{"id":28574,"date":"2012-03-26T12:02:49","date_gmt":"2012-03-26T16:02:49","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/03\/26\/harry-brownes-permanent-portfolio-when-you-cant-afford-to-lose-money\/"},"modified":"2012-03-26T12:02:49","modified_gmt":"2012-03-26T16:02:49","slug":"harry-brownes-permanent-portfolio-when-you-cant-afford-to-lose-money","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/03\/26\/harry-brownes-permanent-portfolio-when-you-cant-afford-to-lose-money\/","title":{"rendered":"Harry Browne\u2019s Permanent Portfolio: When You Can\u2019t Afford to Lose Money"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<div><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-28527 \" title=\"Harry Browne's Permanent Portfolio\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/03\/harry-browne-permanent-portfolio.jpg\" alt=\"Harry Browne's Permanent Portfolio\" width=\"220\" height=\"220\" \/><\/p>\n<p>For that money you can\u2019t lose, Harry Browne recommends investing in a \u201cpermanent portfolio\u201d that provides safety, stability, and simplicity.<\/p>\n<\/div>\n<p>I guess when you\u2019re an investor or in the business it\u2019s your mission to find vehicles, processes and theories that beat the market. This isn\u2019t just a returns driven game but you must understand what you\u2019re getting into in regards to your personal make-up and the market climate.<\/p>\n<p>Talking to an old work buddy I was reminded of time long ago in a galaxy far away when money market accounts at your local mutual fund company gave you 4.5% return. Now, when monthly inflation squashes Treasury yields, what do you do for safety?<\/p>\n<p>Here\u2019s one option.<\/p>\n<h2><strong>The Permanent Portfolio<\/strong><\/h2>\n<p>If you pick up Harry Browne\u2019s <em>Fail-Safe Investing: Lifelong Financial Security in 30 Minutes, <\/em><em>you\u2019ll be introduced to his Permanent Portfolio. The libertarian\/financial writer\/presidential candidate\u2019s theory has been out there for about 30 years and seems to be standing the test of time.<\/em><\/p>\n<p>Browne divides investment money into two categories:<\/p>\n<ul>\n<li>Money you cannot afford to lose.<\/li>\n<li>Money you <em>can<\/em> afford to lose.<\/li>\n<\/ul>\n<p>For that money you can\u2019t lose, Browne recommends investing in a \u201cpermanent portfolio\u201d that provides three key features: safety, stability, and simplicity. He argues that your permanent portfolio should protect you against all economic possibilities in the future, provide a steady performance, and be simple to put in play.<\/p>\n<h2><strong>What makes up the Permanent Portfolio?<\/strong><\/h2>\n<p>How do you not lose money? Harry Browne feels you need to select various investment components in a manner where one of the asset classes is favored in any economic climate. Here is the make-up. Each class should hold an equal proportion for as long as you\u2019re in it:<\/p>\n<ul>\n<li>25% in U.S. stocks, to provide a strong return during times of prosperity. For this portion of the portfolio, Browne recommends a basic S&amp;P 500 <a title=\"Investing in Index Funds\" href=\"http:\/\/www.investmentu.com\/2012\/March\/index-funds.html\">index fund<\/a><\/li>\n<li>25% \u00a0in long-term U.S. Treasury bonds, which do well during prosperity and during deflation (but which do poorly during other economic cycles).<\/li>\n<li>25% in cash in order to hedge against periods of contraction or recession. A money market fund.<\/li>\n<li>25% in precious metals (gold, specifically) in order to provide protection during periods of inflation. Browne recommends <a title=\"Investing in Gold Coins\" href=\"http:\/\/www.investmentu.com\/2012\/February\/investing-in-gold-coins.html\">gold bullion coins<\/a>.<\/li>\n<\/ul>\n<p>Once each year, you rebalance the portfolio. If any part of the portfolio has dropped to less than 15% or grown to over 35% of the total, then you reset all four segments to 25%.<\/p>\n<p>Because this <a title=\"Optimal Asset Allocation: How To Build A Strong Portfolio Using Four Basic Strategies\" href=\"http:\/\/www.investmentu.com\/2002\/June\/20020606.html\">asset allocation<\/a> is diversified, the entire portfolio performs well under most circumstances. Browne writes:<\/p>\n<p>The portfolio\u2019s safety is assured by the contrasting qualities of the four investments \u2014 which ensure that any event that damages one investment should be good for one or more of the others. And no investment, even at its worst, can devastate the portfolio \u2014 no matter what surprises lurk around the corner \u2014 because no investment has more than 25% of your capital.<\/p>\n<h2><strong>Keep in Mind\u2026<\/strong><\/h2>\n<p>This is that old <a title=\"Active vs. Passive Investing\" href=\"http:\/\/www.investmentu.com\/2012\/February\/active-vs-passive-investing.html\">active versus passive investing<\/a> prerogative. It\u2019s a passive strategy built on diversification. It doesn\u2019t use market timing.<\/p>\n<p>It\u2019s a defensive investment strategy that also happens to produce a decent return. But remember, its goal is stability.<\/p>\n<p>The Permanent Portfolio strategy\u2019s returns have a low correlation with the returns of the stock market (a correlation coefficient of 0.58), meaning that if you\u2019re in it, you only reap the benefits of market gains about 50% of the time.<\/p>\n<p>It has also enjoyed better than average returns over the past 10 years because of its high allocation in precious metals. As interest rates rise, the appreciation in precious metals will likely stall. Meaning a more equity-heavy passive portfolio, such as Alexander Green\u2019s <a href=\"http:\/\/www.investmentu.com\/2003\/September\/20030905.html\">Gone Fishin\u2019 Portfolio<\/a> is likely to offer better growth going forward.<\/p>\n<p>Good Investing,<\/p>\n<p>Jason Jenkins<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=6CUjSCWOi2c:zHVkFn2Lc-8:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=6CUjSCWOi2c:zHVkFn2Lc-8:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=6CUjSCWOi2c:zHVkFn2Lc-8:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=6CUjSCWOi2c:zHVkFn2Lc-8:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=6CUjSCWOi2c:zHVkFn2Lc-8:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=6CUjSCWOi2c:zHVkFn2Lc-8:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=6CUjSCWOi2c:zHVkFn2Lc-8:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=6CUjSCWOi2c:zHVkFn2Lc-8:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/6CUjSCWOi2c\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>For that money you can\u2019t lose, Harry Browne recommends investing in a \u201cpermanent portfolio\u201d that provides safety, stability, and simplicity. I guess when you\u2019re an investor or in the business it\u2019s your mission to find vehicles, processes and theories that beat the market. This isn\u2019t just a returns driven game but you must understand what &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/03\/26\/harry-brownes-permanent-portfolio-when-you-cant-afford-to-lose-money\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Harry Browne\u2019s Permanent Portfolio: When You Can\u2019t Afford to Lose Money&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-28574","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=28574"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/28574\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=28574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=28574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=28574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}