Harry Browne's Permanent Portfolio: All-Weather Investing Strategy
How the Permanent Portfolio works with 25% stocks, bonds, gold, and cash. Historical performance, ETF implementation for European investors, and pros and cons.
7 min czytaniaHarry Browne's Permanent Portfolio: All-Weather Investing Strategy
The Permanent Portfolio, conceived by libertarian investment adviser Harry Browne in the 1980s, divides your wealth equally among four asset classes: stocks, long-term government bonds, gold, and cash. The logic is that these four assets collectively cover all economic scenarios. In any environment, at least one of the four should perform well, cushioning the others.
The four pillars
| Asset | Allocation | Thrives during |
|---|---|---|
| Stocks | 25% | Prosperity and growth |
| Long-term government bonds | 25% | Deflation and recession |
| Gold | 25% | Inflation and currency crisis |
| Cash (T-bills or money market) | 25% | Tight money and rising rates |
The allocation is not an optimised mathematical formula. It is a hedge against uncertainty: you do not know which economic scenario is coming, so you prepare for all of them equally.
Historical performance
The Permanent Portfolio has delivered remarkably consistent returns with low drawdowns:
US Permanent Portfolio (1972-2025)
| Metric | Permanent Portfolio | 60/40 stocks/bonds | 100% stocks |
|---|---|---|---|
| Annualised return | ~8% | ~9% | ~10% |
| Max drawdown | ~13% | ~30% | ~51% |
| Worst single year | -4% | -22% | -37% |
| Sharpe ratio | ~0.7 | ~0.5 | ~0.4 |
The key insight: the Permanent Portfolio sacrifices 1-2% of annual return for dramatically lower risk. The worst single year was approximately -4%, compared to -37% for stocks. For investors who prioritise sleeping at night over maximising returns, this tradeoff is compelling.
Performance during crises
| Crisis | Stocks | Bonds | Gold | Cash | Permanent Portfolio |
|---|---|---|---|---|---|
| 2008 GFC | -37% | +20% | +5% | +2% | ~-2% |
| 2020 COVID | -34% (March) | +8% | +25% | 0% | ~0% |
| 2022 Rate hike | -18% | -30% | -1% | +3% | ~-12% |
The 2022 period was the Permanent Portfolio's weakness: both stocks and long-term bonds fell simultaneously, an unusual occurrence. Gold and cash were not enough to offset the combined losses.
European implementation with ETFs
| Pillar | ETF | Ticker | TER |
|---|---|---|---|
| Stocks | Vanguard FTSE All-World | VWCE | 0.22% |
| Long-term bonds | iShares EUR Govt Bond 15-30yr | IBGL | 0.15% |
| Gold | Amundi Physical Gold ETC | GOLD | 0.12% |
| Cash | Xtrackers EUR Overnight Rate Swap | XEON | 0.10% |
Total portfolio TER: approximately 0.15% weighted average.
Bond pillar considerations for Polish investors
The original portfolio uses long-term government bonds (20-30 year maturity). European options:
- EUR government bonds: IBGL tracks eurozone sovereign bonds with 15-30 year maturity. Volatile but provides strong deflation/recession protection.
- Polish Treasury bonds: EDO (10-year, inflation-linked) do not serve the same purpose. The bond pillar needs long-duration, fixed-rate bonds to rally during deflation.
Gold pillar
Physical gold ETCs (exchange-traded commodities) are the simplest implementation. Popular options for European investors:
- Amundi Physical Gold ETC (GOLD) — TER 0.12%
- iShares Physical Gold ETC (IGLN) — TER 0.12%
- Invesco Physical Gold ETC (SGLD) — TER 0.12%
These are backed by physical gold held in vaults, providing direct exposure to gold price movements.
Rebalancing rules
The original Permanent Portfolio uses threshold rebalancing:
- Rebalance when any asset drifts to 15% or below, or 35% or above
- Return all four assets to 25%
In practice, this means rebalancing roughly once every 1-3 years. The wide bands (15-35%) reduce unnecessary trading.
Advantages
1. Simplicity
Four assets, equal weights, simple rules. No need for market analysis, economic forecasting, or tactical adjustments.
2. Low volatility
The portfolio's maximum drawdown of ~13% is psychologically manageable for almost anyone.
3. Inflation protection
The 25% gold allocation provides meaningful inflation hedging. In 2021-2023, when CPI inflation spiked across Europe, gold appreciated significantly.
4. Crash resistance
The portfolio has survived every major crisis since the 1970s with minimal damage.
Disadvantages
1. Lower long-term returns
Sacrificing 1-2% annually compounds dramatically over decades. Over 30 years, the difference between 8% and 10% annualised on 100,000 EUR is approximately 350,000 EUR.
2. The 2022 problem
The simultaneous decline of stocks and long-term bonds in 2022 exposed a vulnerability in the traditional negative stock-bond correlation.
3. Cash drag
25% in cash/money market is substantial. Even at 3-4% interest, cash significantly drags on long-term returns.
4. Gold is non-productive
Gold does not generate earnings, pay dividends, or compound. Its return comes purely from price appreciation.
Who should consider the Permanent Portfolio?
Good fit:
- Retirees who need capital preservation above all
- Investors with low risk tolerance who would panic-sell during a stock market crash
- People with short time horizons (5-10 years)
- Those who value simplicity
Bad fit:
- Young investors (25-40) with a 20-30 year horizon
- Investors comfortable with volatility
- Those maximising IKE/IKZE contributions (limited space better used for higher-return assets)
Modified Permanent Portfolios
Some investors adapt the concept:
- Golden Butterfly: 20% stocks, 20% small-cap value stocks, 20% long bonds, 20% short bonds, 20% gold
- All-Weather (Ray Dalio): 30% stocks, 40% long bonds, 15% medium bonds, 7.5% gold, 7.5% commodities
Track your Permanent Portfolio allocation in Freenance. The equal-weight structure makes drift easy to spot: when any pillar deviates significantly from 25%, it is time to rebalance.
Related Articles
- Bogleheads Three-Fund Portfolio — A simpler alternative with higher expected returns
- Asset Allocation by Age — Why your age affects which portfolio suits you
- How to Invest in Gold in Europe — The gold pillar in detail
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