Allocation Lab

Permanent Portfolio (Harry Browne)

Created by Harry Browne

Four equal slices built to survive any economic season, not just to grow the fastest in good times.

Current Allocation

US Large Cap25%
US Long-Term Bonds25%
Gold25%
Cash25%

How This Strategy Maps to ETFs

Asset ClassWeightETF
US Large Cap25%SPY
US Long-Term Bonds25%TLT
Gold25%GLD
Cash25%BIL

Performance: 19.2-Year Backtest

Data for Cash starts 2007. Simulation covers 19.2 years.

Permanent Portfolio (Harry Browne)
── Actual ETF data   ╌╌ Proxy index data

$10,000 initial investment → $36,015

Annual Returns

2007–2016

'07'08'09'10'11'12'13'14'15'16
+12-6+8+12+18+3-2+12-5+6

2017–2026

'17'18'19'20'21'22'23'24'25'26
+100+16+11+4-6+6+15+230

Key Metrics

CAGR+6.88%
Max Drawdown-16.2%
Volatility7.5%
Sharpe Ratio0.66
Sortino Ratio1.12
Best / Worst Year2025 / 2008

What is it?

The Permanent Portfolio, designed by investment advisor and political writer Harry Browne in the 1980s, splits a portfolio into four equal 25% slices: US stocks, long-term Treasury bonds, gold, and cash. Each slice is chosen to dominate during a different economic regime, so that at any given time at least one part of the portfolio is thriving.

The philosophy

Browne's starting premise was that no one — including professional economists — can reliably predict which of four broad economic conditions (prosperity, inflation, deflation, or recession/tight money) is coming next. Rather than forecasting, he built a portfolio deliberately robust to all four: stocks do well in prosperity, gold does well during inflation, long bonds do well during deflation, and cash protects capital and provides optionality during tight-money recessions. The name "permanent" reflects his intent that an investor sets this allocation once and holds it through every kind of market, without trying to time or predict the cycle.

How it works

The 25% stock sleeve captures growth during good economic times. The 25% long-term Treasury bond sleeve benefits the most when interest rates fall sharply, such as during deflationary shocks. The 25% gold sleeve is the portfolio's inflation and crisis hedge, historically surging when confidence in currencies or the financial system erodes. The 25% cash sleeve (short-term Treasuries or equivalents) cushions the portfolio during recessions and tight monetary policy, and gives the investor dry powder to rebalance into whichever of the other three assets has become cheap.

Who is it for?

This strategy is built for highly risk-averse, capital-preservation-focused investors who care more about avoiding a catastrophic drawdown than about maximizing long-run returns. It suits someone who wants an allocation they genuinely never have to adjust based on their macro views, and who is willing to accept a lower expected return in exchange for a historically much shallower worst-case decline than a stock-heavy portfolio.

Key strengths & trade-offs

Its central strength is resilience: because only 25% is in equities, historical drawdowns have been dramatically smaller than a 60/40 or all-stock portfolio, and it has rarely had a severely negative year. The trade-off is a meaningfully lower long-run compound growth rate, since half the portfolio (gold and cash) does not generate strong long-term real returns on its own. It also tends to lag badly during sustained bull markets in stocks, which can test an investor's discipline to stay the course.

Historical performance in context

The Permanent Portfolio's design showed its value in crises: during the 2008 meltdown its gold and long-Treasury sleeves rose while stocks collapsed, holding the overall drawdown far shallower than a stock-heavy portfolio. Its quietest stretches came during long equity bull markets — much of the 2010s — when 50% of the portfolio sitting in gold and cash caused it to badly lag a rising stock market, testing investor patience. In 2022 it struggled unusually, as both its long bonds and gold gave little help against simultaneously rising rates.

Common variations

A frequent tweak is replacing the S&P 500 sleeve with a US total-market or globally diversified equity fund for broader reach. The Golden Butterfly is effectively a growth-oriented evolution that adds small-cap value and splits the bond duration — compare them directly in the Permanent vs Golden Butterfly view. Some investors also shorten the long-bond sleeve to reduce duration risk after the 2022 experience.

Risk Level

conservative

Rebalancing

annual

Number of Assets

4

Best For

Capital preservation, low tolerance for drawdowns

Before using this allocation

  • • Match the strategy's drawdown history to the amount of loss you could tolerate without abandoning the plan.
  • • Check whether its stock, bond, international, and inflation-sensitive sleeves address the risks that matter for your time horizon.
  • • Compare the same historical period and rebalancing rule against alternatives before changing a target allocation.

Related reading

Try This Strategy in the Simulator →

Or see the growth of $10,000 in the Permanent Portfolio (Harry Browne) over the past 30 years.

Hypothetical historical performance based on backtested data. Past performance does not guarantee future results. This site is for educational purposes only and does not constitute investment advice. Full disclaimer