Gyroscopic Investing

Hey everyone,

Today my portfolio is roughly:
• 30% Gold
• 30% Stocks
• 30% Bonds
• 10% Cash

This is close to the Harry Browne Permanent Portfolio strategy, though not exactly the same (and not strictly rebalanced either).

I’m thinking of adding new money, but I’m trying to avoid rebalancing for now, as it would trigger taxes. So, for the time being, I want to leave the current allocation as it is and just allocate the new funds in the best possible way going forward.

Questions for those who know more about this strategy or have run the backtests:
1. What are the main risks with this type of allocation in today’s market conditions?
2. What’s the historical maximum drawdown for this kind of portfolio (or close variant)?
3. What kind of average annual return has this produced over the last few decades?

Any insights or links to backtests/charts would be super helpful!

I know there’s no crystal ball , but I want to understand the trade-offs better before allocating the new capital.

Thanks in advance!

Let HB answer your queries
Spent hours listening to these on a long interstate trip couple of days ago. Highly recommended.

https://www.youtube.com/@harrybrownearchives5823/videos

Hey Frugal. It's a very interesting coincidence that I have toyed with a similar idea in the past. I think it's a very sensible allocation. I like to think of it as putting 1/3rd of your risk capital into each of the main asset classes: stocks, bonds, monetary alternatives. And then rounding out the total portfolio with a nice cash buffer.

I also had a modified version of this that I really liked too:

- 10% cash
- 30% stocks
- 30% bonds
- 10% gold
- 10% bitcoin
- 10% commodities

Same idea, but just splitting out the inflation hedge portion of the portfolio into a couple alternatives.

From a 'value' perspective and recently long dated bond yields have been relatively low (bonds expensive), generally you want to shorten down when so, expand when yields are high.

Gold is relatively high compared to silver recently, gold/silver ratio 100+

S&P500 has outpaced midcaps, aided by a boom in tech stocks (Mag7 stocks within the S&P500 uplift).

Shift some of the LTT bond over to the stock/PM/cash side, swap S&P500 out for S&P400, swap gold for silver and around thirds each S&P400/silver/cash is the recent 'value' choice. But bear in mind that value can take years to out.

At the end of 1979 the gold/silver ratio was down at 15 levels. Gold was better value than silver. As did interest rates rise significantly in the 1980's, you could pick up (value) LTT's relatively cheaply. Stocks PE's were relatively low, so you might have held S&P500/gold/LTT's as the 'value' choice of that time.

Without wading through the 'value' choice of the time and measuring the outcomes that's awkward to backtest. As one example though in 1990 the gold/silver ratio rose to around 90 levels, over the next decade it dipped to around 50 levels, if you swapped out gold for silver when a ounce of gold bought 90 ounces of silver, and then swapped silver back to gold again when it took just 50 ounces of silver to buy a ounce of gold, then you ended up with 80% more ounces of gold than had you just stuck with gold alone.

Smith1776 wrote: ↑Sat May 24, 2025 3:44 pm - 30% bonds

What Kind of Bonds do you aim?

Grinch wrote: ↑Sun May 25, 2025 4:54 am

Smith1776 wrote: ↑Sat May 24, 2025 3:44 pm - 30% bonds

What Kind of Bonds do you aim?

I opted to keep it simple: global aggregate bond.

seajay wrote: ↑Sat May 24, 2025 5:01 pm Shift some of the LTT bond over to the stock/PM/cash side, swap S&P500 out for S&P400, swap…

If it’s not in a taxable account