Bitcoin Forum

This can be very useful for people who have made money with bitcoin and digital assets but eventually would like to create a calmer portfolio. I may write later about how bitcoin could be part of a permanent portfolio reviewed to today's possibilities.

Harry Browne  (https://en.wikipedia.org/wiki/Harry_Browne#:~:text=Harry%20Edson%20Browne%20(June%2017,more%20than%202%20million%20copies.)was an US financial advisor, writer and politician.

His most influential work was de development of the permanent portfolio - A tool to build an asset portfolio that is able to perform under any foreseeable circumstance of the markets.  As anyone may guess, the also called "all-weather" does not perform as well as specific portfolios built for special market conditions. The developer of the method was mainly interested in preserving capital with a moderate return.

The basis:
- There are 4 basic scenarios: prosperity, inflation, recession or deflation. You would need assets that do well in each of these to keep a good balance.
- In Prosperity - stocks, to provide a strong return. Bonds will do well as well.
- In Inflation - Gold is the choice (not the only possibility though).
- In Recession - Cash or cash equivalents do well, due to low liquidity in recessions.
- In deflation - Bonds will do great.

This is how the basics look like. Simple? Yes, that is the beauty of it. This type of portfolio have been tested in different countries, so it is not specific to US or other.

https://roboticinvesting.com/wp-content/uploads/2018/07/Harry-Browne-Permanent-Portfolio-Allocation.png

I'd do 33:33:34 bonds:gold:stocks.

Gold is a bit of an asset on its own in terms of it having both retail and business demand and the demand being international.
Stocks have better growth generally too than a lot of other assets.
Bonds offer a FIXED return normally so by buying both bonds and cash you're increasing your level of risk quite dramatically imo. If inflation hits 8% and you have a 10 year bond paying 4% a year, you'll be annoyed you did that - especially if it lasts 5+ years and monatory policy can change under extreme circumstances...

An interesting concept. I didn't know it, but it even makes a lot of sense.

Adapting to the crypto world, how do you think the investment can be divided?
Long term bonds, I would say would be Bitcoin.


By the way, do you have a link to an article that talks more about this?

This is interesting. But I wonder, what would be the result of such a portfolio to your desire to increase your worth? Or is this portfolio better on protecting or preserving your wealth rather than increasing it? Will this only result to a break-even at the end of the day?

Or should the bulk of our portfolio jump from one asset to another based on the call of the times to make the most out of the changing circumstances and leave the rest for a hedge?

For example, in our current time, would we rather do away from cash and just risk on, say, Bitcoin? Or should we just devote a small percentage to Bitcoin to avoid the rough seas?

Well, the truth is that there are many types of portfolios and none of them is perfect. Depending on one's personal situation we may require different distributions. In my opinion, if you have a high net worth, for example $4M, I think it is silly to have 25% in cash that will lose you 15% annual purchasing power in the next years. For Gold I'd rather stick with Bitcoin, which is Gold 2.0, although I think it's acceptable to have something like 80% Bitcoin 20% Gold.

But well, as you say, it is a portflio more to protect than to perform so that each part of the portfolio protects you against certain types of problems, so I think it is OK, although I will never use it.

It indeed looks simple, but imho one has to have at least 500k, but most probably more than 1M USD worth of wealth in order to get even close of thinking to diversify like this.
But maybe I am wrong and then I am open to suggestions/ideas.

That was my first thought too, it is difficult to diversify especially if you don't have enough money or you don't have because as far as I know, it is pretty expensive creating a portfolio that will match that, not to mention that most of them you have to pay a large amount of management fee. I think that it is the end goal but in my opinion, you have to start focusing on one of them first so you can concentrate the wealth and make more money and then diversify.

There are no ideal models. There are good models and this seems to be one.

These 4 investment areas are good in all aspects, because it increases investment and ensures less loss when the market falls.
Because normally when one of the areas falls, another is going up.

The question in any investment model, which can never be explained, is when to invest more money or when to withdraw money.
This is because nobody knows the future. It has to be a bet of the undue, after an analysis and what you think will be the best. Also with your needs.

