Permanent Portfolio vs. Single-Asset All-In: Comparing 10-Year Backtest Results

[Permanent Portfolio vs. Single-Asset Backtest]

In the last post, we looked at the 10-year performance of the **Permanent Portfolio** without rebalancing. In this post, we'll directly compare its performance with an 'all-in' strategy, where 100% is invested in a single asset that makes up the Permanent Portfolio. Can the power of diversification truly surpass the high returns of individual assets? We'll provide an in-depth analysis of the results, focusing on key indicators like returns (CAGR) and maximum drawdown (MDD).

Permanent Portfolio vs. Single-Asset All-In: Comparing 10-Year Backtest Results

1. What is the Permanent Portfolio?

The Permanent Portfolio is an investment strategy devised by the investment wizard Harry Browne. He divided all market conditions into four categories and proposed an equal 25% allocation to the asset that performs best in each situation.

• Prosperity: Stocks (25%)
• Recession: Long-term bonds (25%)
• Inflation: Gold (25%)
• Deflation: Cash-like assets (25%)

The core of this strategy is that it is designed to maintain stable returns for the entire portfolio regardless of economic conditions. By having one asset compensate for the losses of another, it aims to overcome market unpredictability.

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2. Backtest Overview and Data

This comparative analysis uses 10 years of data from **August 3, 2015, to July 31, 2025**. The initial investment for all portfolios was set at 10 million KRW. The assets and portfolios used in the backtest are as follows.

• Permanent Portfolio: Initial allocation of 25% each to KODEX Gold Futures(H), KODEX 200, KODEX 10-Year Treasury Futures, and bank deposits (no rebalancing)
• Single-Asset All-In: 100% all-in investment in each of the four assets above

Backtest Data Source and Reference

• ETF Data: Daily data from Yahoo Finance
• Bank Deposit Rate: Based on the Bank of Korea's base rate (for calculation convenience, deposits were assumed to apply the daily base rate with a daily value of 1,000 KRW)

▶ Reference: How to search for historical data on Yahoo Finance
▶ Reference: How to download data from Yahoo Finance
▶ Reference: Go to the Bank of Korea's Economic Statistics System

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3. Backtest Results Comparison

The table below summarizes the 10-year backtest results. You can compare the performance of the Permanent Portfolio and each single-asset 'all-in' strategy at a glance using metrics like total return, compound annual growth rate (CAGR), and maximum drawdown (MDD).

Category	Permanent Portfolio	KODEX Gold Futures(H)	KODEX 200	KODEX 10-Year Treasury Futures	Bank Deposits
Final Amount	17,001,697 KRW	23,083,800 KRW	22,313,900 KRW	11,279,460 KRW	11,278,169 KRW
Total Return	70.02%	130.84%	123.14%	12.79%	12.78%
CAGR	5.45%	8.73%	8.36%	1.21%	1.21%
MDD	-18.91%	-24.62%	-38.08%	-21.31%	-0.00%

          

▲ 10-Year Permanent Portfolio Return Chart (No Rebalancing)

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4. Results Interpretation and Insights

The backtest results offer several important insights. The single-asset strategies that went all-in on KODEX Gold Futures(H) and KODEX 200 recorded a much higher CAGR than the Permanent Portfolio, but they had to endure significantly higher risk. In particular, KODEX 200's MDD of -38.08% shows that the asset's value could have dropped by nearly half from its peak during the investment period. In contrast, the Permanent Portfolio recorded a much more stable MDD of -18.91%, which was even lower than the single asset with the lowest MDD, KODEX Gold Futures(H) (-24.62%). This demonstrates that diversification, by utilizing the low correlation between assets, dramatically increases portfolio stability, even if it means sacrificing some returns. Ultimately, this analysis suggests that for investors who prioritize steady long-term asset growth and peace of mind, an asset allocation strategy like the Permanent Portfolio may be a much wiser choice.

The content of this blog is for reference in investment decisions only, and investment decisions should be made based on individual judgment and responsibility. Under no circumstances should the information in this blog be used as legal evidence for investment outcomes.