Permanent Portfolio is a portfolio strategy I came across through The Voluntary Life, one of my favorite podcasts. The core tenet is that you put your wealth in different asset classes. The Permanent Portfolio strategy was conceived by Harry Browne, who wanted a strategy that works regardless of which specific economic cycle we’re in:
- Prosperity
- Inflation
- Deflation
- Recession
Browne (and Jake from The Voluntary Life) put their money in these asset classes, equally divided:
- 25% stocks, great during prosperity or declining inflation.
- 25% gold, good during bad inflation and general global insecurity
- 25% long term bonds, profit while interest is declining and during deflation
- 25% cash, great during recession
We believe Bitcoin is the new gold, all digital and online (though better stored offline), and as Bitcoin maximalists our ideal share of the digital gold is also much higher.
Rebalancing your portfolio
With Browne’s strategy you can rebalance every year, or when a specific asset goes below or over a specific band. E.g. stocks have gone up and are now 31% of your portfolio you sell and buy whatever asset has dropped.
Your specific tax situation is very important when it comes to rebalancing. You want to minimize capital gains tax.
It also makes sense to consider moving countries or becoming a perpetual traveller.
Ideal Satoshi FIRE portfolio
Bitcoin is much volatile than other assets. And this will be remain like this until it will take over the role of gold and international settlement, so until the price of 1 Bitcoin will be at least $300,000 you can expect strong market movements. It doesn’t make sense to rebalance too much with Bitcoin in your portfolio.
Here are 3 different portfolio ideas:
Conservative
- between 1% and 5% Bitcoin
- rest in cash
Conservative crypto
Great for folks who love a bit of risk (e.g. have been trading shitcoins)
- 25% Bitcoin
- 25% indexfunds
- 25% whatever floats your boat
- 25% cash
Burning Man FIRE
- 50% Bitcoin
- 10% index funds
- 10% p2p investing (for a nice cash flow)
- 10% real estate
- 10% random stuff
- 10% cash