As investors we are always searching for the holy grail of investing.
What does it mean by holy grail of investing?
- Decent return
- Consistent returns
- Minimal work
- Predictable
Investors ask whether there is such an instrument around. And in recent years there have been one answer: The permanent portfolio or the all weather portfolio.
The beauty of the permanent portfolio is the idea how it was constructed: 4 different asset classes that have a positive expected returns over time, but are not correlated over 4 different secular market scenarios.
If you look at the returns of PERM versus the other expert portfolio allocation the compounded average growth rate (CAGR) is comparable BUT the stdev is one of the lowest. The stdev stands for standard deviation, or the positive and negative swing from the mean. A smaller standard deviation shows more predictability.
The all weather portfolio looks like a god send ......