Of course, if the investment value is low, it is difficult to divide it by 4 areas and really have a return. This model will really work better for those who have a greater investment capacity.
But it is still a model, to be analyzed, so that it may be better to invest less amounts at certain times.

This is an interesting take on asset allocation. I haven't seen the 25% share before. One big thing I find missing is real estate funds. I would probably put half of the 25% hold into real estate just to have some more diversification. Another point that I would make is that cash and bonds are very similar, putting 50% into these two seems to much. I would rather leave 25% in cryptos than going for cash, we still have positive inflation and not getting interest from cash.

Never heard about it before but this concept does make me curious and interested. This should be spread around the globe so that people have more chances to both earning and saving money. Such allocation surely make your funds secure while facing any kind of recession, disaster, or pandemic

But when the world gets developed, some assets in this technique should be replaced with new ones, and I believe bitcoin ( or some sorts of cryptocurrencies) are capable of this list. Besides inflation, bitcoin does reach all of the other requirements in the list. So it is possible for you to replace any of them with bitcoin so that we can utilize this method more effectively

 

I don't like 50% of this conception.

25% Cash?? Why? Static cash is the sure way to lose value.
I agree it's good to have liquidity in a recession or crisis, but it's much better to keep that 25% in high-liquidity assets than cash.

it's hard to guess what are the other 25% I don't like :) The Gold.

very simple and easy to understand, you have given us a simple but very useful presentation. That is your character who is good at providing information about both micro and macro economic management. Then from the 4 methods, I am sure that an efficient and optimal portfolio management will be created.

Same concept as the 70/20/10 rule on how you allocated your income for your daily needs and investments but only this one is focusing on investments. Although we should keep in mind that this "permanent portfolio" method is literally "permanent" which means the money you are putting in these are for the purposes of investments or holding the assets in long-term which for me personally I don't think applies perfectly to a volatile market such as the crypto market this was an investment strategy that was created in the 80% a time of recession and a great time for investments because most of the assets back then are undervalued.

My current financial status cannot diversify as wild as this, though it's an interesting concept for those who have a lot of money in the bank. They will generally have all the money in whatever season there is, and would continue thriving even if the world around them is going down. Then again, you have to have something in the bank for you to be able to support this method. Those who are living from paycheck to paycheck would not be able to do this, even if they are to take odd jobs in between and take all the overtimes they can get.

Ideally, anyone interested in constructing a portfolio should read Markowitz's Modern Portfolio Theory. The %-asset isn't a number that comes up from one's imagination, rather from the calculation.

Why I say "ideally?" Because it's time-consuming, and you may don't have the information needed to do the calculation. Hence, you should ask your investment manager to create a portfolio, not just a guesstimate. But if you can't afford it, go for gold, index fund, term deposit, and a tiny portion of Bitcoin. Easy to get, less hassle.

Not bad, it is just that you will not have cash when cash is in demand (recessions and liquidity crisis)



Harry Browne authored a book, but I am sure there are may updated versions. https://www.amazon.co.uk/Permanent-Portfolio-Long-Term-Investment-Strategy/dp/1118288254 (https://www.amazon.co.uk/Permanent-Portfolio-Long-Term-Investment-Strategy/dp/1118288254)



The idea behind the portfolio is to be as lazy as possible while preserving wealth. Now, you can tweak it a be a bit more "active" if you chose so yes.



Not at all. This is perfectly possible with 1000 USD. It is better if you have at least 5000 to avoid the commissions eating up too much. What you do is to make a "synthetic" porfolio with ETFs or funds.



Bitcoin is still variable in behaviour. It is not bad in recession and great with inflation, but it there is a liquidity crisys like at the start of COVID,... well...

I am thinking that bitcoin could  add some pepper to it. Keep tuned :)



Cash or cash equivalents (e.g. short term bonds). But careful, in 2008 cash was cash and bonds markets were on the verge of collapse for a few days.

To make it calmer, I'll add real estate and properties on that chart.

