Golden Butterfly Portfolio
The Golden Butterfly Portfolio was designed by Tyler of the financial research site PortfolioCharts.com as a refinement of Harry Browne's Permanent Portfolio. Tyler set out to find an allocation that would maximize sustainable long-term withdrawal rates while preserving the Permanent Portfolio's characteristic smoothness and all-weather diversification. The result is a five-asset equal-weight portfolio that splits the Permanent Portfolio's equity allocation into two parts -- broad market stocks and small-cap value stocks -- while retaining the core structure of stocks, bonds, gold, and cash.
Investment Philosophy
Like the Permanent Portfolio, the Golden Butterfly is designed to hold up across all four economic conditions: stocks for prosperity, gold for inflation, bonds for deflation, and cash for recessions. The key departure is dividing the Permanent Portfolio's 25% equity slot into 20% broad market equities and 20% small-cap value equities. This tilt toward smaller, cheaper stocks adds a factor exposure backed by decades of academic research showing that small-cap value has historically earned a return premium over the market. The result is five assets at 20% each, maintaining the all-weather balance while improving the portfolio's long-run return potential.
Who It's For
This portfolio suits investors who appreciate the stability and all-weather design of the Permanent Portfolio but want slightly higher long-term return potential from a value and small-cap tilt. It is appropriate for moderate to conservative investors, those approaching or in retirement who prioritize consistency over maximizing growth, and investors who value simplicity and predictability over optimization.
Pros
- Small-cap value tilt adds a historically productive factor exposure absent from the original Permanent Portfolio
- Five equal-weight positions are straightforward to implement and rebalance
- Designed for consistent performance across multiple economic environments, not just equity bull markets
- Gold and cash provide meaningful downside protection during equity bear markets and deflationary periods
Cons
- 20% in cash and 20% in gold still meaningfully limit long-term growth compared to equity-heavy portfolios
- Small-cap value can experience extended periods of underperformance relative to large-cap growth stocks
- Underperforms equity-heavy portfolios during sustained bull markets driven by large-cap growth
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Target Allocation
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -15.0% | +8.4% | +27.2% |
| 3 Year | +0.3% | +7.8% | +17.5% |
| 5 Year | +3.4% | +7.7% | +13.0% |
| 10 Year | +4.4% | +7.8% | +10.3% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.