0.68% Lower Annual Return, Yet 119% Higher Expected Returns? The 4-Asset Portfolio Paradox
The 4-Asset Permanent Portfolio (25% SPY+25% TLT+25% SHY+25% GLD) reveals a 23.4-year backtested truth: 0.68% lower annual return (10.38% vs 11.06%), yet 119% higher expected returns (7.27% vs 3.32%). Key advantage: negative correlation hedging reduces max drawdown from -49% to -17%, enabling 70% persistence rate vs 30%. Nearly break-even during 2008 crisis (+0.11%).
