Permanent Portfolio
Four equal parts for four conditions
Philosophy
Each of the four asset classes thrives in a different economic environment. Equal weighting means you are always prepared.
Origin
1981 — Published in Harry Browne's 1981 investment guide with 25% each to stocks, bonds, gold, and cash.
Key Principles
- ✓ 25% each in stocks, long-term bonds, gold, and cash
- ✓ Each asset class is a hedge against a specific economic regime
- ✓ Cash acts as dry powder and recession buffer
- ✓ Rebalance only when an asset drifts far from its 25% target
Target Allocation
| Asset | Category | Weight |
|---|---|---|
| US Stocks | Equity | 25% |
| Long-Term Treasuries | Bonds | 25% |
| Gold | Gold | 25% |
| Cash / Short-Term Bonds | Cash | 25% |
Advantages
- Extremely simple — four funds, equal weight
- Very low drawdowns historically
- No market timing or active decisions required
- Gold and cash provide strong crisis protection
Considerations
- Lower long-term returns than equity-heavy portfolios
- 25% cash drag in strong bull markets
- Gold can be volatile and non-productive
- May feel too conservative for younger investors
Best For
Conservative investors focused on wealth preservation.
Browne recommends rebalancing only when any asset drifts below 15% or above 35%.
About the Author
Harry Browne was a financial adviser and author who introduced the Permanent Portfolio in his 1981 book.
Frequently Asked Questions
What is the Permanent Portfolio?
The Permanent Portfolio, created by Harry Browne in 1981, allocates 25% each to stocks, long-term bonds, gold, and cash. Each asset class is designed to thrive in one of four economic conditions: prosperity, deflation, inflation, and recession.
When should I rebalance the Permanent Portfolio?
Harry Browne recommended band-based rebalancing: only rebalance when any single asset drifts below 15% or above 35% of the portfolio. This minimizes unnecessary trading while keeping the portfolio balanced.
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