What should the composition be of a really long term portfolio? Such a portfolio must be capable of surviving through inflation, deflation, recession, and good times. The Permanent Portfolio, originally proposed by Harry Browne, may be such a portfolio.
A variant of the Permanent Portfolio proposed by CrawlingRoad is even simpler. It consists of long term treasuries, short term treasuries, gold bullion, and US total stock market index. The compound annual growth rate (CAGR) for the Permanent Portfolio from 1972-2008 was 9.79%. The plot above shows the portfolio compared to SPY for the last 3.5 years. The portfolio in the plot above consists of 25% positions in each of TLT, SHY, GLD, and VTI.
The CAGR for the Permanent Portfolio is a bit better than the total stock market index while greatly reducing the devastating drawdowns of the stock market alone. The original Permanent Portfolio also included an allocation to silver, real estate, natural resource stocks, and the Swiss franc. I will more closely examine the original portfolio. Either version of the Permanent Portfolio may be a good approach for the long term core position allocation of your personal portfolio.
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