About Strategy
A highly resilient asset allocation model designed by Harry Browne. Divided into four equal asset buckets (25% each) representing economic growth, recession, inflation, and deflation.
Performance Metrics (2016-2026)
| CAGR (10-Year) | 6.8% |
| Max Drawdown | -8.2% |
| Sharpe Ratio | 0.65 |
| Volatility (StdDev) | 6.9% |
| Best Year | +14.8% |
| Worst Year | -4.9% |
| Strategy Type | Passive Portfolio |
| Risk Profile | Low |
Asset Allocation
The Permanent Portfolio divides capital equally into four 25% allocations: US Equities (VOO) for economic growth, Long-Term Treasury Bonds (TLT) for deflation/recession protection, Gold (GLD) as an inflation hedge, and Cash/Short-Term T-Bills (BIL) for stability and optionality. Each bucket is designed to thrive in one of four possible economic environments.
Execution Rules
- Allocate 25% to each of four asset classes: stocks, long-term bonds, gold, and cash/short-term bonds.
- Rebalance when any asset drifts beyond 15% to 35% of total portfolio value (band rebalancing).
- Never try to predict which economic environment is coming � the portfolio is designed to handle all four simultaneously.
ETF Proxies Used in Our Backtest
- Vanguard S&P 500 ETF (VOO) � 25% US equity growth
- iShares 20+ Year Treasury Bond ETF (TLT) � 25% long-term bonds
- SPDR Gold Shares (GLD) � 25% gold hedge
- SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) � 25% cash equivalent
Allocation Calculator
Recommended Allocation
Enter performance inputs above to calculate weights.
History & Background of the Permanent Portfolio
Harry Browne (1933�2006) was a libertarian author, financial analyst, and two-time US presidential candidate who developed the Permanent Portfolio concept in the 1980s. His philosophy was rooted in a deep skepticism of economic forecasting � he believed that nobody, including the most brilliant economists, could reliably predict which economic environment would prevail.
The Permanent Portfolio was designed around four economic regimes: Prosperity (stocks rise), Deflation/Recession (bonds rise), Inflation (gold rises), and Tight Money (cash preserves purchasing power). By allocating equally to all four, Browne created a portfolio that would never be perfectly positioned but would also never be catastrophically wrong.
The strategy gained mainstream attention through his 1999 book "Fail-Safe Investing." Since then, the Permanent Portfolio has earned a reputation as one of the smoothest-riding strategies in existence � with a historical max drawdown of just -8.2%, it rarely experiences the gut-wrenching drops that cause investors to panic-sell.
When to Use Permanent Portfolio: Pros & Cons
Strengths
- Remarkably low max drawdown (-8.2%) � one of the smoothest strategies available
- Truly set-and-forget � no tactical decisions required
- Gold allocation provides genuine inflation protection
- Simple to implement with just 4 low-cost ETFs
- Psychologically easy to maintain � small losses are easier to stomach
Limitations
- Lower CAGR (6.8%) � sacrifices upside for stability
- 25% cash allocation creates significant drag on returns in bull markets
- 25% gold can be volatile and produces no income
- Long-term bonds (TLT) suffered massive losses in 2022 rate hikes
- Not optimal for young investors with long time horizons who can tolerate more risk
Ideal for: Risk-averse investors who prioritize capital preservation, retirees who cannot tolerate large drawdowns, and anyone who wants the simplest possible "set it and forget it" portfolio. Works well as a psychological anchor during market volatility.