Portfolio Overview

Harry Browne Permanent Portfolio for All Weather

Investing doesn't always have to be complicated, does it? You've probably heard about lazy portfolios, those set-it-and-forget-it strategies that aim to keep things simple while still giving you a shot at decent returns. Today, we're diving into the Harry Browne Permanent Portfolio, a strategy that's been around for decades. It's got this calm, almost philosophical approach to handling markets, no matter what they throw at you. Harry Browne, the guy behind it, was a libertarian thinker, writer, and investor who believed in preparing for all economic seasons, inflation, deflation, prosperity, or recession. His portfolio is like a sturdy ship, built to weather any storm. But is it right for your 401(k), IRA, or even a taxable brokerage account? Let's dig in and see. First off, what's the Permanent Portfolio all about? Browne's big idea was balance. He argued that markets are unpredictable (aren't they always?), so why not build a portfolio that's ready for anything? Instead of chasing hot stocks or trying to time the market, he suggested splitting your money equally across four assets, each one shining in different economic conditions. The result is a portfolio that's not flashy but steady, or at least that's the hope. It's gained a bit of a cult following among investors who like its simplicity and long-term focus, though it's not exactly topping the trending lists on financial X posts.

Harry Browne Permanent Portfolio Holdings

Here's how the portfolio breaks down, nice and even:

• Stocks: VTI  or Vanguard 500 index fund VFINX 25%
• Gold: GLD 25%
• Long Treasury Bonds: TLT or Vanguard long term Treausry fund VUSTX 25%
• Cash: Money Market Fund or USFR or TFLO 25%

Each piece has a job. Stocks (VTI) are your growth engine, thriving in good times. Gold (GLD) is your hedge against inflation as it's a safe haven when prices spiral. Long-term Treasury bonds (TLT) step up during deflation or market crashes, because they tend to rally when stocks tank. Cash, whether in a money market fund or ETFs like USFR or TFLO, is your anchor, keeping things stable and ready for opportunities. It's a simple setup, but does it cover enough ground?

Diversification and Risk: What's Covered, What's Not?

Let's talk diversification. The Permanent Portfolio includes US stocks (VTI), which is great, since it captures the broad market. But international stocks? Nope, they're missing. Emerging markets, small-cap stocks, REITs, or other commodities beyond gold? Not here either. This portfolio keeps things minimal, which is both its strength and its weakness. On one hand, you've got exposure to growth (stocks), inflation protection (gold), deflation protection (bonds), and stability (cash). That's not bad for just four holdings. On the other hand, you're skipping out on international diversification, which could hurt if the US market lags. Small caps or REITs might add some spice, but Browne didn't care for complexity, and maybe that's okay for some investors. Risk-wise, this portfolio is conservative, probably too conservative for young investors chasing big returns. With only 25% in stocks, it's not going to shoot the lights out during a bull market. But that's the point, isn't it? It's built for stability, not thrills. The heavy allocation to bonds and cash keeps volatility low, while gold adds a buffer against inflation. If you're someone nearing retirement, or just starting out and nervous about market swings, this low-drama approach might feel like a warm blanket. Still, the lack of international exposure and limited stock allocation could mean missing out on growth over decades. And gold, well, it's polarizing. Some see it as dead weight, others swear by it. What do you think?

Applying the Permanent Portfolio to Your 401(k) or IRA

So, how do you make this work in a 401(k) or IRA? First, check your plan's fund lineup. For VTI, look for a total US stock market index fund, ideally a low-cost one like Vanguard's or Fidelity's. If your 401(k) doesn't have an exact match, a large-cap index fund like an S&P 500 fund will do, since it's close enough. For gold (GLD), things get trickier, most 401(k) plans don't offer gold ETFs. You might need to skip it or, in an IRA, buy GLD directly through a brokerage. For long-term bonds (TLT), hunt for a Treasury bond fund with a long duration, if your plan has one, check its expense ratio on Morningstar.com to ensure it's not too pricey. If no long-term bond fund exists, an intermediate-term bond fund can work, though it's less ideal. Cash is usually easy, most plans have a money market or stable value fund. If your 401(k) lacks index funds for these assets, consider actively managed funds, but be picky. For stocks, choose a diversified US equity fund with a solid track record. For bonds, stick to high-quality, actively managed total return bond funds, as suggested by MyPlanIQ. Always double-check diversification and fees on Morningstar. If gold isn't an option, you might map it to stocks for a 401(k), but that's a compromise, since gold's role is unique. In an IRA, you've got more freedom, ETFs like VTI, GLD, TLT, or USFR are widely available at brokers like Schwab or Fidelity. Who's this portfolio for? It's best for cautious investors, maybe those in their 50s or 60s, or beginners who want simplicity. To scale it for risk tolerance, figure out how much you're comfortable allocating to stocks and gold (the riskier pieces). Use an Asset Allocation Calculator from MyPlanIQ to gauge your risk level. If you want more growth, you could bump up VTI to 35% and reduce cash or bonds. If you're ultra-conservative, maybe lower VTI to 15% and increase TLT or cash. The key is keeping the spirit of balance, even if you tweak the numbers.

Using the Permanent Portfolio in Taxable Accounts

In a taxable brokerage account, the Permanent Portfolio shines for tax efficiency. Index ETFs like VTI, GLD, and TLT are tax-friendly because they rarely distribute capital gains, unlike some mutual funds. You're mostly dealing with dividends or interest, which you can manage with your tax strategy. The buy-and-hold nature of this portfolio is another plus, you're not trading in and out, so you avoid triggering taxable events. If you're in a high tax bracket, you might even look into tax-loss harvesting, selling a holding like VTI at a loss during a dip, then buying a similar ETF (like ITOT) to maintain exposure while booking the loss for tax purposes. It's a bit of a hassle, but it can save you money. Cash ETFs like USFR or TFLO are also tax-efficient, since they focus on short-term Treasuries with minimal capital gains. One catch, gold (GLD) is taxed as a collectible, with a higher capital gains rate (up to 28%) if held over a year. That's not ideal, but if you're holding for the long haul, it's a small price for the inflation hedge. Overall, this portfolio's low turnover and ETF structure make it a solid fit for taxable accounts, especially if you're not chasing short-term gains.

Final Thoughts

The Harry Browne Permanent Portfolio isn't going to make you rich overnight, and maybe that's the point. It's a strategy that says, "Hey, markets are wild, but I've got you covered." Its equal split across stocks, gold, bonds, and cash feels almost too simple, yet it's got this quiet confidence, like an old friend who's seen a few market crashes and lived to tell the tale. For 401(k) or IRA investors, it's a low-maintenance option, though you might need to get creative with fund choices. In taxable accounts, its tax efficiency is a big win. Still, the lack of international stocks and heavy gold allocation might give you pause. Are you okay with that trade-off? If you're after stability over flash, this portfolio might just be your speed. But like always, we don't know what markets will do next. All we can do is build a plan, stick to it, and adjust when life demands it.

Asset Allocation

Historical Performance

Calculators

Rolling Returns

Maximum Drawdown

Harry Browne Permanent Portfolio Maximum Drawdown