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

    A grouping of financial assets such as stocks, bonds and cash ...
  3. Portfolio Investment

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

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

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

    An informal meeting that takes place over lunch. This type of ...
Related Articles
  1. Investing

    Permanent Portfolio Locks In Long-Term Profits

    Harry Browne believes his "permanent portfolio" theory is the ideal long-term investing strategy.
  2. Investing

    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. Financial Advisor

    The Workings Of Equity Portfolio Management

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

    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. Investing

    Understanding Portfolio Investment

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

    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. Managing Wealth

    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 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 >>
Hot Definitions
  1. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  2. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  3. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  4. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  5. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  6. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
Trading Center