The permanent portfolio

What Hacker News says

1. javanissenSep 2023
   I don’t follow the Harry Browne portfolio advice, but I have read Craig Rowland’s very good book about it [0], and I disagree. The Permanent Portfolio has had pretty good overall returns extremely consistently despite its low (25%) stock allocation because it holds four assets with poor correlation and rebalances between them, and because one of them is cash.

   These assets each do well under different economic conditions. The cash asset does well during periods of sharply rising interest rates since it retains its principle and gets higher rates, while all the other assets get wrecked. Because cash’s correlation with the rest of the portfolio assets is 0% or negative, you tend to store some gains from the other assets in the cash section during up years, and then use the cash section to buy other assets once they have down years - in effect buying low and selling high. This is why the permanent portfolio gets pretty good returns with a low standard deviation: the cash protects the downside, but doesn’t significantly hamper portfolio performance due to the rebalancing effect. (It also helps that your cash should be in short treasuries per Harry Browne’s advice, which almost always have better yield than bank accounts with basically no risk).

   You could remove or titrate down the cash portion, but then you’re left with three risky assets in stock, gold, and 25- to 30-year bonds. (Anyone who doesn’t think long bonds are risky doesn’t understand interest rate risk). Does this raise the expected return? Yes! But it also raises the risk of extended periods of poor performance, or acute periods of terrible performance. The Permanent Portfolio made 1.8% in 2008. It didn’t have a 10-year rolling period since 1972 with real returns below 3%, with all of them falling between 3 and 6.1%. A 60/40 portfolio achieved better returns but with much higher risk, including full decades of negative real return [0].

   Ultimately I think your objection to the portfolio is because you think it’s advantageous to take on more risk. For a young investor with high risk tolerance I agree with you, but for older investors and retirees who need to be mindful of sequence of returns risk, and young investors who can’t stomach volatile portfolios, I think it’s an underrated choice.

   Even if you’re not convinced by the rest of the argument, consider that holding half your fixed income in cash and the other half in very long bonds tends to produce similar performance to holding it all in intermediate bonds, which is often the recommended duration for an investor’s bond holdings.

   [0] https://www.amazon.com/Permanent-Portfolio-Long-Term-Investm...

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2. tannerbrockwellMar 2020
   Investing is a very personal matter. A financial advisor is the best person to discuss this with. If I were pursuing this for myself I would build a Permanent Portfolio [1]. If I was looking for a financial advisor I would talk to Andrew Horowitz [2]. I would also recommend you look a small allocation in something such as Bitcoin, Zcash or Ethereum as they have a lot of upside potential still.

   Permanent Portfolio Allocation: 25% Cash 25% Long Term Bonds 25% Stocks 25% Gold

   [1]: https://assetbuilder.com/knowledge-center/articles/the-world... [2]: http://thedisciplinedinvestor.com/blog/dhunplugged/

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3. shooverFeb 2016
   The Permanent Portfolio [1]. The plan is based on very simple economic theory, and historically it generates market-competitive returns in the long run with much lower volatility than stock indexes or 60/40 portfolios.

   As in the peer thread on stock funds, this plan is not a great income generator because it's designed more for capital preservation and long term capital gains. (Unless you have half a million dollars in there and interest rates are favorable for the bonds or cash holdings.) But for me it's a great way to carve out savings and get some real compounding going. The longest drawdown in the past 40 years is 2-3 years, so I'm comfortable using it with any savings I don't expect to need to use in the next five or more years.

   Implementation could hardly be simpler for the robustness that it offers. You put the money in and divide it into four parts. Once a year take a look at the balances and rebalance if any category is too far out of alignment.

   For resources, Harry Browne's book mentioned in [1] is awesome for general investment sense and lays out the basics of the plan. Another book by Roland and Lawson [2] goes into much more of the nuts and bolts of implementation using different account types, tax status, and many other factors in individual situations.

   [1] https://en.wikipedia.org/wiki/Fail-Safe_Investing

   [2] http://www.amazon.com/The-Permanent-Portfolio-Long-Term-Inve...

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4. shooverDec 2014
   Shop Class As Soulcraft by Matthew Crawford completely changed and focused how I think about work and mental healthy.

   The Accidental Creative and Die Empty by Todd Henry provide excellent tools and background for adding practical discipline to creative work and life in general. As of now I can't prioritize one over the other. Either or both are well worth the time invested.

   Toxic Charity by Robert Lupton takes a critical look at how charitable giving and service are done by the modern church and provides a better plan distilled from decades of experience helping troubled neighborhoods in Atlanta.

   The Permanent Portfolio by Rowland and Lawson preaches Harry Browne's Permanent Portfolio but fills in all the implementation gaps left in Harry's rather thin original.

   Mere Christianity by C.S. Lewis. This classic on what Christians believe cuts as deep today as it did in Lewis's day.

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5. joshkaufmanFeb 2010
   I'd use Harry Browne's "Permanent Portfolio" allocation - it performs as well or better than other passive portfolios while experiencing far less volatility. Here's a detailed analysis of historical returns: http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-...

