Monday, 8 May 2023

The All-Weather Portfolio for Uncertain Times

A little while back I was thinking about the type of portfolio allocation that would be most appropriate for longer term investing during what could well be an uncertain future bearing in mind the significant threats posed by climate change. This report from Chatham House is one of many in recent times which highlights some of the risks we face over the coming decade and beyond. So, as I have pondered about these risks and how to position my portfolio, what came to mind was something I have known about for quite some time but until recently had dismissed as too extremely cautious... but the times they are a changin’!

What Is It?

The Harry Browne Permanent Portfolio is essentially an all-weather strategy and was devised in the 1980s by US investment analyst Browne. It is very simple and merely consists of an equal mix of equities, government bonds, gold and cash (or Treasury bills). Browne argued that this mix would be profitable in all types of economic situations. When times were good, equities would benefit; gold would prosper during periods of high inflation ( as we have seen over the past year or so); government bonds should perform better during periods of deflation and cash is king during a depression.

It is recommended that the portfolio is rebalanced every year to maintain the 25/25/25/25 mix.


Browne eventually created a fund based on his 1982 theoretical portfolio. Over the past 40 year period from 1976 to 2016, a hypothetical permanent portfolio would have given a compound annual return of 8.6% p.a. compared to a more traditional 60/40 portfolio return of 10.1%. The permanent portfolio returns come with much lower volatility. (via Investopedia)

According to Browne, the portfolio provides 3 key features - safety, stability and simplicity.

Possible Constituents

It should be fairly straight forward to set up a simple portfolio.

For equities, a low cost global index fund/ETF should fit the bill e.g. Vanguard All World ETF (VWRL). Personally I would prefer something that avoided fossil fuel companies so would select the likes of iShares MSCI World SRI (SGWS)

For government bonds maybe Vanguard Global Aggregate (VAGP)

Gold could be held via the likes of iShares Physical Gold ETF (SGLN)

For cash, I think the most obvious solution would be a higher interest cash deposit a/c with a building society.

None of us can know what’s around the corner and we live in increasingly uncertain times - climate change, Ukraine, Taiwan/China, inflation combined with high levels of government and corporate debt, the long term threats to humanity from AI chatbots - I just cannot see investment returns over the coming years from a more traditional 60/40 or 80/20 equity/bond mix being anywhere near the average of 8% or 9% we have seen over the past 20 or 30 years.

This excellent article from earlier this year on Monevator makes the case for looking further than just bonds for a truely defensive portfolio.

The benefit of the Permanent Portfolio is that it should deliver a half-decent return for investors in nearly every scenario short of the outbreak of nuclear war or some climate-related tipping point.


For some time I have been prevaricating on how to rebalance my portfolio to reflect the perceived risks ahead. This has resulted in a reduction in equities over the past 18 months or so and a significant increase in cash but of course holding high levels of cash over the longer term in times of high inflation is far from ideal.

There have been a few bumps in the road but on the whole, over the past 50 years, patient investors will have reaped their rewards when the markets bounced back. And after those downturns, investors have not had to wait too long for the 'inevitable' bounce-back...a year or so, maybe two years tops. But the markets don't always rebound as expected and as we are always reminded...past performance is no guide to the future. For example, during the Wall St crash of 1929, the Dow Jones index fell almost 90% from 381 in September 1929 to a low of 41 in July 1932. It was not until the end of 1954 that the index passed its previous peak of 381. The great optimism, consumer spending and economic growth of the 'Roaring 20s' became the Great Depression of the 1930s.

Just looking at my current portfolio mix, I am more or less on track to match the permanent portfolio with cash and government bonds so would just need to cut back on the equities a little more and increase gold quite a bit to create my diy all-weather portfolio. However, I will most likely be holding on to my renewable energy investment trusts which account for around 25% of my portfolio so maybe I will add them to the mix as an additional 5th asset class.

Could this is the ultimate set-and-forget portfolio?

Further reading - The Permanent Portfolio by Craig Rowland & J.M. Lawson

If you have any thoughts on the ideal defensive portfolio mix for an uncertain future feel free to leave a comment below.


  1. Related to the above, I found the portfoliocharts website interesting in the context of objectively assessing a range of different asset allocation decisions...

    1. Thanks for the link...some interesting portfolio options there. I quite like the Golden Butterfly variation.

  2. Thank you for mentioning the HB portfolio, DIY. A useful pointer in these uncertain times. How effective it would have been over the last 15 years or so is debatable. The 'normal' correlation between equities and bonds has, as we've seen, been thrown into disarray since the GFC in 2008. Perhaps only now is it just beginning to normalise. So your flagging up the All Weather at this juncture may be very timely. Who knows though what's round the corner?

    1. Thanks Anon,

      It's true that over the past 15 yrs the traditional 60/40 index fund would have delivered the better returns. But of course the next 15 years could be very different so for me it's all about balancing perceptions of risk/reward and of course time line...for me not so long as most!

      I think the more conservative portfolio could well be the better option at this juncture with all the risks and challenges we face in the decade to come.

  3. Apologies but you are missing the main macroeconomic thinking behind this portfolio. For examples, bonds have to be ling dated bonds, with a duration of approximately 14-15. Not t rhe one you suggested. Also bonds and shares need to be from the same geographical area to allow the ecomic cycles to have an effect on them. If you have british bonds but your shares are mainly in the usa you are uo for a nasty surprise….

    1. I agree. The point was to invest in your own jurisdiction for stocks bonds and cash ad buy gold in physical form

    2. That's interesting to learn. What investment vehicles would you suggest for the average UK-based investor?

  4. I do think the Permanent Portfolio is now looking a lot more promising now that the ZIRP and QE policies are over. They had distorted things so much that 75% of the portfolio yielded virtually zero. As an income oriented investor there wasn't much to like. Now the starting yields on bonds and cash/cash like instruments are much healthier they may even offer real returns by the end of the year. The permanent portfolio is looking a lot more resilient to shocks. I do share your view on renewable energy investment trusts offering some unique characteristics (high income indexed to inflation/energy prices regardless of economic conditions - unlike, say commercial property) which mean I have a healthy 15% allocation to them. I also like IG corporate bonds though, sub 5 year. High yields, low volatility, who knows maybe they will give equity like performance over the next decade. So the Permanent Portfolio is still not for me.