Performance & Risk Metrics (2016-2026)
| Metric | Larry Portfolio | Golden Butterfly |
|---|---|---|
| CAGR (10-Year) | 9.1% | 8.5% |
| Max Drawdown | -24.5% | -11.0% |
| Sharpe Ratio | 0.52 | 0.68 |
| Volatility (StdDev) | 12.2% | 7.4% |
| Best Calendar Year | +28.9% | +18.2% |
| Worst Calendar Year | -19.8% | -5.8% |
| Asset Universe | US & Int'l Small-Cap Value, US Total Stocks, Short Bonds | US Total Stocks, US Small-Cap Value, Long Bonds, Short Bonds, Gold |
| Rebalancing | Annual rebalancing | Annual or 5% drift threshold |
Larry Portfolio — Concentrated Factor Growth
Named after author Larry Swedroe, the Larry Portfolio takes an unconventional approach to risk. It allocates 75% to equities, but instead of standard market-cap indexes, it directs 50% to small-cap value stocks (split equally between US and International) and 25% to US Total Market. The final 25% is allocated to safe, short-term bonds. By using high-expected-return small-cap value factors, the portfolio targets market-beating returns. However, this tilt carries high tracking error and substantial drawdowns when value factors underperform.
Golden Butterfly — The All-Weather Optimizer
The Golden Butterfly is a highly defensive variation of Harry Browne's Permanent Portfolio. It splits capital into five equal 20% pieces: **US Total Stock Market**, **US Small-Cap Value Stocks**, **Long-Term Treasury Bonds**, **Short-Term T-Bills**, and **Physical Gold**. This allocation blends the inflation/deflation hedges of the Permanent Portfolio with a factor tilt toward small-cap value for additional growth, resulting in one of the smoothest historical performance curves in finance.
Key Differences Explained
While both portfolios utilize the small-cap value premium to boost performance, they are built for entirely different risk thresholds.
- Equity Exposure: The Larry Portfolio is 75% stock-exposed, whereas the Golden Butterfly caps stock exposure at 40% (20% total market + 20% small-cap value). This makes the Larry Portfolio far more volatile (12.2% StdDev vs 7.4%).
- Asset Diversification: The Golden Butterfly contains 20% Gold and 20% Long-Term Treasury bonds, providing reliable cushions in both inflation and deflation crises. The Larry Portfolio lacks gold and relies entirely on short-term bonds for defense, leaving it vulnerable to stock market crashes (max drawdown of -24.5% vs -11.0% for Golden Butterfly).
- Growth Dynamics: The Larry Portfolio generates a higher CAGR (9.1% vs 8.5%) because of its aggressive equity profile. In long bull markets, it will run away from the Golden Butterfly.
Side-by-Side Pros and Cons
Larry Portfolio Pros & Cons
- Higher CAGR (9.1% vs 8.5%) capturing factor premium.
- Strong international small-cap value exposure.
- Very simple rebalancing with cheap liquid ETFs.
- Very high maximum drawdown (-24.5%).
- Long tracking-error periods where value stocks underperform the broad market.
Golden Butterfly Pros & Cons
- Excellent risk-adjusted returns (Sharpe ratio 0.68 vs 0.52).
- Max drawdown of only -11.0% with very rapid recoveries.
- Includes gold for purchasing power protection.
- Holds 40% bonds and 20% gold, capping upside.
- Requires tracking 5 asset slices instead of 4.
Which Strategy is Right For You?
Choose Larry Portfolio if: You believe in historical factor premiums (small-cap and value), have a long horizon, and can stomach a -25% drawdown without selling. It is a smart portfolio for long-term growth.
Choose Golden Butterfly if: You want a smooth ride and inflation protection. If you want small-cap value exposure but cannot tolerate large stock market declines, the Golden Butterfly delivers exceptional balance.