J.M. Lawson is co-author with Craig Rowland of the book, “The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy” (John Wiley & Sons, 2012).
Craig Rowland is co-author with J.M. Lawson of the book, “The Permanent Portfolio: Harry Browne’s Long-Term Investment Strategy” (John Wiley & Sons, 2012).


Discussion

ED from NJ posted about 1 year ago:

I became aware of the Permanent Portfolio concept while researching the Permanent Portfolio mutual fund (PRPFX).

Over the next two years, I monitored the performance of the Harry Browne's Permanent Portfolio and observed that it does appear to deliver a good annual return, with reduced volatility.

In late 2011, I dipped my toe into the Portfolio by moving about 2% of my investment inbto four mutual funds. So far so good.

The concept may not be for everyone, but so far I am satisfied with the results.


Charlie Troell from TX posted about 1 year ago:

Have used PRPFX for number of years with better than anticipated results. Also have coupled the underlying core allocations with other stocks, funds and assets with similar results.

Not a panacea, but as part of overall strategy of diversifying, rebalancing when situation warrants leads to positive returns.

Whole-heartedly agree that tinkering with basics can have serious consequences.


Edward Spitzer from PA posted about 1 year ago:

some foreign currency in the cash portion might be suitable.


Robert Gilleski from GA posted about 1 year ago:

The concept is almost foolproof.As stated holding Gold Bullion is important,and tinkering with basics will!!! have serious consequences.


Edward Reifsnyder from CO posted about 1 year ago:

Why, with interest rates at historic lows, is this a good time to have 25% of one's portfolio in long bonds?


John from TX posted about 1 year ago:

Following up on Edward's question - with interest rates at historic lows, is it a good time to have 25% in long bonds and another 25% in cash yielding -0-?

Take a look at where interest rates stood at the beginning of the study period. Gold was also dead and stocks went on a mighty bull run. Those factors may have more to do with the performance of this portfolio.


Hemendra Parikh from IN posted about 1 year ago:

although I could not see the figure one graph clearly with all the lables the yellow line seems to be better over a very long term over the permanent portfolio line (blue). If that seems to be true would it not be a better investment? (provided one can stomach the ups and downs)


Ramesh Patel from OH posted about 1 year ago:

Sticking to a dogmatic purist position on exact instruments for the four asset classes is foolhardy. The concept as a whole is sound but it is marred by the authors' dogmatic purism. VTI, IAU, TLT and SHY seem to be an excellent simple set of four ETFs that would be convenient as well as in keeping with the broad concept of permanent portfolio.
One can certainly experiment even with leveraged ETFs for enhanced effect. And don't call it "tinkering with the basics." What matters is the idea and its effective implementation in consideration of the individual's risk profile. Sticking to a preconceived structure of so-called basics as sacrosanct is dogmatic and thoughtless. Anything that can possibly enhance the concept should be practiced by an investor who alone is the arbiter of what risk he or she wants to take.
At any rate, stop patronizing, in the name of preconceived basics.


Bob from MA posted about 1 year ago:

If you take time to actually read the book, you'll find there are variations including ETF portfolio suggestions and additions (like adding international exposure -- VEU, for example). Just take this as a framework. Like everything else, you have to figure out how to apply this to your personal style and strategy.

Given the high correlations we've seen across ETFs, having a broad-based portfolio that doesn't take much analysis time is attractive.


Thomas Pruitt from CA posted about 1 year ago:

A question more than a comment: Is there a valid reason for putting 25% in long bonds at this point in the interest rate cycle?


William from FL posted about 1 year ago:

IMO, we are going to face a serious devaluation of the dollar resulting from our government's overspending (both parties are to blame so I'm not trying to turn this into a political discussion).

Does anyone want to comment on what devaluation might do to this portfolio concept?

Ramesh, thanks for your comment. I ordered the book as a result of reading your post.


William from FL posted about 1 year ago:

Oops, actually I should have thanked Bob.


John from TX posted about 1 year ago:

I would think a more balanced bond portfolio portion would be prudent at this stage of the interest rate cycle.


Patrick Roszel from KS posted about 1 year ago:

I thought interest rates were going to rise 2-3 years ago but stayed with intermediate and short term investment grade bonds, Tips, and high yield bonds. All pretty good. Also GLD ETF and good dividend equities. My motivation was the most uncertainty I have seen in my 78 years. I agree with most of the repondents that L.T.Bonds do not look prudent at this time but what do I know. Explain to me why TIPS have done so well with low inflation.


Carmen Putrino from CA posted about 1 year ago:

At almost any point on the curve, even though stocks have wide swings, they are worth more than the total portfolio .