It's easier to manage it and you don't have to be an expert when you're going to have it. You can have it as an appreciative asset and at the same time, you can earn passively through by renting it out.

That's also the beauty of real estate which I've seen missing on his method.

Likewise, 25% is also a good diversification for its part and most of the rich people have it most in real estate.

This is a good portfolio to face future problems and of course, it has a good reason to be done.
Though, personally I still prefer cryptocurrency over stocks since this market proves to become more profitable and I can trade anytime I want which is not possible on stocks. Nevertheless, we have to start planning with our portfolios, always expect for a worse scenario to come and if you’re prepared enough you don’t need to worry that much.

While comparison of stock and crypto, cryptocurrency is the best one.In many ways price of bitcoin was low, then the stock market. You need huge analysis of the stock in certain stock.But the thing is no need to analysis bitcoin the huge.The returns from the bitcoin is more then the returns from the stock.

Cool portfolio but so 1990. Have we not seen enough recessions and market fails? There is a new market fail in the crypto market everyday for fuck sake. We saw what happened to the stocks like GameStop and such.

The idea is cool, simplify your portfolio but fuck gold. It can suck a dirt penis for all I care.

I think the ideal portfolio in 2021 would be to add in either a 5th element for crypto and divide it with a portion of bitcoin/some good DeFis/aspiring NFTs/solid alts like Eth. Spice it up.  :D

---

Also, very crucial time for real estate investments. Covid has fucked up the real estate market sooo damn hard. If people can get hands to something good, in the long run it will be :chef's kiss:. 

One might think that saving 25% in cash does not make sense because it is stopped and does not yield.
Of course, for most people, they don't have enough money to do that. But for those who have a lot of money it makes sense.

What caused the first economic crisis in the USA was the banks' lack of liquidity. Millions of people wanting to raise the money they had invested at the same time. There was no liquidity.
Having 25% of the wealth in money, allows not to suffer if it happens again. In addition, if all assets collapse, you lose 75% ... but you still have the 25% to try to hold the boat.

This is not a luxury for everyone. But it is a warning, as we must all have some money without being invested.

I have applied this type of portfolio so far without even looking at the theory developed by Harry.  However, I admit that this theory is quite plausible to make our assets safe and have a fairly good liquidity.  The nature of the assets in the portfolio that Harrh applies is complementary to one another. Gold which has a safer nature but low return is covered by stocks that have a higher return but also a higher risk.

Nailed it! These guys are forgetting something, we are here on this forum to look for something good aside from those above. Bitcoin is a better option, gold is and old asset, death can get you first before you can double your money. There are good stuffs in here and let's talk about them, not those outdated strategies whose makers are already gone.

In your opinion, how can this strategy adapt to the crypto world?

Bitcoin is suitable for all times and all kinds of economic crises.
The balance existing in the above equation is necessary for those looking to generate money in all cases, which requires that you have the sufficient asset in the sufficient time needed by the market.

Bitcoin may impose a new position as an alternative to gold in the event of inflation or an alternative to bonds in the event of deflation, with their being stocks and money.

I am hearing about Harry Browne for the first time but i was following similar method all the way, i do have investment in stock and gold but not in bonds instead i am investing in cryptocurrency for the last several years and i do consider that as an ample good way of investment. I have not dived into the world of bonds that well and i am happy with my investment right now as i think it is a good balance.

All of these models are aimed at one thing - risk diversification. This principle has been known for a long time, and there are even very old folk proverbs, something like "you can't keep all your eggs in one basket." The only difference is which insurance options investors choose. You can hold a portfolio as above. You can invest in crypto, real estate, corporate shares. It is possible in gold, rare earth metals, earth. It is possible in fiat, dollars, euros, yen ...
In fact, there is no perfect "portfolio", there are portfolios with higher risks and lower risks. It should be understood that not all "portfolios" are actually available to the mass consumer. It is better to study the markets, theory, and only after that, taking into account the risks, invest. Good luck and profit to everyone :)

The main aim is to gain profits in the long run and it does not matter which type of portfolio you are maintaining actually.But one main thing is to have cash or bank saving only upto that amount which fulfill your financial needs because if you are holding too much cash with you it will not give you any return in the long run and on contrary basis it will devaluate over time decreasing your purchasing power in future.Get your portfolio with gold,stocks,crypto which ever you like but it should give your good and satisfactory returns unless it's of no use to carry or sticking to that portfolio.So have advice from others and make combinations of all which best suits you.

