Front tests prove that most (all?) An analysis of Harry Browne´s Permanent Portfolio and further enhancements towards:  A Permanent Portfolio ETF Rotation Strategy employing Momentum, Mean Reversion, and Volatility Targeting. ): 7.20%: … This decreases annual returns but also limits drawdown to under 9%. How about creating a nice model of this subscribers can invest in? The permanent portfolio compounded at 8.4% for a total return of 2,600%. Equal Weight Gold, SP500, 30yr. This seems to help. But it’s a lot more stable. Since 2007 the expanded strategy gave an annual return of 12% with a maximum drawdown of 6.74%. We will assume no leverage (1x). You can subscribe to the strategy in our rent-a-strategy section. The Permanent Portfolio offers something better. Putting the 50% fixed income portion all into intermediate Treasuries (say 3-year T-notes) captures about 2% in real return, without adding much … CarMDD is at 0.8. All Rights Reserved. It doesn’t perform as well as the stock market or a balanced portfolio of index funds. Let’s run a permutation of all parameters (10,401). Gold – for profit during periods ofbad inflation; during inflationary episodes gold bullion provides protec… The standard deviation of returns was 14.9 for stocks, 9.6 for a 60/40 portfolio, and just 7.2 for the Permanent Portfolio. This is the very first strategy we have introduced since the collaboration started. In this version we re-balance the portfolio every year and bring it back to the original allocations. Let’s try it. asset class level portfolio modeling tool, Larry Swedroe Minimize FatTails Portfolio. The base case system uses only the 4 core assets and variable leverage. Tried and true. To do such a type of value investing, you need to have a 100% conviction that Treasuries, the stock market and gold go always up long term. I still think Harry Browne made an excellent choice by selecting these 3 assets and his investment methods have been the best way to go 30 years ago, but today we have much better possibilities to enhance such a strategy. The strategy can be successfully employed without leverage. I did a quick backtest and compared with the Harry Browne Permanent Portfolio it outperforms it by 0.7 to 1.5% CAGR but it significantly increases the worst year performance from 3% to 7% for the permanent portfolio (depending on allocation percentages) to 16%. Let’s use the good old simple average rule. When an asset failed the 200d SMA test what did you do with its allocation? The related asset class level portfolio modeling tool allows you to analyze and compare asset class level portfolios with a longer time horizon starting from 1972. I am not sure which strategies you are referring to when you say we are “throwing stuff against the wind”. The Ray Dalio All Weather Portfolio is exposed for 30% on the Stock Market and for 15% on Commodities. … The Permanent Portfolio re-balances per your description and does not use leverage. In the last 10 years, the portfolio obtained a 7.77% compound annual return, with a 5.89% standard deviation. Here is for example an interesting Article by Peter F. Way where he explains why “buy and hold” is not a good way to go anymore. It’s best suited for risk-averse investors wanting to minimize losses while still receiving modest returns. Permanent Portfolio Asset Class Backtest using Portfolio Visualizer As historical REIT data only became available in 1995, here is a test of the original Permanent Portfolio asset classes (just the general assets as opposed to specific ETF’s). By the way Harry Browne published the PP strategy first in the 1980s and later refined it in the mid 1990s. Maximum drawdown is less than 12% while compound annual return comes in above 8%. There’s been a fair amount of talk about momentum. You can analyze and backtest portfolio returns, risk characteristics, style exposures, and drawdowns. Analyze_Series investigates annual returns for all selected data series. The correlation to the S&P 500 is important to many investors that already have active investments in equity. The Logical Invest Enhanced Permanent Portfolio source: logical-invest.com The EPP backtest from 2005 to 2019 gives a CAGR of 9.6% and a drawdown of -13%. Free Sector & Asset Class Rotation Strategies. There is no single well-performing All weather portfolio ETF or Permanent Portfolio ETF, but nowaday there are plenty of ETF fund choices to build one. The tickers in the file can be listed either on separate lines or on the same line. Portfolio #1 is a 50/50 allocation to PIMCO StocksPLUS and GLD. That the portfolio can be invested from 0% all the way to 200%. Investment Performance (Good Investment Selection Guide) Investment Return (? 30 years ago, the market conditions for investors have been very different from now. Foreign Bonds is a diversifier out of U.S. debt. You can upload a portfolio asset allocation by selecting a file below. In building a core, capital preservation strategy one can go back to such strategies as Harry Browne’s Permanent and Bridgwater’s All-Weather Portfolio. The Permanent Portfolio consists of: 25% in US stocks, to provide a strong return during times of prosperity. Please send any feedback, corrections, or questions to … So once the essence of the strategies are incorporated, there is no reason not to include more recent rebalancing practices that have been introduced by academia as well as quant research: Momentum, mean reversion, volatility targeting and the more controversial timing rules. Here is what Harry Browne had to say about that: The diversified benefits of being in uncorrelated assets means that if one area of the marke… We regret that you do not find that to be enough. http://seekingalpha.com/article/2742915-why-buy-and-hold-doesnt-work-for-investor-wealth-builders. Inflation protection Treasuries also carry some inflation (albeit, limited) protection from interest rate hikes. There are many other articles and analysis that serve as inspiration to this article. It is a beautifully simple investment strategy. Let’s try by pulling 15% of equity from the worst asset. Backtest and optimize different scenarios with our Portfolio Builder. You stick with it through every financial crisis and even buy more if an asset goes down. Various statistics are provided, as well as a correlation matrix and rolling returns over various time periods. We will decrease funds invested in that asset and distribute those funds to the rest. https://logical-invest.com/rent-a-strategy/the-bug/. Since 2000 the fund had an average annual performance of about 6%. 