These five portfolios are often presented as competitors. They are better understood as five different answers to the same practical question: how much growth do you need, how much volatility can you carry, and what kind of bad news are you trying to survive?
Portfolio recipes are comforting. They turn an intimidating question - how should I invest for decades? - into a few numbers that add up to 100.
But a ratio is not a personality test, and it is not a forecast. Every allocation makes a trade: more expected growth for more drawdown risk; more stability for less participation in a long bull market; more inflation protection for more complexity or years of frustration.
This guide compares five commonly discussed frameworks for ordinary long-term investors. It is educational, not personal investment advice, and it does not tell you which funds or securities to buy.
The short version
| Portfolio | Simple public version | What it is trying to do | The trade-off |
|---|---|---|---|
| 60/40 | 60% diversified equities, 40% high-quality bonds | Balance long-term growth with smoother swings | Can still fall sharply; bonds are not always a hedge |
| 90/10 | 90% low-cost S&P 500 index fund, 10% short-term government bonds | Maximize equity participation with a small cash-like reserve | Very equity-heavy and concentrated in one market |
| All Weather (retail version) | 30% equities, 55% government bonds split by duration, 7.5% gold, 7.5% broad commodities | Spread exposure across growth and inflation regimes | Complex, bond-heavy and not guaranteed to be "all weather" |
| Permanent Portfolio | 25% equities, 25% long government bonds, 25% cash or short bonds, 25% gold | Hold one simple defence for prosperity, recession, inflation and deflation | Can feel very conservative in a long equity boom |
| Golden Butterfly | 20% large-cap stocks, 20% small-cap value stocks, 20% long bonds, 20% short bonds, 20% gold | Blend a value tilt with the Permanent Portfolio's broad defences | More moving pieces and a long period of relative underperformance is possible |
1. The 60/40 portfolio: a balanced compromise
The classic 60/40 portfolio generally means 60% equities and 40% bonds. In a modern implementation, the equity side might be diversified across countries and the bond side might use high-quality government or investment-grade bonds.
Its logic is straightforward. Equities are the primary long-term growth engine. Bonds are intended to dampen swings, provide income and offer something to rebalance into equities after a fall.
The important point is that 40% bonds does not mean 40% cash. Bond prices can move significantly, especially when interest rates rise. And stock-bond diversification is helpful, not magical: periods of rising inflation can hurt both at once.
Who this framework is trying to help
The 60/40 idea can appeal to someone who wants meaningful exposure to long-term business growth but knows that a near-all-stock portfolio would be hard to hold through a major drawdown. Its strength is not that it wins every year. Its strength is that it is understandable, low-maintenance and easier for many people to rebalance.
What can go wrong
It can lag a stock-heavy portfolio for long stretches. It can also disappoint investors who assume bonds always rise when stocks fall. The 40% allocation needs to match an actual need for stability, not simply a belief that "balanced" means safe.
2. Buffett's 90/10: a growth-first instruction, not a universal rule
The portfolio commonly called "Buffett 90/10" comes from Warren Buffett's 2013 letter to Berkshire Hathaway shareholders. In instructions for a trust benefiting his wife, he wrote that 10% should be put in short-term government bonds and 90% in a very low-cost S&P 500 index fund. Read the original 2013 Berkshire letter.
That context matters. This was an instruction for a specific trust, not a claim that every person in every country should hold exactly this allocation.
The philosophy behind it is clear: own a low-cost slice of large American businesses, keep a modest reserve in short-term government bonds, and do not let fees or constant activity destroy the long-term result.
Who this framework is trying to help
It is designed for someone with a very long horizon, substantial tolerance for equity drawdowns and little need to take money from the portfolio during a market crash. Its simplicity can be a behavioural advantage: fewer holdings mean fewer opportunities to tinker.
What can go wrong
Ninety percent equities is still ninety percent equities. A large drawdown is not a design flaw; it is part of the bargain. It also has a strong U.S. large-cap tilt, so it is not the same as a globally diversified equity allocation.
For someone close to drawing from the portfolio, with unstable income, or who knows a 40%-50% fall would trigger a sale, the question is not whether 90/10 has an elegant story. The question is whether they can actually hold it.
3. All Weather: diversification across economic surprises
The popular retail portfolio associated with Ray Dalio is usually shown as:
- 30% equities
- 40% long-term government bonds
- 15% intermediate-term government bonds
- 7.5% gold
- 7.5% broad commodities
The idea is to avoid making one large bet on a single economic environment. Growth may rise or fall. Inflation may rise or fall. Different asset classes are expected to react differently to those surprises.
This is related to the risk-balancing thinking behind Bridgewater's institutional All Weather work. But the familiar five-part allocation is a public retail simplification, not a complete description of Bridgewater's institutional strategy or a fixed prescription from Ray Dalio. That distinction is worth keeping.
