Set Up Your Own Permanent Portfolio

I am a strong advocate of Harry Browne’s permanent portfolio, as described in his short book Fail Safe Investing.  I believe you should have at least half of your investments in the permanent portfolio or something similar to it.  If you are a more conservative investor, I would suggest at least 80%.  As Richard Maybury says, it is not the perfect plan, but until we find something better, it is the best thing out there.

One easy way to invest in something similar to the permanent portfolio is to simply buy the mutual fund PRPFX.  It is not an exact match, but it is the closest thing you can get in one package.

With the popularity of exchange traded funds (ETFs), you can easily set up a permanent portfolio with a typical online brokerage account.  The set up of the permanent portfolio is to put 25% in stocks, 25% in gold, 25% in long-term government bonds, and 25% in cash or short-term instruments.  You can easily do this with ETFs.

For the stock portion, you can buy the ETF with the symbol SPY.

For the gold portion, you can buy the ETF with the symbol GLD.

For the long-term government bond portion, you can buy the ETF with the symbol TLT.

For the cash portion, you can leave it in the money market fund of your brokerage account, or simply hold it in a money market fund or cd in a bank.

I am not saying this set up is ideal.  I think you should own some gold coins before you put money into GLD.  I think you should consider tax consequences and also the options of your 401k or other retirement plan if you have one.  You may also have other factors in your financial life that come in to play.

The point is though, between PRPFX and the new popularity of ETFs, there is no excuse that you can’t set up a good permanent portfolio plan, at least outside of your 401k.  These are risky and uncertain times and you should make sure that you have your financial ducks in a row.