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Rate Of ReturnWhat is a "permanent investment portfolio"?
In the U.S. stock investment world, if we're talking about the "most enduring" investment portfolio designed to weather all economic cycles (boom, recession, inflation, deflation), the most representative is undoubtedly the "Permanent Portfolio."
This strategy was proposed by the late investment guru Harry Browne in the 1980s. Its core philosophy is unique: acknowledging that no one can predict the future, it doesn’t attempt to "time the market" but instead ensures that, no matter the economic conditions, some part of the portfolio will always be profitable through extreme diversification.
Below is a detailed breakdown of this strategy and why it’s called the "Financial Noah’s Ark":
⚖️ 1. Core Allocation: The 25% × 4 Golden Rule
The Permanent Portfolio divides funds equally into four parts, each accounting for 25%, corresponding to one economic scenario:
🔄 2. Mechanism: Rebalancing
This is the "soul" of the strategy. Browne recommended annual adjustments (or when an asset’s allocation deviates significantly, e.g., exceeding 35% or falling below 15%) to forcibly reset the 25% allocation.
● Principle: Buy low, sell high. For example, if stocks surge and their allocation rises to 40%, you sell some stocks and buy underperforming assets (like cash or gold).
● Effect: This mechanical approach forces investors to sell when assets are expensive and buy when they’re cheap, locking in gains and controlling risk.
📊 3. Why Is It "Enduring" and "Stable"?
Based on U.S. market data from the past 50+ years (1970s to present), this strategy has shown remarkable resilience:
● Extreme resilience: During the 2008 financial crisis, when the S&P 500 plummeted ~37%, the Permanent Portfolio fell only ~2% or even achieved slight gains.
● Long-term compounding: While it underperforms an all-stock portfolio in bull markets, over the long term, it helps avoid catastrophic losses. The historical annualized return is around 8%–9%.
● Emotional value: It doesn’t require daily monitoring or macroeconomic research. This "buy-and-forget" feature makes it ideal for long-term holding by ordinary investors.
🆚 4. Comparison with the "All Weather" Strategy
You may have also heard of Ray Dalio’s "All Weather" strategy, designed to perform in all economic conditions.
● Difference: The All Weather strategy is more based on "Risk Parity," with higher bond allocations (~55%–75%) and relatively smaller return fluctuations.
● The Permanent Portfolio is more balanced, with higher allocations to stocks and gold, performing better against hyperinflation and economic growth but with slightly higher volatility than the All Weather strategy.
📌 Summary
If you’re looking for a worry-free, sleep-well investment strategy that can last a lifetime, the Permanent Portfolio is a proven, classic "long-term solution" in U.S. stock market history.
Suggestion: If you’re investing in U.S. stocks from China, you can build your own "Permanent Portfolio" by allocating to S&P 500 ETFs (IVV/VOO), long-term Treasury ETFs (TLT), gold ETFs (IAU/GLD), and USD money market funds.
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