The plan consists of 4 funds. It covers 3 major asset classes and 4 minor asset classes. The major asset classes it covers are US Equity, REITs and Fixed Income.
In his Fail-Safe Investing book, Harry Browne proposed this one size fit all portfolio that he called 'permanent portfolio'. His theory has been discussed in numerous articles like this. A mutual fund PRPFX was constucted and named after his theory. The following consists of the portfolio's components.
- 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&P 500 index fund such as VFINX.
- 25% in long-term U.S. Treasury bonds for deflation protection.
- 25% in cash in order to hedge against periods of “tight money” or recession. In this case, “cash” means a money-market fund.
- 25% in precious metals (gold, specifically) in order to provide protection during periods of inflation. Browne recommends gold bullion coins.
We use VFINX, VUSTX, VFITX, VFISX, CASH and GLD for the above components. Investors can compare the model portfolios in this plan with this static portfolio.
