Is Harry Browne's Permanent Portfolio too cautious for its own good?
Harry Browne designed the Permanent Portfolio for people who would rather never think about their investments again. It holds four equal parts — stocks, long-term Treasury bonds, cash, and gold — each chosen to shine in one of four economic conditions: prosperity, recession, deflation, and inflation. The result is unusually steady by design; the open question is what that safety costs in long-run growth.
What's in it: the allocation
- VTI25%
- TLT25%
- BIL25%
- GLD25%
Growth of $10,000
What an investor actually experiences: drawdowns
Stability is the Permanent Portfolio's entire purpose, and the numbers deliver: its deepest fall was only -15.9%, less than a third of the S&P 500's -50.8%, and it was back to even in about 26 months. With a quarter of the portfolio always in cash and a quarter in gold, there is almost always something holding firm while stocks slide.
A loss this shallow rarely triggers the panic-selling that ruins long-term results. For anyone with money earmarked for a near-term goal — a house, tuition, or retirement — this is about as close as a stock-holding portfolio gets to letting you sleep at night.
Results
| Statistic | S&P 500 (SPY) | Permanent |
|---|---|---|
| CAGR | 8.8% | 7.0% |
| Annualized volatility | 15.0% | 7.1% |
| Sharpe ratio | 0.64 | 0.99 |
| Sortino ratio | 0.96 | 1.71 |
| Max drawdown | -50.8% | -15.9% |
| Longest drawdown (months) | 52 | 26 |
| Growth of $10,000 | $83,976 | $55,619 |
The portfolio grew at 7.0% a year, turning $10,000 into $55,619 over about 25 years. That trails the S&P 500's $83,976 — the price of keeping 25% in cash and 25% in gold, two assets that produce little over long stretches.
But for the risk taken, it is hard to beat: volatility of just 7.1% versus 15.0%, and a Sharpe ratio of 0.99 (Sortino 1.71) against the S&P's 0.64. It earned nearly as much return per unit of risk as anything here, with the shallowest losses of the group. The only real question is whether you can accept lower long-run growth in exchange for that calm.
Figures are computed from monthly adjusted closing prices over Sep 2000–Jul 2026. Drawdowns are measured at month-end and so understate intra-month extremes.
Methodology
The two instruments
- VTI — Vanguard Total Stock Market ETF
- The broad US stock market — the piece that carries the portfolio during good economic times (prosperity).
- TLT — iShares 20+ Year Treasury Bond ETF
- Long-term US government bonds, which tend to surge during deflation and recessions.
- BIL — SPDR Bloomberg 1-3 Month T-Bill ETF
- Cash-like short-term Treasury bills — stability and dry powder for recessions and rising rates.
- GLD — SPDR Gold Shares
- Physical gold, the portfolio's defense against inflation and currency crises.
Backtest parameters
- Allocation
- 25% VTI / 25% TLT / 25% BIL / 25% GLD
- Benchmark
- S&P 500 (SPY)
- Data
- Monthly adjusted closing prices (dividends reinvested)
- Period
- Sep 2000 – Jul 2026 (history before an ETF's inception is extended with its older index/mutual-fund equivalent)
- Rebalance
- Yearly, at month-end
- Transaction costs
- None modelled
Advantages
- Exceptional stability
- With a quarter always in cash and a quarter in gold, the Permanent Portfolio has historically been one of the calmest allocations available, with small and short declines even through severe market crises.
- One asset for each climate
- Because stocks, long bonds, cash, and gold each shine in a different economic condition, something in the portfolio is usually working, which limits how far the whole can fall.
- Simple and hands-off
- Four equal slices and a once-a-year rebalance make it easy to run and easy to stick with — a big advantage, since sticking with a plan is what actually produces returns.
Disadvantages and risks
- Low long-run growth
- Holding 25% cash and 25% gold — two assets that produce little or nothing over long stretches — means the portfolio has historically grown much more slowly than a stock-heavy one.
- A large permanent cash drag
- A full quarter in cash is a steep price for safety; in long bull markets that quarter earns little while stocks soar.
- Big bet on gold
- Gold is 25% of the portfolio and can disappoint for a decade at a time, so a meaningful part of returns rides on an asset with no earnings or yield.
Try it yourself
Every number on this page is reproduced by MarketHeist's free portfolio tool — change the weights, tickers, or rebalancing and watch the result update.
Open the Permanent Portfolio in the live tool →Frequently asked questions
- What is the Permanent Portfolio?
- An allocation of 25% each to US stocks, long-term Treasury bonds, cash, and gold, rebalanced yearly. Harry Browne designed it so that one asset would do well in each of four economic conditions: prosperity, recession, deflation, and inflation.
- Is the Permanent Portfolio still a good idea?
- It remains one of the most stable simple portfolios and appeals to investors who prize safety and peace of mind. The cost is lower expected growth, so aggressive long-term savers often prefer a stock-heavier mix.
- Why does the Permanent Portfolio hold 25% cash and 25% gold?
- Cash protects against recessions and rising rates, and gold protects against inflation and currency trouble. Together they are the reason the portfolio's declines are so shallow — and also why its long-run growth is modest.
References
Educational analysis of historical data, not investment advice. Past performance does not guarantee future results. Backtested results are hypothetical and computed from the MarketHeist portfolio engine on the parameters above.