Throughout the time that a person has a financial portfolio, the concept of diversity should be kept in mind. This entails having enough different kinds of investments so that if one or two of them do not perform well, the others will make up for the difference. There are many ways to diversify the portfolio and some people strive to create what is referred to as a permanent portfolio.
The permanent portfolio is one that will maintain nearly all its value no matter what situations befall it. Investment author and two-time candidate for president, Harry Browne, make this concept popular. Mr. Browne felt that a 25 percent investment in each of government bonds, Treasury bills, growth stocks, and precious metals should hold its own even during the most difficult economic times.
In terms of precious metals, Mr. Browne advised investors to buy gold coins and silver coins. This is because these hold value during inflationary times and periods of political unrest. Growth stocks offer nice returns during healthy economic times and government bonds hold their own during a recession. Extreme economic downturns, or depressions, do not hurt the performance of Treasury bills.
While not all agree that the allocation percentages are necessarily a hard and fast rule, many do promote diversification of the portfolio. Some condone adding cash and foreign currency to the portfolio, to be prepared for any emergencies. Others recommend the addition of stocks in the real estate or natural resource sector.
Investors should create a portfolio that will endure bull and bear markets, periods of inflation and deflation, and times of political peace and turmoil. Those who have difficulty building their own permanent portfolio can consider options like the Permanent Portfolio Fund, a mutual fund that adheres to the concept. Having a permanent portfolio will allow the investor to weather even the roughest economic storms.