The Permanent Portfolio. In Depth. Comparisons. My 2 Cents.

by Corey Philip //  March 19, 2022

A portfolio that has only drawn down about 13% and still has an annual growth rate of 8.25%... That’s the historical performance of the Permanent Portfolio. 

Sounds great right?!

Here we’ll take a more indepth look at the Permanent Portfolio.    

I recently did a video on the topic which you can see here.  I follow the same flow on the topic but give details a little differently.

Origin of The Permanent Portfolio

Harry Browne Created the concept of the Permanent Portfolio in the 80s and publicized it in a book he published in 2001 called Fail-Safe Investing.  He also created  permanent portfolio mutual fund in 1982 which is similar to the Permanent Portfolio concept but not the exact same.  We’ll cover the mutual fund later one.  

Permanent Portfolio Constituents and Methodology

The Permanent Portfolio is comprised of the four asset classes, each of which is intended to down well in a specific economic climate as proposed by Harry Browne.  Here is the asset allocation and the corresponding economic climate.

  • 25% US Stocks – economic expansion
  • 25% Cash – economic recession
  • 25% Gold – inflation
  • 25% Bonds (Long Treasuries) – deflation

Let’s See How It Performed

I am able to easily backtest the portfolio to 1978.  The follow data reflects and annual rebalance period. 

We can see that an initial invest of the $10,000 would've grown to $332,270 on a total return basis with a 8.26% annually.  This return is achieved with only a 13.52% drawdown and standard deviation of 7.13%.  These propertied make the portfolio appealing to those that a risk adverse, and/or those that don't like stocks.  

My Thoughts On The Permanent Portfolio.

Simple & diversified.  I like that the portfolio is comprised of only 4 holdings.  Simple usually wins. You could implement the portfolio very easily with low fee funds.  This also has the perk of making tax loss harvesting easier.  

Gold would probably be the most expensive asset class to get exposure to with the lowest cost gold fund that I know of (SGOL) having an expense ratio of 0.17% -- which isn't too bad.  The portfolio is also well diversified among 4 relatively uncorrelated asset classes which you wound expect considering the concept of economic seasons.  

Minimal exposure to stocks. This is where things get wonky in my opinion. The portfolio only holds like 25% in stocks, while they have been the best performing asset class off all (as you'll see further down when when we compare to S&P 500).  

Along with that, consider the economic climates... we are usually in an economic expansion.  In 74% of the 94 year of the S&P 500 through 2017, the index was positive.  So while we are usually in an economic expansion 74% of the time, the portfolio only gets 25% exposure to equities.   .

No International Stock Exposure.  The portfolio concept only holds US equities.  I wouldn't say that is bad as stocks are strongly correlated, but I personally see a lot of value in international equities due that currently high valuation differences between US and international equities.  Personally I would like to hold emerging markets for international exposure as they have much lower correlation to US equities then broad international equities.  Related video I did on Youtube: How Much Of Your Portfolio Should Be International.

Gold is a weird asset. It's not a value producing asset.  It is more volatile than bonds, and has also had much higher drawdowns.  

From the time period of 1/1/1987 through 02/2022 gold actually had a drawdown of -48.26% vs -5.86% for the Total Bond Market Index, all the while Total Bond Market outperformed gold by 1.15% annually.    

Just look at it for yourself...

And on top of the abysmal performance, it's really not even an inflation hedge...  While gold may 'spike' during inflationary periods, over the long term, it does not sustain that the performance.  

Comparisons To Other Portfolios

Let's give the Permanent Portfolio some context.

Permanent Portfolio vs SP500

I think it is important to show the performance of the Permenent Portfolio to 100% US Stocks.  You'll notice the wild swings vs stability, but long term out performance of stocks.  

While the Permanent Portfolio returned a stable 8.26% annually, and that doesn't sound better a mere 3.5% better annual return in stock created life changing wealth over this 44 year time period.  $10,000 invest in the S&P 500 would've grown to $1,408,105 where as a $10,000 investment in the Permanent Portfolio would've only grown to $322,270.  When you look at it in that context, the volatility and drawdown of stocks, doesn't seem so bad -- at least not for me.  

