"The mention of the Permanent Portfolio by Tim Price in the article published on Monday deserves further comment.
"The mention of the Permanent Portfolio by Tim Price in the article published on Monday deserves further comment. I strongly recommend that FullerMoney readers study the original (very thin) book by Harry Browne called Fail-safe Investing, which is one of the wisest ever written on investing. I also recommend the new book called The Permanent Portfolio published last autumn by Craig Rowland, who has for many years maintained a website in the USA dedicated to the system. The website is called Crawling Road. I manage my own investments as one-third inflation-proofed cash, one-third Permanent Portfolio, and one-third global-macro trend following hedge fund. The Permanent Portfolio is the rock-solid foundation of my investing. It works just as well for GB pound based investors in the UK, and this data (pdf) (I found on the internet) tabulates returns for 1972-2008. It has continued to perform well in recent years too. Note that there have been very few drawdown years, and the drawdowns have been small. If anything, performance has been slightly better in GB pounds that in US dollars, with double-digit returns on average over the years, requiring only an hour or two of attention once a year. So why pay a fund manager? And please note that these excellent returns have been calculated based on Harry Browne's original holdings of 25% each of cash, government bonds, gold and FTSE100 index tracker. Tim Price has modified the formula leading to lower returns, even before charges are taken into account. There is an ETF in the USA also based on the Permanent Portfolio but again it has tinkered with the holdings and produced worse returns than the basic formula. I highly recommend that investors consider setting up their own Permanent Portfolio based on Harry Browne's original formula."
David Fuller's view Many thanks
for this extremely interesting email and performance record, contributed in
the spirit of empowerment through knowledge. I think many subscribers will be
interested in reading Harry
Browne's Fail-Safe Investing and also Craig
Rowland's The Permanent Portfolio, as will I.
Noting your concluding recommendation, I think many subscribers will at least set up a hypothetical 'Permanent Portfolio', so that they can monitor and perhaps experiment with it, as others have done. One caution: there are instances where the widespread adoption of a successful methodology can overload it, leading to deteriorating results. Also, market action remains subject to change. In other words, will the Permanent Portfolio do as well while gold and other resources underperform and as the 30-year plus bond bull market ends?
Eoin and I welcome further feedback on this subject, not least from Permanent Portfolio practitioners or observers over the medium to longer term.