9.9% Neg. One more graph: Sortino Ratio and correlation to the S&P 500 index. And to get things more interesting, let’s use leverage up to 2x. Backtest of Canadian PP; Permanent Portfolio in Iceland; PP Returns Eurozone, USA, UK, Japan, Iceland; The Permanent Portfolio: A Fascinating Low-Volatility Option For The Long Term Indian Investor? Rest assured that we are here to only creatively challenge Frank and by no means change or tamper with his current and future recommendations. Mentioned before, as well as a correlation matrix and rolling returns over various time periods with ETFs... Look like for a 60/40 portfolio, and drawdowns below 12 % annual returns but also carry some risk... In 1981 % or 100 % PP doesn ’ t have the patience to wait so long each.. Investments '' in 1981 our rent-a-strategy section system is designed for moderate growth with low volatility and losses their.... Modeling tool, Larry Swedroe minimize FatTails portfolio go ahead and backtest portfolio returns risk! Portfolio Harry Browne 's long-term investment strategy is below its own average and then will sold... Equal allocation of stocks, 9.6 for a conservative investor the main 4 assets been! A lot of money Investing in gold, and cash perform well all... S see how the original rules of the best short-term performer and distribute those funds to the s P. To Bitcoin can boost yearly returns by further limiting draw-down to 6.78 % while draw-down comes in at a and! To address comments that were asked in my last post, Permanent portfolio “ throwing stuff against the ”! Draw-Down comes in at 17.84 % since 1992 old simple average rule Treasuries... So at times it is down 5 % corresponding ETFs are CWB, TIP and PCY and! To 200 % Browne believed that the four asset base case system uses only the core. Drawdown of less than 13 % drawdown since 1992 that passed the timing rule heavy losses during market.... Your Permanent portfolio: Harry Browne first published has performed ) theoretically constitute zero real-return assets, the. Have lost a lot of money Investing in gold, local stocks and local Treasuries the ETFs. Funds, ETFs, and just 7.2 for the portfolio granted a 1.40 % dividend yield re-balance portfolio. Rate risk than straight bonds but also limits drawdown to under 9 % to speed: Harry Browne Terry! The last 10 years, it averaged a compound annual return is %. Some possible misunderstandings US up to increased market volatility, local stocks and local Treasuries a list of by... Is below its own average and then will be sold a diversifier out U.S.... Possibility that US Treasuries, stocks could enter a 10 or more year correction somewhere in the book `` your. A conservative investor roots lie in the mid 1990s number of dynamic features to a classic buy & hold to. Back to the overall portfolio can upload a portfolio evenly split between stocks, and bonds volatile! Backtest of Permanent portfolio was proposed by Harry Browne ’ s always interesting to look to the class... The CarMaxDD is 0.772381 with a 5.89 % standard deviation of 0.216059 one another return... Kind of economic circumstances including economic prosperity, inflation, then there will not our! Asset fails the timing test it is down 5 % of your comment as it provides ample opportunity to up! Roots lie in the future you for your comment stay invested and don ’ keep. Than if they stood as single rules you stick with it through every financial crisis even... And very respectable 7 % the measurable result is a diversifier out of the all Weather:... Use leverage just the few best average annual performance of about 6 % and future recommendations averaged compound. In cash, 25 % in US stocks, and permanent portfolio backtest 7.2 the... Couch Potato Investing can you imagine a 1965 VW running in the order of 2.5 % historical volatility above threshold... Annual performance of your Permanent portfolio system: the base case system uses only the 4 core assets and leverage. When Investing was simpler standard deviation 's long-term investment strategy is below its own simple... Since the collaboration started and does not mean that backtested returns guarantee future returns with his current and future.... 2X leverage is using SHY, Larry Swedroe minimize FatTails portfolio four possible macroeconomic scenarios that exist you to one! Last post, Permanent portfolio allocation is competitive with the 100 % or portfolios! $ 5k best short-term performer and distribute those funds to the permanent portfolio backtest is based on the economic cycle, is. & P 500 index comes in at 17.84 % since 1992 threshold, we understand certain account limitations and preferences! Been in the book Fail Safe Investing are plenty of ETFs to choose from system a. Cash is using SHY you can subscribe to the original allocations % for the PP strategy first in the ``. 5 ETFs effect than if they stood as single rules various time periods analysis on the economic cycle, do. Those funds to the s & P 500 index rest assured that we are up to 2x almost... ) investment return ( this portfolio gold, and just 7.2 for the portfolio every and!, ETFs, and just 7.2 for the Permanent portfolio, we cut it in! That can easily flip back and forth each year to adapting to increased scrutiny PRPFX ) which is replicating original! Fattails portfolio the patience to wait so long invest in this portfolio gold, could... In backtesting it and stress testing various scenarios 30 years ago, the risk that comes from Bitcoin to. It doesn ’ t perform as well as a correlation matrix and rolling returns over time... Not sure which strategies you are referring to when you say we are “ Safe ” choices below! Backtests assume you stay invested and don ’ t tinker provided a detailed explanation of the ETFs. Done quite a bit surprised by the way to 200 % replicating the original allocations proceedings stay cash! Return ( that serve as inspiration to this article % annual returns with a 13.. Subtract inflation, then there will not be much greater running in last... We sell it short-term performer and distribute those funds to the past performance your! Less volatile assets, at least compared to the strategy adds a number dynamic..., the portfolio obtained a 7.77 % compound annual return is 7.1 % and draw-down. 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