Permanent Portfolio vs All Weather Portfolio

The All Weather Portfolio by Ray Dalio is similar in concept to perform well in any economic climate and with minimal downside and volatility.  The All Weather Portfolio is comprised of 

  • 40% Long Treasuries
  • 30% Stocks
  • 15% Intermediate Treasuries
  • 7.5% Gold
  • 7.% Commodities.

I like that it has no 'go nowhere' exposure to cash, minimizes exposure to gold, and adds commodities.  

Take a look at the performance of both of them; I only have data back to 2007 for commodities.

The All Weather Portfolio has outperformed by a little bit, although both performing similarly.  In backtests I have performed using other datasets allowing me to go further back than the PortfolioVisualizer Tool, I've found about a 1.5% out performance of the All Weather Portfolio over a 40 year time period.  

The Permanent Portfolio Mutual Fund

Interestingly, a Permanent Portfolio mutual fund was launched in the early 80s, but as of the moment the holdings of the mutual fund are slightly different than the portfolio concept.  Here's what the mutual fund holds.

Notice the differences?  Swiss franc Assets.  10% more allocated to cash ('Dollar Assets').  5% in silver.  30% in total equities, split between growth stocks, real estate and natural resources.  How has this done; let's put the mutual fund and portfolio concept on a chart.

Interestingly he Permanent Portfolio concept actually out performed the mutual fund (simple wins).  Even more interesting, the out performance is an amount equal to that of the fee on the mutual fund of 0.86%.  Fees matter.

The other thing we notice is that the mutual fund was more 'risky' with slightly higher standard deviation and drawdown.  

This is a perfect example of why I like to keep things simple with low fee!  No doubt there was substation research into the asset allocation of the mutual fund, likely believed to improve returns, but as you can see here a simple, low cost strategy out performs.  This is why I would personally choose to implement the Permanent Portfolio with low fee ETFs using a no fee broker like M1 Finance (here is the M1 Finance Pie for it).

Related: My Video On The Impact of A 1% Fee On 40 Asset Allocations

Variations Of The Permanent Portfolio

Let's give the Permanent Portfolio some twists and see what happens.

Here are the Golden Butterfly and 'Corey Twist' back to 1995.  2 Variations Not Pictured.


The Golden Butterfly (I believed created by Harry Browne as well) adds small cap value to the portfolio and equal weights them at 20%. This gives 40% exposure to equities and tilt towards economic expansion, which is the most common economic climates.  This increases returns a bit along with increasing the risk; both downside and volatility.

The Corey Twist With Emerging Markets 

I like emerging markets because they have the lowest correlation to the US Stock Market of all equity asset classes bringing further diversification value.  I'd propose adding emerging markets to the portfolio in equal weight.  With US Stocks, both large cap and small cap at high valuations to emerging markets measured by the CAPE Ratio, I believe there is more upside potential in emerging markets of the next decade.  

Emerging markets does add more downside to the portfolio.  


The minimal drawdown and volatility of the portfolio make it a great candidate for leverage.  You could implement this portfolio with 2x leveraged ETFs.  In theory you could also do it with 3x ETFs, but there is not currently a 3x Gold ETF Available.  

When leveraging it 2x keep in mind, the returns will be 'not quite' 2x due to the high fees of leveraged ETFs and decay from the daily rest of the futures contracts they hold.  With that, the volatility and downside is more than 2x.  

Here is the 2x ETF Pie.

Quantitative Tactical

How awesome would it be if you could be in the right asset class for the right economic climate?  In this video on Youtube I show a simple quant method for doing just that.  

Final Thoughts

The Permanent Portfolio is a great option for risk adverse investors particularly those investor that cannot ignore the 'doom and gloom cloud' perpetuated by the media.  

That said, I would personally rather stick to value producing assets that I feel are more continue delivering returns going forward.  I lack belief that gold will continue to perform in the future as it had in the past consider ing the shift in view where as more people are looking to crypt as a store of view of value, both in the millennial and younger generation and even among the gold bug crowd.

Consider this, a portfolio of simply 20% Us Stocks and 80% 10 Year Treasuries would have performed a about the same as the Permanent Portfolio.... BUT it wouldn't have had the diversification gold or cash.  Is that a pro or a con?  

About the author

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

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