Permanent Portfolio
| CAGR | 10.0% |
|---|---|
| Maximum drawdown | -10.9% |
| MAR ratio | 0.92 |
| History | 46 years (560 months) |
Evolved from Harry Browne
A Permanent Portfolio for today, and the future.
Overview
The Permanent Portfolio is designed to deliver steady, compounding returns across every economic environment — without requiring predictions, market timing, or active management. It is built on a simple but powerful premise: no one knows what the economy will do next, so the only rational response is to be prepared for all of it.
Harry Browne introduced this framework in 1981. His insight was that the economy moves through four distinct regimes — prosperity, inflation, recession, and crisis — and that a portfolio divided equally among assets tuned to each regime would survive and grow through all of them. The original construction was elegant: stocks, gold, long-term treasuries, and cash, each at 25%.
This evolution keeps the philosophy intact and replaces each leg with a modern, more capable instrument.
Construction
The portfolio holds four positions, equally weighted at 25% each. Each position is mapped to a specific economic regime.
| Quadrant | Ticker | Allocation | Role |
|---|---|---|---|
| Prosperity | CLSE | 12.5% | Concentrated long/short equity |
| Prosperity | HFGM | 12.5% | Global macro equity |
| Inflation Hedge | SGOL | 25% | Physical gold |
| Recession Hedge | DBMF | 25% | Managed futures |
| Crisis / Deflation | CAOS | 25% | Tail risk convexity |
Rebalancing: Annually, with triggered rebalancing if any sleeve drifts below 15% or above 35% of total portfolio value.
The Four Quadrants
Prosperity — 25% When the economy is growing and asset prices are rising, equities lead. Rather than holding a passive index, this sleeve pairs two sophisticated active strategies: CLSE (concentrated long/short equity) and HFGM (global macro equity). Together they pursue equity-like returns with meaningful downside management — capturing prosperity without riding it all the way down.
Inflation Hedge — 25% Gold has served as the definitive inflation hedge for centuries. SGOL holds physical gold and brings the full 25% allocation to bear on this role, just as Harry Browne intended. Simple, proven, and uncorrelated to nearly everything else in the portfolio.
Recession Hedge — 25% When the economy contracts, managed futures historically shine. HFMF is a methodology-agnostic managed futures replication ETF that captures the essence of trend-following across asset classes without picking a single CTA flavor. It has historically performed well in sustained economic downturns — the exact environment this quadrant is designed for.
Crisis / Deflation — 25% In a true crisis — a sudden market dislocation, deflationary shock, or tail event — CAOS provides convex payoffs. Unlike long-duration treasuries (Harry Browne’s original choice for this role), CAOS is specifically engineered to benefit from volatility spikes and market dislocations. It does not rely on the rate environment being favorable. This is the portfolio’s insurance policy, and at 25% it is held with full conviction.
Why This Works
The equal weighting is not arbitrary — it is the philosophy. Overweighting any quadrant requires a prediction about which regime is coming. This portfolio makes no such prediction. Each leg is sized to matter when its moment arrives.
The four regimes are not equally likely at any given moment, but they are equally unknowable in advance. A portfolio prepared for all of them does not need to be right about the future. It only needs to survive it — and compound through it.
What Changed from Harry Browne’s Original
| Original (1981) | This Portfolio | Why |
|---|---|---|
| S&P 500 / broad equities | CLSE + HFGM | More capable in all phases of a bull market; active downside management |
| Gold | SGOL | Same role, ETF wrapper for ease of ownership |
| Long-duration Treasuries | CAOS | Not dependent on the rate environment; provides convex crisis payoff |
| Cash / T-bills | HFMF | Managed futures significantly outperform cash in recessions |
Tax Efficiency
There is no active trading within this portfolio. Holdings are rebalanced once per year, with occasional triggered rebalances on significant drift. For most investors, this means minimal taxable events and low turnover — an important advantage over more active strategies.
A Note on Simplicity
This portfolio holds five ETFs. It rebalances once a year. It requires no signals, no forecasts, and no monitoring between rebalances. That simplicity is a feature, not a limitation. The best portfolio is one you can hold through every environment without second-guessing it. This one is built for that.