The December 2012 issue of the American Association of Individual Investors Journal carried an interesting article, The Permanent Portfolio: Using Allocation to Build and Protect Wealth. The article is all about Harry Browne’s portfolio laid out several decades ago. Browne recommended the follow asset allocation.
1. 25% in stocks.
2. 25% in bonds
3. 25% in cash
4. 25% in gold
On face value, this is a very conservative portfolio, yet over the last 40 years the allocation plan returned 9.5% compounded annually. From the AAII article, “The worst loss, a drop of 5%, occurred in 1981. In 2008’s financial crisis, the portfolio was down only around 2% for the year.”
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