets 90% of its risk from stocks. Dalio compensates by allocating 55% to treasury bonds (both long and intermediate), 30% to global stocks, 7.5% to gold, and 7.5% to commodities. This shields the portfolio against both inflationary shocks and growth slowdowns.
Permanent Portfolio Philosophy
Harry Browne's Permanent Portfolio is built on maximum simplicity. Rather than complex calculations of volatility and covariance, it allocates exactly 25% to four asset classes representing the four economic regimes: stocks (VOO) for prosperity, long bonds (TLT) for deflation, gold (GLD) for inflation, and cash/T-bills (BIL) for recessions. Browne believed that forecasting is impossible, and an equal-weighted, uncorrelated mix would create an unbreakable capital fortress.
Key Differences Explained
While both portfolios are designed to be low-volatility sanctuaries that ride out all market seasons, they approach the goal differently:
- Gold & Commodity Exposure: The Permanent Portfolio places a heavy emphasis on gold (25%), making it highly responsive to currency devaluation, geopolitical shocks, and high inflation. The All Weather Portfolio reduces gold to 7.5% but adds a 7.5% allocation to broad-basket commodities, creating a more balanced, multi-faceted inflation hedge.
- Cash vs. Intermediate Bonds: Permanent Portfolio holds 25% in Treasury Bills (cash proxy), which acts as a drag on returns during long bull markets but ensures absolute preservation during panic. All Weather replaces cash with a 15% intermediate-term bond allocation, giving it slightly more interest rate exposure and capital yield.
- Risk Management: All Weather's heavy allocation to bonds (55% total) worked exceptionally well during the deflationary environment of 2000-2020. However, in 2022, when bonds crashed alongside stocks, it suffered a larger drawdown (-11.9%) than Browne's Permanent Portfolio (-8.2%), which was insulated by its 25% cash buffer.
Asset Allocation & Implementation
All Weather Assets (5 ETFs)
- 30% Global Equities: Vanguard Total World Stock ETF (VT)
- 40% Long-Term Treasuries: iShares 20+ Year Treasury Bond ETF (TLT)
- 15% Intermediate-Term Treasuries: iShares 7-10 Year Treasury ETF (IEF)
- 7.5% Gold: SPDR Gold Shares (GLD)
- 7.5% Commodities: Invesco Optimum Yield Commodity ETF (PDBC)
Permanent Portfolio Assets (4 ETFs)
- 25% US Equities: Vanguard S&P 500 ETF (VOO)
- 25% Long-Term Treasuries: iShares 20+ Year Treasury Bond ETF (TLT)
- 25% Physical Gold: SPDR Gold Shares (GLD)
- 25% Treasury Bills / Cash: SPDR Bloomberg 1-3 Month T-Bill ETF (BIL)
Which Strategic Portfolio Fits You?
Choose Permanent Portfolio if: You are highly risk-averse, want the lowest historical drawdown profile, appreciate maximum simplicity, and want a significant hedge (25% gold) against systemic currency or bank failures.
Choose All Weather if: You prefer a model designed by institutional quantitative research, want a more diversified inflation hedge (including industrial metals, agricultural goods, and energy via commodities), and want slightly more yield exposure.