The Permanent Portfolio: Using Allocation to Build and Protect Wealth
by J.M. Lawson and Craig Rowland
Simple, safe and stable: These are the three tenets of the Permanent Portfolio, a strategy invented by the late Harry Browne to help investors grow and protect their life savings no matter what was going on in the markets.
Over the last 40 years, the strategy has returned 9.5% compound annual growth. The worst loss, a drop of 5%, occurred in 1981. In 2008’s financial crisis, the portfolio was down only around 2% for the year. We think that’s pretty impressive for a strategy that appears so startlingly simple on the face of it.
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The basic premise of the Permanent Portfolio is this: The economy is always transitioning between four states. If you own an asset that can deal with each of those states, you will achieve powerful diversification. Harry Browne identified those states as:
- recession and
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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).