Who this framework is trying to help
The approach may interest an investor who worries less about maximizing return in an equity boom and more about avoiding dependence on a single outcome - particularly unexpected inflation, recession or deflation.
It also illustrates a useful lesson: portfolio risk is not the same as the percentage of dollars in an asset. Long-term government bonds are usually less volatile than equities, which is one reason a risk-balanced framework can hold a large bond allocation.
What can go wrong
The portfolio has 55% in government bonds, including a large allocation to long-duration bonds. Long bonds can fall hard when rates rise. Gold and commodities can have long, unproductive stretches. In a strong, equity-led expansion, the 30% equity allocation may feel painfully conservative.
And despite its name, it is not immune to bad years. "All Weather" should mean less reliant on one forecast, not protected from every loss.
4. Permanent Portfolio: four equal responses to four climates
The Permanent Portfolio is commonly associated with Harry Browne. Its simple public form holds four equal sleeves: 25% stocks for prosperity, 25% long-term government bonds for recession or deflation, 25% cash or short-term government bonds for tight-money periods, and 25% gold for inflation or loss of confidence in paper money.
The appeal is not precision. It is the refusal to predict. Instead of deciding which economic story comes next, it keeps one deliberate response to each broad story already in the portfolio.
Who this framework is trying to help
It can suit someone who values a calm, understandable allocation more than capturing every percentage point of an equity bull market. A meaningful cash-like sleeve can also make rebalancing feel less frightening when markets are stressed.
What can go wrong
Equal weights do not mean equal economic importance. Gold can sit still for years; long bonds can suffer when interest rates jump; and 25% equities may feel painfully slow while stocks are soaring. The investor is paying for broad defences with less participation in a single winning asset.
5. Golden Butterfly: a slightly more growth-oriented cousin
The Golden Butterfly is a well-known variation on the Permanent Portfolio. Its usual public recipe is 20% large-cap stocks, 20% small-cap value stocks, 20% long-term government bonds, 20% short-term government bonds and 20% gold.
It keeps the broad economic defences of the Permanent Portfolio, but gives more of the growth sleeve to equities and adds a small-cap value tilt. In the backtest tool, VBR is used as a historical proxy for that small-cap value sleeve and SHY as a short-Treasury proxy.
Who this framework is trying to help
It may appeal to an investor who likes the idea of multiple defences but wants a little more exposure to business growth and value shares than the Permanent Portfolio provides.
What can go wrong
This is not a free upgrade. Small-cap value can lag for very long stretches, and five sleeves require a clear rebalancing rule. Its complexity only earns its place if the investor understands why each part exists and can stay with it when one or two parts look foolish.
Do not compare them by one backtest chart
A backtest can make any of these portfolios look obvious if the start and end dates happen to favour it. The 90/10 portfolio benefits when equities dominate. A bond-heavy allocation can look unusually strong after a long decline in interest rates. Inflation-sensitive assets can look wise after inflation spikes.
Return is not the only result worth comparing. Volatility describes how violently the monthly experience moved around. Sharpe ratio asks how much historical return was earned for each unit of that volatility. Maximum drawdown shows the deepest peak-to-trough loss the portfolio asked an investor to sit through. None is a forecast, and none chooses a portfolio for you. Together, though, they are closer to the lived question: could I keep holding this when it is uncomfortable?
Compare the trade-offs yourself: Open the Portfolio Backtest →
The more durable comparison is structural:
- 60/40 accepts equity risk but moderates it.
- 90/10 embraces equity risk and asks the investor to endure it.
- All Weather spreads risk across more economic scenarios and gives up some equity upside for that breadth.
- Permanent Portfolio gives equal weight to four broad economic defences.
- Golden Butterfly keeps those defences while adding a larger equity and small-value sleeve.
No historical return stream settles the personal question of which compromise you can live with.
The questions that matter before choosing a ratio
Before copying any allocation, write down the conditions around it:
- When will you need the money? A 30-year horizon for one part of a portfolio does not make next year's house deposit long-term.
- What currency are your future expenses in? Bond holdings and currency hedging deserve more thought when you will spend in euros, pounds or another currency rather than U.S. dollars.
- How will you behave in a deep drawdown? Your actual reaction matters more than an online risk questionnaire.
- What other risks already exist in your life? A home, a pension, a job tied to one industry and a private business can all change the portfolio risk you already carry.
- How will you rebalance? A simple annual review or a clear threshold is usually more useful than reacting to headlines.
For FIRE, the allocation is only one layer. A cash buffer, lower fixed costs and some flexible income can reduce the chance that you must sell any portfolio during a bad moment.
A portfolio should fit your life, not a famous name
The real attraction of all five frameworks is not the numbers themselves. Each offers a decision rule that can reduce impulsive behaviour.
If you can explain why every part is there, how it behaves in a bad year and when you would rebalance it, you are much closer to a durable plan. If the answer is only "a famous investor used it," the ratio has not yet done its job.