Richard Paul from CT posted about 1 year ago:

There are two very important considerations in the use of this approach. The portfolio must be rebalanced whenever it deviates significantly from equal weighting and the approach is a long term approach. It is this latter element that makes bonds appropriate regardless of the level of current interest rates. What is lost by the bonds as interest rates increase are made back when interest rates come back down. This is proven by the behavior of bonds fron 1977 to 1990, a period of first risen and then falling interest rates. This is not a portfolio approach that encourages market timing which has never been proven to be effective.


Leamon Lorance from IN posted about 1 year ago:

Hemendra, click on the graph to enlarge. It will then have a tab to click that will give a full page graph. You and Carmen are right about the stocks. Bonds did not do a lot worse than the permanent line at the end altho it was about 5 years behind most of the time. Cash was the big drag; growth to 80000 over 40 years with everything else north of 300000. I have a hard time understanding the program when gold bullion is specified but an ETF is suggested.






















James Moule from CA posted about 1 year ago:

I have had part of my portfolio invested in PRPFX for two years. That is not long enough to reach any conclusions based on results. However, I can say that PRPFX seems to be uncorrelated with everything else.

I am concerned about the 25% in bonds. I would not be surprised to see a 20 year long bear market in bonds considering the present interest rates. I understand the theory that a long term bear market in bonds will be offset by a following long term bull market. However, my life expectancy is only 20 years.


John Heryer from MO posted about 1 year ago:

This is worth looking at. I know that it does not comply with the rules of the strategy but putting money into bonds when interest rates are at record highs bothers me. A book about this is written by these authors: The Permanent Portfolio published by Wiley for those who want more.


John Heryer from MO posted about 1 year ago:

Correction: Interest rates at record lows and bond prices at record highs. OOPHs!


Albert Meyer from NY posted about 1 year ago:

A total return table is presented in the article which includes the PRPFX fund but does not include return figures for the 4 part, frequently re-ballanced implementation suggested in the article. That would be nice to have to supplement the chart.


Wilford Poe from FL posted about 1 year ago:

The variable missing here is life expectancy. You may not live long enough to see the long term benefits of such a strategy.


Douglas Kuntzelman from OK posted about 1 year ago:

This is a very interesting strategy and reminds me of another that is built on a timing strategy using 5 category ETFs that are either fully invested or in cash depending upon the 200 day moving average. The author Mebane Faber also has a book "Ivy League Portfolio' and a website 'World Beta/timing' that tracts 5 sample ETFs. This model is based on his research paper which is also posted. Curious to hear the comments on this one.

http://www.mebanefaber.com/timing-model/

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461


Elliot Cohen from PA posted about 1 year ago:

How do we know the 40 year measurement period wasn't cherry picked?


Albert Meyer from NY posted about 1 year ago:

Regarding data - their blog at

http://crawlingroad.com/blog/2008/12/22/permanent-portfolio-historical-returns/

gives much more insight into the data used - seems very fair.


Donald Goldmacher from CA posted about 1 year ago:

You really have to read the entire book to see that not only is the data valid, but the premise of this strategy is really pretty bulletproof. This portfolio lost 2% in 2008. How did you all do? Despite our having undergone a lost decade in the market, following 2 decades of a stock and bond bull market, this portfolio still provided a real return after inflation of at least 3% each year. How? Well, it caught the rise in gold, as well as bonds. It does work-buy the book. I wish it was around 20 years ago, so I didn't have to figure out all this stuff by myself.


William Kloss from FL posted about 1 year ago:

It looks like PRPFX took about a 14% drawdown from 1-1-2008 thru April 2009. That's quite a bit more than the historical drawdown in the book.


Wayne Smith from OR posted 11 months ago:

Is this a good plan for a 79 year old to get into currently?
I am currently drawing down 4.9% annually.
The bond portion brothers me at this low interest rate period.


EdwardjK from NJ posted 9 months ago:

Wayne Smith,

Harry Browne, and now Craig Rowland and J. M. Lawson, recommend that we use the Permanent Portfolio strategy "for money you absolutely cannot afford to lose".

For example, if you have a $1 million investment portfolio, maybe you want to secure $750,000 of it and then take more investment risk with the $250,000 balance. Browne would call the $250,00 your "variable portfolio".

I have followed the Permanent Portfolio results for about 5 years now. They are impressive, although 2013 was a bust compared to equities.

Your being 79 years old, I guess you have to decide what your future goals are. Have you and your wife done all the traveling that you wanted to do? Do you want to leave anything to your children or other relatives?

If you just want to relax for the rest of your life, then consider the Permanent Portfolio. At this point in your life, you want to reduce investment volatility. Who wants to worry about market swings at 79 years of age? The Permanent Portfolio has much lower volatility than equities and bonds, and appears to provide reasonable returns over the long run.

Good luck!


rsmCanuck from CA posted 7 months ago:

There are a lot of comments here about the long term bond allocation. All four assets are required in equal proportion for this strategy to work. The purpose of the bonds is to provide protection from deflation which can come at any time. No one can predict the future, so you you need to hedge against inflation, deflation and recession.


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