Harry Brown created The Permanent Portfolio, which is a four-way, 25% split across asset categories of:
Long-term Treasury Bonds
Short-term Treasury Bills
These assets are maintained in a 4-way equal split and rebalanced annually or whenever any asset exceeds 35% of total portfolio or falls below 15%. This rebalancing ensures that you are always selling high and buying low.
The portfolio works because there are a finite number of economic environments, and at least one of the asset classes will thrive during that time period and compensate for the losses in the others.
Deflation: Bonds and cash do well. Gold and stocks do poorly.
Inflation: Cash and Gold does well. Bonds do poorly.
Prosperity: Stocks do well. Bonds and gold do poorly.
Recession: Cash does well. Stocks do poorly.
When the last big stock market drop happened in 2009, the PP gained around 2% because long-term treasury bonds carried the entire portfolio.
There’s another forum (gyroscopic investing) dedicated to the PP, and a great book (which I haven’t read, but I’m told it’s brilliant) by Craig Rowland (CraigR) and JM Lawson (MediumTex). The topic of the PP has come up on Bogleheads many times in the past and CraigR maintained a long thread on it in the past. Bogleheads disapprove of the PP because of the high gold allocation. They make statements such as “only want as much gold as is in their wife’s jewelry.”
I find the PP to be a low-volatity method of investing because despite of the high volatility of underlying assets, the overall volatility is very low. Feel free to ask any questions you have about the PP and I will answer them.