   It's also simple enough that you don't have to pay a tax/financial advisor exorbitant fees to manage your money - you can do it yourself, saving a lot of money in "wealth management services" you don't really need. Remember, you're a financial advisor's dream come true, and they'll try to sell you everything they can.

   Here's a review I wrote of "Fail Safe Investing," Browne's book: http://personalmba.com/review/fail-safe-investing/

   Here's more solid supporting information: http://crawlingroad.com/blog/2010/02/06/permanent-portfolio-...

   Hope this helps!

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6. Fade_DanceAug 2025
   Mirror: https://archive.ph/BM8Tq

   The advice seems trite. Discussing risks of American Exceptionalism receding, debt risks, and the market action around "Liberation Day", and then halfheartedly recommending a 60/40 doesn't really seem to be addressing the problem that the author is highlighting.

   To be up front, I'm no fan of the "60/40". Considering this was the default allocation for decades, why not reassess? How about 65/35, or 50/50? Can you specify why 60/40 is the best choice? At this point 60/40 is just a regurgitated answer. 2020 was the year when even the traditional, risk averse participants were looking at other approaches, and 2022 was the year when everyone who didn't heed the obvious warnings were crushed when stock/bond correlations flipped. So we're at the point where we have 5 years of very mainstream discussions around this topic, and I just don't think it's right to offhandedly throw out 60/40 anymore like that.

   This is part of what I do in my day-to-day, and I'll give two alternatives:

   The first is "let's reassess 60/40 but not stray too far" which is what a lot of people feel comfortable doing. Starting with the concerns laid out in the article (which are indeed major grey swans), the first step is to perhaps step a bit away from the passive investing industrial complex. SP500 isn't "the market", it's a market cap weighted index of the largest companies. It's a positive reinforcing feedback loop (for many reasons), but it is fragile to concerns like international capital flows reversing (Liberation Day) and comes with concentration risk (in NVIDIA and tech ad companies currently).

   The first move is to tweak the equity allocation. Add some small-cap value. Add some international exposure. It doesn't have to be much. Maybe 80% S&P, 10% international, 10% small cap value. That's an improvement. There are so many ways for the modern investor to tweak their equity exposure. There are countless low cost factor indexes and overlays (for example, I personally always have a tiny bit of systematic smallcap value/quality/momentum, which is perpetually latching on to cheap small names which are on sound financial footing and breaking out to the upside, and I always have a bit of Berkshire for Quality factor, because it work for me).

   The second move for the "60/40 tweaker" is to broaden the assets just a bit. Add a bit of gold, add some TIPS (inflation protected bonds). Again, there are benefits to adding even a small amount of diversification away from the hugely concentrated stock/bond correlation risk that comes with a 60/40.

   The second alternative is just to move on from the 60/40, because it isn't a great portfolio when holistic risk is taken into account (sometimes things that could have happened didn't happen but it's still something you should have been prepared for and benefit from preparing for even if you don't necessarily realize the games from it). The generic portfolio that I implement for today's world is an updated Harry Browne Permanent Portfolio (which was created when inflation and stagflationary risks were in the conversation), and then depending on investor preference, complexity and asset classes can be added/removed. The simplest form would essentially be the original Permanent Portfolio, which is stocks/bonds/gold/cash at an equal allocation. Bombproof and has performed surprisingly well through many market regimes. Next would be to do some of the tweaks laid out above, so the equity allocation is more well-rounded, and perhaps some TIPS/muni-bonds etc get added. Then a level up is to add CTA/trend following commodity exposure, which is quite synergistic and has strong academic backing (when stocks and bonds are both going down, trend following performs well. In true inflationary and stagflationary environments when commodities are rising, trend following performs well.) And then for those who want to bring the framework fully online and up to date, volatility harvesting and long vol tail protection is also included, as well as overlays that dynamically size exposure from nowcasting models. What I want to get across is just how accessible and low cost these things are now. Everything up to the vol trading can be done with low cost ETFs, and should an investor want to lever up a bit (common with these portfolios, ex: 50 percent equity, 50 percent bonds, 20 percent gold, 20 percent trend), all of this can be done with futures overlays extremely easily to fit the puzzle pieces together however you want.

   Obviously the vast majority of investors are going to be in the camp that just takes a few steps away from 60/40, which is great. Of course, the above suggestions aren't necessarily going to outperform an SP500 slamming NVIDIA long in huge size, but the risk and return profile for many may be more palatable, and the path dependency considerations are obviously more comprehensive and robust. In my examples, only a levered permanent portfolio working on all cylinders clearly beats S&P - it's an excruciatingly hard thing to do so it's no wonder why most don't try, yet there is something to be gained from being able to dismiss articles like "the stock market is scary now", and there is nothing better than to be able to rebalance into cheap equities at the bottom of a sell-off when everyone else is panicking, because you are on another wavelength.

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