I couldn't agree more. No portfolio is perfect. And a good portfolio is a solid and healthy portfolio because with a healthy portfolio every day it will provide a profit or at least break even because if you lose something from the portfolio that is formed and immediately with signs like that, we should improve the proportion of assets that are is in our portfolio.

I do think this would differ from person to person. For most people cash would be more than 50% and in more conservative households, 80% , now I do think this might be interesting but for me I would go for :
Property instead of Stocks
Plus I would like to swap Bitcoins and other cryptocurrencies in long term bonds.
Gold is more is so more expensive but I really want to know if anyone did succeed following this and how did it go ? Did it produce good results, because I think depending on the economic situation of every country this would be highly variable and then comes the personal aspect. Therefore I would not advice anyone to go and blindly follow it , but rather take an example and make something like that suiting your personal situation.

I've never heard the name Harry Browne before, he could be a high flyer or he could be a nobody. While it is nice to have a baseline idea, it is always worth constructing your own formulation of assets instead of trying to match some arbitrary figures that worked for somebody else. For instance in the last year we have seen bond yields plunge to record lows and you really needed to be in equities to get a decent return. Obviously bonds are meant to be lower risk, lower return but if they cannot even keep up with inflation then your money is losing value every year. Same with cash, in some places around the world we are starting to see banks charge customers (usually with large amounts) for holding their money, so you end up with a negative interest rate - not only is your cash losing value to inflation, but you are getting charged for that privilege too. The governments out there want people spending that cash and that is the lever that is becoming increasingly common. Altogether I think that Peter Lynch and Warren Buffett are the well known master investors who would advise you to have the vast majority of money in productive company shares - whether through an index fund or individual purchases. It makes sense to have a small emergency cash fund, but that's all.

I do agree that 25% in cash is the worst part in this, I do not agree that anyone should have 25% in cash because that's not a good idea. And gold could be a bit more less risky thing but long term bonds are less risky anyway. This is why I am all in crypto and basically do this in crypto but differently.

For example, I have 30% in bitcoin, that's the cash part for me because I believe bitcoin is as good as cash and will make me profit anyway, I have 20% in ETH and that's my "stocks" part if you ask me, and that's bringing me good profit. I have 20% in BNB which is about long term bonds as it gets and the rest are in small time stuff which is why I do not have gold but I have many different valuable gems let's say. There are people who have NFT as well so that's kinda like investing into art which could be done, if you know what you are doing of course.

We live in a different times as when he lived. I simply dont trust cash that much to have 1/4 of my wealth stored in cash. Maybe few %, but 25% seems like calling bad luck upon yourself. We will enter hyperinflation sooner or latter.

An interesting strategy. If this is working great. It continues with good investments.
We must always look for solutions that are within our reach and that in the medium / long term bring some benefit.

I admit that the portfolio method by Harry Browne is very good at making our wealth safe and growing. But the problem is not suitable for everyone,
it is only  suitable for use by the rich. Because the portfolio method requires a lot of money. But I thank you for the opening post for sharing some
interesting information. Even though I can't run it for now, but it makes my insights increase. So if my finances are ready, I will definitely carry out
this portfolio method by Harry Browne. I admit it is quite simple, beautiful and easy to understand.

Thanks for sharing this thread. Simplicity is the solution to many things. I've never heard of this "Harry Browne Permanent Portfolio" investment model. Coincidentally, I manage my finances with little cash as the chart recommends. I have decided it that way by intuition thinking that it is the best for me due to the inflation that dominates to the economy in the country where I live.