Browne’s Crisis-Proof Portfolio

Hardly a week goes by without folks asking me how they should invest their hard-earned cash.

It ain‘t surprising, of course, considering the name of this newsletter.

It is called Money & Crisis after all.

But the truth is this is more of a Big Picture e-letter. We deal in actionable strategies to sure up your finances — and make some profit — before the next big crisis hits.

I leave the nitty-gritty details to folks like James Altucher, who spend their whole day poring over stocks and market news and government reports. In fact, if you’re looking for a tried-and-tested technique for pulling $3,000 out of the stock market every month, I recommend you check his stuff out.

But while I’m not able to recommend specific stocks to you, I’d like to spotlight a particular investment strategy that I’m very fond of.

We could be looking at a turbulent year for stocks. Which makes this the perfect time to adopt this strategy.

Introducing…

Harry Browne’s Permanent Portfolio

The late Harry Browne was a writer, investment advisor, and the Libertarian Party’s Presidential nominee for 1996 and 2000.

But to my mind, his most notable contribution to the American people was his Permanent Portfolio.

The portfolio was built on the idea that financial crises will happen.

It’s not “likely” or “possible.” It’s inevitable.

As an investor, you will go through multiple financial crises in a lifetime. And each of those crises can affect your portfolio in different ways.

So instead of trying to predict what or when the next crisis would be, Browne developed an investment strategy that would adapt and grow during any crisis.

Browne called this the Permanent Portfolio. Because once you set it up, you never need to rearrange the investment mix — even if your outlook for the future changes.

The strategy involves putting your assets and money into four types of investments that mimic the business cycle (prosperity, recession, inflation, and deflation).

In other words, invest 25% of your wealth in stocks, 25% in cash, 25% in gold, and the last 25% in long-term Treasury bonds.

By dividing your investments across these four classes, your wealth can survive any event that would otherwise be devastating to any individual element within the portfolio… and the results speak for themselves.

In the past 41 years, this simple strategy has suffered only two down years.

Throughout the other 38 years — throughout booms and busts — it continued to churn out gains.

Had you invested $10,000 in a permanent portfolio in 1972, you’d be sitting on over $315,000 today. Without ever having to worry about timing an option move or analyzing a balance sheet.

And what about 2008? One of the worst crises we’ve been through since the Great Depression?

The Permanent Portfolio held its ground, and then some — gaining 1.9%.

A word of warning though: For this strategy to work, you need to sit down once a year and assess the performance of your Permanent Portfolio and rebalance your assets.

After all, in the space of 12 months, one of the four categories might grow big-time, while another might shrink.

If any one sector has grown bigger than 35% of the overall portfolio, or smaller than 15%, it’s time to rebalance the four categories back to roughly equal proportions of 25%.

For instance, if gold explodes and becomes 40% of your total holdings, you might be tempted to “let it ride” in hopes of it growing even bigger.

Don’t give in to the temptation. The moment you do is the moment the market could deliver you a nasty surprise. And the Permanent Portfolio is all about insulating yourself from surprises.

For Browne, the Permanent Portfolio wasn’t just an investment strategy, it was a way of life.

At Harry Browne’s funeral, Autumn Browne read a self-eulogy written by her father which wonderfully summed up some of his core beliefs:

To have made so many mistakes, and yet to have had so much. It proves that you don’t have to be perfect to succeed (. . .) 

I don’t advise being careless or sloppy. I do advise that you hold fast to your beliefs and act in the best way you know how — but then forgive yourself whenever you fail to measure up to your standards. 

You will never be perfect. But you can be free and happy. 

I hope you make it.

All the best,

Owen Sullivan
Editor, Money & Crisis

P.S. If you’re looking for more specific investmentadvice, I highly recommend checking out this message from my colleague James Altucher. In it, he shows you a simple strategy to yank $36,000 out of the stock market every

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