Permanent Portfolio

DEFINITION of 'Permanent Portfolio'

A portfolio construction theory devised by free-market investment analyst Harry Browne in the 1980s. Browne constructed what he called the permanent portfolio, which he believed would be a safe and profitable portfolio in any economic climate. Using a variation of efficient market indexing, Browne stated that a portfolio equally split between growth stocks, precious metals, government bonds and Treasury-bills would be an ideal investment mixture for investors seeking safety and growth.

BREAKING DOWN 'Permanent Portfolio'

Harry Browne argued that the portfolio mix would be profitable in all types of economic situations: growth stocks would prosper in expansionary markets, precious metals in inflationary markets, bonds in recessions and T-bills in depressions. Browne eventually created what was called the Permanent Portfolio Fund, with an asset mix similar to his theoretical portfolio in 1982. Over a 25-year period, the fund averaged an annual return of 6.38%, only losing money three times.

RELATED TERMS
  1. Modern Portfolio Theory - MPT

    A theory on how risk-averse investors can construct portfolios ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  3. Capital Growth Strategy

    An asset allocation strategy that seeks to maximize capital appreciation, ...
  4. Trading Effect

    A measure of performance that examines the difference in returns ...
  5. Brown Bag Meeting

    An informal meeting that takes place over lunch. This type of ...
  6. Portfolio Return

    The monetary return experienced by a holder of a portfolio. Portfolio ...
Related Articles
  1. ETFs & Mutual Funds

    Permanent Portfolio Locks In Long-Term Profits

    Harry Browne believes his "permanent portfolio" theory is the ideal long-term investing strategy.
  2. ETFs & Mutual Funds

    Brown Advisory: Investment Manager Highlight

    Learn more about Brown Advisory, including products the firm offers, asset classes it covers and background information about key professional team members.
  3. Managing Wealth

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  4. Trading

    5 Popular Portfolio Types

    Learning how to build these portfolios will increase your investing confidence and give you financial control.
  5. Financial Advisor

    What is Portfolio Management?

    Portfolio management is the act of maximizing the return on a portfolio. This is done with trading decisions made for the marketable securities in that portfolio. A portfolio manager, or a team ...
  6. Investing

    The History Of The Modern Portfolio

    Learn how the writings of John Burr Williams and Harry Markowitz led to the creation of the investment portfolio.
  7. Investing

    Understanding Modern Portfolio Theory

    Modern portfolio theory describes ways of diversifying assets in a portfolio in order to maximize the expected return given the owner’s risk tolerance.
  8. Managing Wealth

    Understanding Portfolio Investment

    Portfolio investment involves buying securities with the expectation of earning a return on them.
  9. Managing Wealth

    Harris Associates: Investment Manager Highlight

    Take a look at the executive management and investment professionals team that leads the private investment firm of Harris Associates.
  10. Trading

    Modern Portfolio Theory: Why It's Still Hip

    See why investors today still follow this old set of principles that reduce risk and increase returns through diversification.
RELATED FAQS
  1. What is a permanent portfolio?

    A permanent portfolio is a portfolio construction theory devised by free-market investment analyst Harry Browne in the 198 ... Read Answer >>
  2. Why is risk return tradeoff important in designing a portfolio?

    Learn how the risk return tradeoff is used in the construction of portfolios, and how modern portfolio theory seeks to diversify ... Read Answer >>
  3. How is portfolio variance reduced in Modern Portfolio Theory?

    Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >>
  4. How are my total returns calculated?

    My financial planner says my equity portfolio is up year to date after the fee (1.5%) 5 months into the year. Bonds are up ... Read Answer >>
  5. How much of a diversified portfolio should be exposed to the metals and mining sector?

    Learn what criteria investors use to determine what percentage of their diversified portfolios should be exposed to the metals ... Read Answer >>
  6. The BEST definition of a benchmark portfolio is:

    The BEST definition of a benchmark portfolio is: a) A preset list of securities to be used to compare the performance of ... Read Answer >>
Hot Definitions
  1. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  2. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  3. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  4. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  5. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
  6. Weighted Average Life - WAL

    The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Once calculated, ...
Trading Center