It’s time for the clash of the Titans!
We’re comparing the two most famous long-only asset class portfolios known for their balance, risk management and overall diversification levels that put them miles ahead of an industry standard 60/40 portfolio.
If you haven’t guessed it already, we’re comparing the Ray Dalio All Weather Portfolio versus the Harry Browne Permanent Portfolio.
Many consider these two classic portfolio configurations to be the most all-season, resilient and robust long-only portfolios.
I’m honestly hard pressed to think of two portfolios that have had a bigger influence on investors of all backgrounds, experience levels and pedigrees.
And you’ve got hardcore fans on both sides!
Some will go to the ends of the earth to toot the horn for Ray whereas others are staunch admirers of Harry.
It’s quite honestly fascinating.
One of the most popular tweets from my @NomadicSamuel twitter account (which I’ve lost control over – @nomadicsammy is what I’m using for the time being) was a poll I did asking investors which portfolio they liked better.
Here are the results:
https://twitter.com/NomadicSamuel/status/1596625383444594688
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very kind of you to share so much relevant information, but I still feel lost the content is deep for me.
I am not a fan of either of the portfolios. They are both ridiculous. Using 2007 as a starting point, S&P 500 beats both with respect to CAGR. Note that by starting in 2008, the mortgage meltdown is included in the comparison. Even so, 100% equity beat those two stupid concoctions.
Weather: 6.06%, Permanent: 6.18%, S&P 500 9.48%
Now… change the comparison start date to 2009 and the difference is even more profound.
Weather: 5.99%, Permanent: 6.16%, S&P 500: 13.87%
It never ceases to amaze me that people give diversified portfolios any credence at all. S&P 500 beats all diversified portfolios.
All data comes from Portfolio Visualizer.
Sure – if you’re willing to accept short-to-medium term volatility and have enough lifespan left to ride out the lows. Not so good if your elderly and may need to liquidate your assets at a loss to pay for say care home fees. Incidentally, there is evidence that holding a 10-25% position in bonds with the rest in equities will slightly outperform a 100% share portfolio. So I wouldn’t dismiss these portfolios as ‘stupid’ or ‘ridiculous’…