Browne's All-Weather Fund

10/16/2002 12:00 am EST


Janet Brown

President, FundX Investment Group

Noted author, hard money advocate, and Libertarian Party Presidential candidate, Harry Browne, is also well known for the development of his Permanent Portfolio strategy - an all-weather approach to investing. Browne's goal: create a balanced, simple portfolio that will survive any event imaginable. His Permanent Portfolio Fund is now a buy from Janet Brown's newsletter, NoLoad Fund*X.

"The Permanent Portfolio Fund has moved to the top of the performance list among total return funds. This unique fund has an excellent long-term record, but remains quite small with $58 million in total assets. The strategy is based on a book co-authored by Harry Browne and Terry Coxon titled, Inflation Proofing Your Investments, published in 1980. Currently, Browne is a consultant to the fund and Coxon is president and lead manager. The concept is to preserve and enhance one's purchasing power regardless of the market or economic environment by owning a variety of negatively correlated assets. For many investors, stocks are simply too volatile. But owning bonds or cash creates a different risk - earning less than the rate of inflation, and therefore preserving your principal but depleting your overall purchasing power.

"The fund's eight asset classes can be quite volatile if held alone. Because of this, the fund had to battle regulators during the registration process until they could prove that as a portfolio, these risky investments combined could provide much less volatility than many other balanced funds. The categories are: gold bullion, silver, swiss francs, real estate, natural resources, aggressive growth stocks, long-term bonds, and treasury bills. Each is maintained at a target percentage that rebalances any time that target deviates more than 10%.

"The specific investments held are designed to be representative of their sectors, as opposed to trying to add value through superior selection of stocks (or REITs, for example). The stocks are basically high-beta, mid- to large-cap stocks, held for their volatility when the stock market moves. Gold protects against inflation, while bonds help protect against a depression. The managers make no attempt to forecast market direction or economic conditions. Target returns are inflation as measured by the CPI plus three to four percent with similar volatility to short-term bonds. The Permanent Portfolio has an annualized return of 5.7% over the last ten years. Year-to-date the fund has gained 9.7%. The fund can be reached at 800-531-5142."

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