Wednesday, March 21, 2012

Permanent Portfolio & Minimize Fat Tail Portfolios

I stumbled on to Permanent Portfolio (inspired by Harry Browne) over 1.5 years back. I am actually invested in this portfolio for almost an year and it has provided good returns. I worry about high gold and long term bond allocations in the portfolio but so far it has held up pretty nicely. I am not sure how it would work in the future.

In the simplest form the portfolio consists of 4 assets at 25%. These are:

  1. Total Stock Market (VTI) - 25%
  2. Gold (GLD or IAU) - 25%
  3. Cash (can be replaced by Short Term Treasury - SHV or SHY) - 25%
  4. Long Term Treasury (TLT) - 25%
If you want to learn more you can read more at and follow the discussion at

Another strategy I am interested in is the Fat Tail minimization by Larry Swedroe. The assets in the portfolio are:

  1. Small Cap Value (VBR/IWN) - 15%
  2. Emerging Market (VWO/EEM) - 15%
  3. Inflation Protected Treasury (TIP) - 35%
  4. Short Term Treasury (SHY) - 35%

Both these strategies are expected to provide returns with low volatility. Fat Tail Minimization is equivalent to traditional 30/70 portfolio but the stock portion has relatively higher risk and bond portion has relatively lower risk (does not include corporate bonds).

Over the next few posts I will outline various flavors of the above strategy and documenting my results. Once I have described various portfolios I plan on updating the results every month.

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