"Ideal" four-quarters portfolio

[BigNick]

I'm sure it was here that I saw a reference to an "ideal" portfolio which had averaged 7-8% come rain or shine since "forever". It was 25% stocks, 25% bonds, 25% gold, and 25% something else which I've forgotten. I've scoured the search function of the board for some time but with no luck. Anyone got the link and/or the mystery "something else" ?

 

[FIREd]

It's called the "permanent portfolio". The "something else" is cash.

 

[Onward]

I think you're talking about the "Permanent Portfolio."

Wild About Harry

 

[REWahoo]

If you don't want to roll your own, check out PRPFX...

 

[chemist]

Harry Browne's Permanent Portfolio. Gets a lot of press these days since Gold and Bonds have done really well lately. Then fades into obscurity for a decade or two until it gets faddishly popular again.

 

[captain3d]

That maybe true but its track record has been steady through the years where gold did not shine I think.

Crawling Road » Permanent Portfolio Historical Returns


phil

 

[BigNick]

I remember when I looked at it about a year ago thinking "well, I have about 25% bonds and 25% cash. But I don't want to get into gold because it's at $1200 and the only way is down". Silly me. But I really, really can't bring myself to buy gold at $1700. Maybe I'll wait until gold comes down a little. (Yes, I know: don't try to second-guess packaged solutions, that's why they're packaged.)

 

[captain3d]

I had the same feeling about TLT (long bond) when I was starting two years back. That is also up alot

So far so good

Phil

 

[Spanky]

The "Permanent Portfolio" is receiving a lots of attention lately as its performance has been steady and respectable for the last decade. No one knows if this trend will continue.

 

[harley]

The "Permanent Portfolio" is receiving a lots of attention lately as its performance has been steady and respectable for the last decade. No one knows if this trend will continue.

Actually it has returned 9.7% since 1972, with only two years of very minor losses along the way. Of course no one knows the future, but IMO if it goes down the tubes it will be preceded by pretty much everything else. I don't use it myself, but I've been tempted to go that way for a long time. If you want a lot more information go to Crawling Road » Investing, economics, finance and random thoughts. and there's enough on the topic there to choke a horse.

 

[Spanky]

Actually it has returned 9.7% since 1972, with only two years of very minor losses along the way. Of course no one knows the future, but IMO if it goes down the tubes it will be preceded by pretty much everything else. I don't use it myself, but I've been tempted to go that way for a long time. If you want a lot more information go to Crawling Road » Investing, economics, finance and random thoughts. and there's enough on the topic there to choke a horse.

The Permanent Portfolio strategy is definitely a viable approach for both capital preservation and appreciation.

 

[jIMOh]

I own it in a taxable account.

The 4th component is swiss francs, which is a currency hedge.

 

[teejayevans]

I own it in a taxable account.

The 4th component is swiss francs, which is a currency hedge.

It's arguable in today's global economy with so many US companies doing business abroad in addition to the availability of international/emerging markets funds if you need a currency hedge.
TJ

 

[kevink]

Have been 100% in the Permanent Portfolio since early '08 (was in Bob Clyatt's "RIP" allocation previously) and have never looked back.

What may be the longest thread ever on Bogleheads is devoted to the PP:

Bogleheads :: View topic - Updated Modification of Harry Browne Permanent Portfolio

To be clear, the Permanent Portfolio proper is 25% each Gold (preferably physical bullion - I use GTU and Bullionvault), Total Stock Market, 30 Year Treasuries and a Treasury MM fund (I use VTI, TLT and SHY). PPRFX, the mutual fund called the "Permanent Portfolio" is a decent fund but no substitute for the actual PP: it has a high expense ratio (over 1%) and is more volatile than the actual PP as it contains different assets (riskier, actively managed stocks plus Swiss francs).

It takes most people a long time to get their heads wrapped around the PP strategy - it certainly did for me coming from extensive reading of modern portfolio theory and a sophisticated slice-and-dice portfolio I'd put a lot of work into assembling. But it works, and when the market panics, as it has been lately, you'll sleep very well indeed.

Craig Rowland, seemingly the heir apparent to Harry Browne, has an excellent blog that touches on PP topics, with today's post being especially timely:

Crawling Road » A Portfolio with Firewalls

 

[mathjak107]

the self rolled origonal version of the permanent portfolio actually out performed the fund. the fund has become a bet more on higher inflation then neutral. it also has fairly high fees.

2008-2009 my permanent portfolio was up ,the fund was down.

 

[steelyman]

Have been 100% in the Permanent Portfolio since early '08 (was in Bob Clyatt's "RIP" allocation previously) and have never looked back.

What may be the longest thread ever on Bogleheads is devoted to the PP:

Bogleheads :: View topic - Updated Modification of Harry Browne Permanent Portfolio

To be clear, the Permanent Portfolio proper is 25% each Gold (preferably physical bullion - I use GTU and Bullionvault), Total Stock Market, 30 Year Treasuries and a Treasury MM fund (I use VTI, TLT and SHY). PPRFX, the mutual fund called the "Permanent Portfolio" is a decent fund but no substitute for the actual PP: it has a high expense ratio (over 1%) and is more volatile than the actual PP as it contains different assets (riskier, actively managed stocks plus Swiss francs).

It takes most people a long time to get their heads wrapped around the PP strategy - it certainly did for me coming from extensive reading of modern portfolio theory and a sophisticated slice-and-dice portfolio I'd put a lot of work into assembling. But it works, and when the market panics, as it has been lately, you'll sleep very well indeed.

Craig Rowland, seemingly the heir apparent to Harry Browne, has an excellent blog that touches on PP topics, with today's post being especially timely:

Crawling Road » A Portfolio with Firewalls

Thanks for posting these links - very interesting! One modification: I believe that the current expense ratio for PRPFX is 0.77%.

 

[kevink]

Right you are steelyman - thanks, and I apologize for my error.

 

[pb4uski]

Thanks for posting these links - very interesting! One modification: I believe that the current expense ratio for PRPFX is 0.77%.

For 77 bps I would DIY. Interesting concept that I had never heard of.