There are many ways to construct an investment portfolio. My preference is to have your core asset classes be U.S. stocks, international stocks, and U.S. bonds, but there are other ways to construct an asset allocation.

One lazy portfolio that is favored by more conservative or pessimistic investors is the so-called “permanent portfolio.” Its defining characteristic is a high percentage of gold and a relatively low percentage of stocks. Let’s take a look at this portfolio and see if it might be the asset allocation for you.

Harry Browne and the Permanent Portfolio Asset Allocation

Harry Browne wrote “Fail-Save Investing: Lifelong Security in 30 Minutes” in 2001, where he describes the permanent portfolio. He markets the permanent portfolio as one designed to perform well in a wide range of market conditions.

The permanent portfolio proposed by Harry Browne consisted of equal weighting in four asset classes:

  • 25% U.S. Stocks
  • 25% Treasury Bills
  • 25% Long-Term Treasury Bonds
  • 25% Gold

Building the Permanent Portfolio with ETFs

The permanent portfolio can be built using index funds at Vanguard or Fidelity:

Permanent Portfolio at Vanguard

  • 25% U.S. Stocks: VTI
  • 25% Treasury Bills: VGSH
  • 25% Long-Term Treasury Bonds: VGLT
  • 25% Gold: GLD (run by SPDR, not Vanguard)

Permanent Portfolio at Fidelity

  • 25% U.S. Stocks: FSTVX
  • 25% Treasury Bills: FSBAX
  • 25% Long-Term Treasury Bonds: FLBAX
  • 25% Gold: GLD (run by SPDR, not Fidelity)

The Heavy Emphasis on Gold: Libertarian Politics?

Harry Browne’s emphasis on gold may have to do with his libertarian politics, as he was the Libertarian Party’s candidate for president in 1996 and 2000. Libertarians are generally suspicious of the loose monetary policy of the Federal Reserve (e.g. Ron Paul’s call to “End the Fed“). Libertarians often propose a return to the gold standard, which would certainly make gold more valuable than it is today.

Permanent Portfolio Historical Returns

Using historical returns from Portfolio Visualizer, let’s see how the permanent portfolio has done compared to a standard three-fund portfolio of 60% U.S. stocks, 30% international stocks, and 10% total bond market since the publication of Harry Browne’s Fail-Save Investing in 2001 (assuming annual rebalancing):

Year Permanent Three-Fund
2001 0.6% -11.8%
2002 6.9% -16.3%
2003 14.5% 31.3%
2004 6.4% 14.2%
2005 8.0% 8.5%
2006 10.9% 17.7%
2007 13.3% 8.6%
2008 -0.7% -34.9%
2009 10.5% 28.8%
2010 14.5% 14.2%
2011 10.5% -3.0%
2012 6.8% 15.6%
2013 -2.0% 24.3%
2014 9.1% 6.8%
2015 -2.9% -1.1%
2016 5.7% 9.2%
2017 8.8% 12.9%
2001-2017 214.9% 166.6%

The permanent portfolio actually outperformed the three-fund portfolio from 2001-2017. Of course, using 2001 as a starting date would be the worst possible time for the three-fund portfolio, as that was during the tech crash and the market experienced two crashes during this time period.

Let’s look at the performance of the permanent portfolio versus the three-fund portfolio starting in 1987, when historical data for all asset classes are available on Portfolio Visualizer:

The three-fund portfolio outperformed the permanent portfolio from 1987-2017.

Criticism Of the Permanent Portfolio

Low stock market exposure

The portfolio has a very low exposure to stocks — only 25%. Many portfolios, including target-date funds for younger investors, have up to 90% of their portfolio in stocks. Even investors in retirement should consider holding around 50% of their portfolio in stocks. For most investors, a portfolio with only 25% stocks is too conservative.

No international exposure

Any “permanent” portfolio should have international exposure. For a portfolio to be truly “fail-safe,” it should have exposure to markets outside of the United States. I’m optimistic about the future of the American economy, but it would prudent to have at least some exposure to international stocks.

High emphasis on gold

Gold is probably the most controversial asset class in all of finance. You either love gold, and are affectionately (or pejoratively) called “gold bugs”, or dislike gold, believing that it does not serve any purpose in a portfolio. I am in the latter camp. I don’t believe that gold has long-term value except as an inflation hedge. Your opinion of the permanent portfolio will be highly correlated with your opinion of gold as an asset class.

Treasury bonds only

The bond portfolio only holds Treasury bonds and does not hold corporate bonds. While corporate bonds are riskier than Treasury bonds because of its credit risk, I believe that a portfolio of Treasury, corporate, and other non-Treasury bonds provides a diversification benefit over Treasury bonds alone.

What The Permanent Portfolio Means To Investors in 2017 and 2018

The permanent portfolio shows that a three-fund portfolio does not perform well in all market conditions. If you select 2001 as the starting point, the permanent portfolio actually outperformed the standard three-fund portfolio.

However, over the past century, the stock market has far outpaced the bond and gold markets. A portfolio that does not hold the majority of its assets in stocks implies a pessimistic view of the future of the global economy.


The “permanent portfolio” of equal parts total stock market, short-term Treasury bills, long-term Treasury bonds, and gold proposed by Harry Browne has declined in popularity over the years. I would not recommend this portfolio for the typical investor because of its high emphasis on gold and low emphasis on stocks. However, very conservative investors and “gold-bugs” can consider this portfolio, as it may be better than a standard three-fund portfolio in more difficult economic conditions.

What do you think? What role do you think gold plays in a typical investor’s portfolio? Would you invest in the permanent portfolio? Comment below!


  1. I think there is a lot to be said for some kind of “permanent portfolio.” Especially when governments start playing with the money supply. Tony Robbins renewed some interest in this.
    The biggest issue I have is I cannot imagine taking 25% of my wealth and putting it in Gold. Wow. No dividends. Not a company. Subject to speculative runs and crashes. Nope. Just can’t do it.


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