Harry Browne's Permanent Portfolio & Rental Real Estate

[Aaron Lancaster]

I'm a huge proponent of asset allocation and diversification, and I was just wondering if anyone has ever read about Harry Browne's Permanent Portfolio which splits investments equally between stocks, cash, long-term treasuries, and gold. Each one of those asset classes is tied to a phase of the economy (prosperity, recession, deflation, and inflation), and the idea behind the portfolio is that at least one of those categories will be performing well at any given time regardless of what's happening in the economy. I specifically bring this up because it is one of the most conservative portfolios out there, and I think it could be used as a holding place to park your money while you're saving up for your next real estate deal? Does anyone else think like this? I definitely don't want to concentrate my bets in just one of those asset classes while I'm saving up for my next deal because it's possible that my account would be down significantly around the same time that real estate prices look attractive. Does anyone have any other thoughts on how to invest your money while saving up?

[Patrick Davis]

Hi - I just was looking for the answer to basically the same question.  I'm not an expert, but it could be argued that both fixed rate debt (like a mortgage) and some income from real estate would both do well in an inflationary environment.  So perhaps real estate financed with fixed rate debt might be a more risky/higher return that functions somewhat like gold? Again, I'm not a financial planner or expert, just my 2 cents!