There is something very attractive about vintage items that just won't die.
They just keep coming back. Same philosophy but better up-to-date technology.

It's not just cars. It's investment strategies, too.

Vintage strategies are often simple, easy to execute and provide ample ‘out-of-sample' data. In other words one can see how they performed in real life years after they have been proposed. And like the VW bug, they are “safe” choices. Tried and true. Can you imagine a 1965 VW running in the Autobahn?

Although the essence counts for a lot, for the car to survive at today's highway speeds the tech needs to be up to date. So let's take my favourite oldie and bring it up to speed: Harry Browne's Permanent Portfolio investment strategy.

The Permanent Portfolio

From Investopedia:

… Browne believed that each of the aforementioned four asset classes would thrive in one of the four possible macroeconomic scenarios that exist.

So let's see how it has performed.

The original rules:

25% in a stock market Index (SP500)
25% in Treasuries.
25% in Gold.
25% in Cash or similar.

Not bad. Annual return is 7.1% and maximum draw-down comes in at 17.84% since 1992.

For a far more detailed analysis of the so called “PP” you can see Gestaltu's excellent “PP Shakedown” series as well as Scott's investments analysis. There are many other articles and analysis that serve as inspiration to this article.

Building a new strategy.

So let's update the Permanent Portfolio strategy by using some recent tactics. All further rules assume monthly rebalance.

If an asset exhibits historical volatility above a threshold, we cut it down in size as to reduce risk to the overall portfolio.

This decreases annual returns but also limits drawdown to under 9%. Overall, risk adjusted returns benefit. CarMDD is at 0.8.