Golden Butterfly
Golden Butterfly
Where it stands today
Our calculation, 1968-04 – 2026-09
Growth of $10,000
Where it came from
The Golden Butterfly is a hobbyist-research portfolio, not a book or a fund-company product. It was popularised by 'Tyler', a mechanical engineer who runs the Portfolio Charts website, a tool for comparing historical behaviour of many asset mixes. The Portfolio Charts page describes it as an extension of the Permanent Portfolio. The exact date of first publication was not found; the earliest dated source located is Tyler's post 'The Theory Behind the Golden Butterfly' of 18 April 2016.
In that post Tyler says he wrote it because the portfolio kept showing up near the top of the site's Portfolio Finder tool and readers were asking why. He admits the mix is unintuitive: only 40% in stocks and four holdings many investors dislike (gold, long Treasuries, short Treasuries, small-cap value).
The parent idea is Harry Browne's Permanent Portfolio. Browne (1933-2006), an American investment writer and 1996 and 2000 Libertarian presidential candidate, wrote 'You Can Profit from a Monetary Crisis' (1974) and later 'Fail-Safe Investing' (1999), and consulted for the Permanent Portfolio mutual fund. His design splits money equally among four assets, each tied to one economic condition: stocks for prosperity, long Treasuries for deflation, gold for inflation, cash/T-bills for recession. A key Browne notion is the 'firewall': a loss in one slice stays confined to that slice while another slice usually does well.
Tyler keeps the philosophy (hold volatile but uncorrelated assets, no forecasting, rebalance) but loosens the strict one-asset-one-condition reading: he treats gold as an imperfect inflation hedge valued mainly for its low correlation with stocks and bonds, and says assets can play several roles. The change from Browne is that the 25% stocks slice becomes two 20% slices (broad US stocks plus US small-cap value), cash becomes short-term Treasuries, and each of the five holdings gets 20%. Per Tyler this tilts the mix toward the 'prosperity' condition, the most common one.
Tyler himself calls the permanence of the small-cap value premium debatable and says the premium is not central to the design; he mentions that small-cap blend or broad international funds could stand in. He addresses the 'data mining' criticism by pointing to periods unfavourable to the mix (1970s rising rates, 1980s-90s gold slump, 2000s weak stocks) in which it still held up.
What is in it
| US large-cap blend stocks | 20% | |
| US small-cap value stocks | 20% | |
| US long-term Treasury bonds | 20% | |
| US short-term Treasury bonds | 20% | occupies the cash/recession slot of the Permanent Portfolio |
| Global gold | 20% |
How we model it
| US large companies (S&P 500) | 20% |
| US small value stocks | 20% |
| Long-term government bonds (20+ y) | 20% |
| Short-term government bonds | 20% |
| Gold | 20% |
For a euro investor
How to build it with European funds
| Part | Share | Example funds (ISIN) |
|---|---|---|
| US large companies (S&P 500) | 20% | iShares Core S&P 500 UCITS ETF USD (Acc) IE00B5BMR087Vanguard S&P 500 UCITS ETF (USD) Distributing IE00B3XXRP09 |
| US small value stocks | 20% | SPDR MSCI USA Small Cap Value Weighted UCITS ETF IE00BSPLC413 |
| Long-term government bonds (20+ y) | 20% | iShares USD Treasury Bond 20+yr UCITS ETF USD (Dist) IE00BSKRJZ44 |
| Short-term government bonds | 20% | iShares USD Treasury Bond 1-3yr UCITS ETF (Dist) IE00B14X4S71iShares Euro Government Bond 1-3yr UCITS ETF (Dist) IE00B14X4Q57 |
| Gold | 20% | Invesco Physical Gold ETC IE00B579F325Xetra-Gold DE000A0S9GB0 |
The idea
Cover every economic condition (growth, recession, inflation, deflation) with volatile uncorrelated assets rather than forecast; rebalancing harvests the volatility. The small-cap value slice adds growth potential relative to the Permanent Portfolio.
How people buy it
Portfolio Charts does not name funds. A typical DIY build uses a total/large US stock index fund or ETF, a US small-cap value ETF, a long Treasury ETF, a short Treasury ETF and a physical gold ETF; fund names are not given by the primary source (not verified).
Rebalancing as published
Tyler describes rebalancing as selling what has risen and buying what has fallen and credits it with generating returns from volatility; no specific schedule or threshold was found in the post read.
Variants
- Permanent Portfolio (25% each: stocks, long Treasuries, gold, cash) - the parent.
- Replace small-cap value with small-cap blend or broad international stocks (Tyler's own suggestion).
- Portfolio Charts also shows how results differ by home country (see evidence).
Criticism
- Results may come from data mining and favourable periods (post-1981 bond rally; gold's free-floating era after Bretton Woods ended in 1971) - a criticism Tyler acknowledges and rebuts.
- Gold's record as an inflation hedge is inconsistent (Tyler concedes).
- Persistence of the small-cap value premium is debatable (Tyler concedes).
- Only 40% stocks and no foreign stocks - investors who believe in long-run equity dominance may expect lower growth; future returns cannot be guaranteed to match the stock market.
