The Golden Butterfly Portfolio by Tyler prioritizes consistently desirable investment growth by balancing economic conditions with an eye towards prosperity.
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Asset Allocation
How to build a Golden Butterfly Portfolio
| % | Asset Class |
|---|---|
| 20% | United States Large Cap Blend Stocks |
| 20% | United States Small Cap Value Stocks |
| 20% | United States Long Term Treasury Bonds |
| 20% | United States Short Term Treasury Bonds |
| 20% | Global Gold |
Author
Tyler
I’m a mechanical engineer, investing researcher, spreadsheet aficionado, and the author of Portfolio Charts. The Golden Butterfly is a portfolio idea born of my ongoing exploration.
Overview
The Golden Butterfly Portfolio is built on the idea of economic risk parity, similar to the Permanent Portfolio which shares four of its five assets. But while the Permanent Portfolio equally balances prosperity, recession, inflation, and deflation, the Golden Butterfly tilts the assets towards prosperity with an additional allocation to small cap value.
While to some that may seem like a trendy choice destined to underperform, the data reveals a remarkable truth. The Golden Butterfly is one of the best risk-adjusted portfolios out there, pairing the famous consistency of the Permanent Portfolio and the growth rates of far more aggressive options. With a tight band of growth paths that are helpful for future estimates and notably high withdrawal rates that are great for retirees, it’s a particularly dependable portfolio option suitable for both accumulators and retirees alike.
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Performance
Since 1970, an investor in the United States holding the Golden Butterfly earned an average 6.3% real return, with a baseline CAGR of 5.3% over 15 years. It supported a 6.0% safe withdrawal rate for 30 years and 4.9% indefinitely. Its worst peak-to-trough loss was 18%, and the longest a new investment spent below water was under 5 years.
Golden Butterfly Portfolio Performance
| # | Metric | What it measures |
|---|---|---|
| 6.3% | Average return | Mean annual return after inflation |
| 5.3% | Baseline real return (15 years) | What 15-year stretches returned in the weaker outcomes |
| 6.0% | Safe withdrawal rate (30 years) | Highest spending rate that lasted 30 years in the worst case |
| 4.9% | Long-term withdrawal rate | The SWR floor over very long retirements |
| 18% | Deepest drawdown | Worst peak-to-trough loss after inflation |
| 5 years | Longest drawdown | Longest a new investment stayed below what you put in |
| 8.3% | Volatility (standard deviation) | Year-to-year variation in returns |
Charts
Different ways to visualize the Golden Butterfly Portfolio
Comparisons
How the Golden Butterfly Portfolio compares to other options
Alternatives
Portfolios with a similar structure or design intent
Permanent Portfolio — The same fundamental portfolio without small cap value
All Seasons Portfolio — A similar investing philosophy built around economic risk parity
Golden Ratio Portfolio — Another risk parity portfolio that shares the same mindset
Articles
Insights that mention the Golden Butterfly Portfolio
Discussion
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