Performance & Risk Metrics (2016-2026)
| Metric | Ivy Portfolio | Permanent Portfolio |
|---|---|---|
| CAGR (10-Year Annualized Return) | 8.8% | 6.8% |
| Max Drawdown | -14.2% | -8.2% |
| Sharpe Ratio (Risk-Adjusted Return) | 0.64 | 0.65 |
| Strategy Type | Tactical Asset Allocation (Moving Average) | Passive Portfolio (Strategic Buy & Hold) |
| Rebalancing Frequency | Monthly (on trend signals) | Annually (fixed target weights) |
Ivy Portfolio Philosophy
Meb Faber's Ivy Portfolio allocates equally across five asset classes (US equities, international equities, REITs, commodities, and bonds) and applies a 10-month simple moving average trend filter to each. When an asset falls below its SMA, the allocation moves to cash. This tactical overlay captures diversified returns while providing systematic crash protection.
Permanent Portfolio Philosophy
Harry Browne's Permanent Portfolio splits capital equally (25% each) among stocks, long-term government bonds, gold, and cash (T-Bills). Each asset class is designed to thrive in one of four economic states: prosperity, deflation, inflation, and recession. The quarterly rebalancing to equal weights captures mean-reversion gains across these structural allocations.
Key Differences Explained
Two defensive-leaning strategies with different protection mechanisms. The Ivy Portfolio uses active trend filters to move to cash, while the Permanent Portfolio uses structural gold/bond/cash diversification. The Ivy Portfolio delivers higher returns (8.8% vs 6.8%) with moderately higher drawdowns (-14.2% vs -10.5%).
- Strategy Type: Ivy Portfolio is a tactical, actively-managed approach. Permanent Portfolio is a passive, buy-and-hold approach.
- Return vs Risk: Ivy Portfolio delivered 8.8% CAGR with -14.2% max drawdown (Sharpe: 0.64). Permanent Portfolio delivered 6.8% CAGR with -10.5% max drawdown (Sharpe: 0.58).
- Maintenance: Ivy Portfolio requires monthly signal monitoring. Permanent Portfolio needs only annual rebalancing.
Side-by-Side Pros and Cons
Ivy Portfolio Strengths & Limits
- Broad 5-asset diversification across real and financial assets
- SMA trend filter provides systematic crash protection
- Moderate complexity — straightforward monthly check
- Can lag in strong trending bull markets due to diversification
- Commodities allocation can be a long-term drag
- Monthly trend signals can whipsaw in choppy markets
Permanent Portfolio Strengths & Limits
- Ultra-defensive — very low maximum drawdowns
- Gold provides inflation hedge and crisis alpha
- Simple to implement with only 4 ETFs
- 25% cash drag significantly reduces long-term returns
- Underperforms badly in strong equity bull markets
- Long-term bonds can lose heavily in rising rate environments
Which Strategy is Right For You?
Choose Ivy Portfolio if: You want higher returns with tactical crash protection. The Ivy Portfolio captures more upside while still providing systematic bear market defense through SMA filters.
Choose Permanent Portfolio if: You want the lowest possible drawdowns with zero market timing required. The Permanent Portfolio's four-equal-slice design is the simplest defensive strategy available.