Through the eras
| Era | Dates | Total | Per year | Worst drop | S&P 500 |
|---|---|---|---|---|---|
| The Great Inflation (stagflation) | 1969-01 – 1982-07 | +288.4 % | +10.5 % | −17.5 % | +84.6 % |
| 1973-74 oil shock and bear market | 1973-01 – 1974-12 | +10.9 % | +5.3 % | −13.3 % | −41.7 % |
| Second oil shock and the Volcker disinflation | 1979-01 – 1982-08 | +69.7 % | +15.5 % | −12.7 % | +59.2 % |
| Great bull market in stocks and bonds | 1982-08 – 1999-12 | +639.3 % | +12.2 % | −13.0 % | +2060.4 % |
| Black Monday | 1987-08 – 1987-12 | −8.0 % | — | −13.0 % | −21.8 % |
| Savings-and-loan crisis and 1990 recession | 1990-07 – 1991-03 | +6.8 % | — | −6.7 % | +7.4 % |
| 1994 bond market massacre | 1994-02 – 1994-12 | −4.0 % | — | −5.4 % | −3.2 % |
| Asian and Russian financial crises | 1997-07 – 1998-10 | +12.1 % | +9.0 % | −8.2 % | +22.4 % |
| Dot-com bubble and crash | 2000-03 – 2002-10 | +7.8 % | +2.8 % | −6.4 % | −37.2 % |
| Recovery and housing boom | 2002-11 – 2007-09 | +81.8 % | +12.9 % | −5.1 % | +97.0 % |
| Global financial crisis | 2007-10 – 2009-03 | −9.9 % | −6.7 % | −16.0 % | −44.7 % |
| The decade after the crisis | 2009-04 – 2019-12 | +153.6 % | +9.0 % | −6.5 % | +411.2 % |
| Fourth-quarter 2018 sell-off | 2018-09 – 2018-12 | −6.3 % | — | −6.3 % | −14.4 % |
| Covid crash and stimulus boom | 2020-02 – 2021-12 | +26.5 % | +13.1 % | −7.2 % | +53.6 % |
| Inflation shock and rate hikes | 2022-01 – 2022-12 | −12.2 % | −12.2 % | −16.7 % | −19.9 % |
Calendar years
Any N-year period
| Any N-year period | Worst | 10 % worse than | Median | 10 % better than | Best |
|---|---|---|---|---|---|
| 1 y (691) | −15.9 % | −0.7 % | +10.2 % | +22.1 % | +48.9 % |
| 3 y (667) | −0.1 % | +4.8 % | +10.1 % | +15.9 % | +23.5 % |
| 5 y (643) | +3.8 % | +5.9 % | +9.6 % | +15.7 % | +20.5 % |
| 10 y (583) | +4.8 % | +7.1 % | +9.8 % | +15.0 % | +16.9 % |
| 15 y (523) | +6.1 % | +7.7 % | +9.7 % | +13.9 % | +15.4 % |
| 20 y (463) | +6.9 % | +7.9 % | +9.8 % | +13.1 % | +13.9 % |
| 30 y (343) | +7.6 % | +8.4 % | +10.1 % | +12.0 % | +12.7 % |
How it behaved in history
- 1970s. Tyler says the mix held up when Treasuries were hurt by rising rates; gold was the offsetting asset. Qualitative statement only. portfoliocharts.com
- 1980s-1990s. Gold lost about 80% of its value over this stretch per Tyler, yet the portfolio still produced competitive returns thanks to stocks and bonds. portfoliocharts.com
- 2000s. Stocks went a decade-plus with no gain; gold rose and the mix kept growing, per Tyler. portfoliocharts.com
Published results (by others)
- Average real return, US investor (1970-2025): 6.3% per year portfoliocharts.com
- Deepest drawdown after inflation, US investor (1970-2025): 18% portfoliocharts.com
- Longest time below prior high (1970-2025): 5 years portfoliocharts.com
- Volatility (standard deviation) (1970-2025): 8.3% portfoliocharts.com
- Baseline real CAGR over 15 years / 30-year safe withdrawal rate / long-term withdrawal rate (1970-2025): 5.3% / 6.0% / 4.9% portfoliocharts.com
- Same mix for a Japanese investor in yen terms: weaker (site data): baseline return 1.8%, deepest drawdown 27%, longest drawdown 20 years portfoliocharts.com
- Permanent Portfolio comparison, US investor (1970-2025): avg real return 5.1%, deepest drawdown 19%, volatility 7.6% portfoliocharts.com
What we could not verify
- Exact date of first publication of the Golden Butterfly (earliest found is April 2016).
- Specific rebalancing schedule recommended by Tyler.
- Specific funds - not named in the sources read.
- Bogleheads wiki page could not be opened (HTTP 403), so no independent summary was checked.
- Browne's original year for the Permanent Portfolio concept: 1974 and 1999 are book dates; the portfolio's start year was not confirmed.
Sources
- portfoliocharts.com
https://portfoliocharts.com/portfolios/golden-butterfly/ - portfoliocharts.com
https://portfoliocharts.com/2016/04/18/the-theory-behind-the-golden-butterfly/ - portfoliocharts.com
https://portfoliocharts.com/portfolios/permanent-portfolio/ - en.wikipedia.org
https://en.wikipedia.org/wiki/Harry_Browne
Calculated on historical data. Past results do not predict the future. Models before the 1990s use stand-ins for classes that had no index yet; fees, taxes and fund costs are not included. This is mathematics, not an investment recommendation.