- Harry Browne Permanent Portfolio
- The Golden Butterfly
- Dalio's All Weather
- Larry Swedroe's Minimize Fat Tails
What they all have in common is an allocation to equities of 40% or less. All but the Larry portfolio had a significant allocation to long term treasuries, and the Larry portfolio had a 70% allocation to intermediate treasuries. All but the Larry portfolio had an allocation to gold and/or commodities. Each of these is a version of a "risk parity" portfolio allocation. Here were the author's takeaways:
https://portfoliocharts.com/2019/08/20/ ... vestments/Really think about cutting back on stocks to something less than 50%. Some people may laugh and tell you that’s way too conservative, but those same people will likely be freaking out and complaining about their losses when the next stock market correction inevitably comes. Stocks are just one asset in the grand scheme of things, not the entire “market”. Betting most of your money on economic prosperity is exactly how most portfolios get killed in a recession.
For bonds, your choice depends on your preferred portfolio approach. If you’re taking risks on niche stock classes like Swedroe, stick to larger quantities of shorter maturities with your bonds. But if you’re looking to balance your portfolio based on economic conditions like Browne, give long term treasuries a try as the added volatility helps these portfolios react to economic conditions.
Three of the four portfolios find gold to be an effective ingredient to mitigate downside risk. It seems very counter-intuitive that a shiny metal with no yield can maintain or even increase portfolio returns while reducing volatility, but play around with the calculators and you’ll see it doesn’t take much to have a noticeable positive effect. And as we’ve seen, it’s not simply an artifact of a one-time gold correction. Gold adds valuable diversification in a well-balanced portfolio and has historically responded strongly when it’s needed most.