Our portfolios are constructed using the principals of the Permanent Portfolio Asset Allocation Strategy which is based on economic cycle analysis. The Permanent Portfolio separates these economic cycles into four basic categories:

At any one time, the economy will be in one of the four economic cycles listed above. The secret of the strategy is that it does not attempt to predict when these cycles will begin or guess how long they may last. Instead, it holds specifically chosen asset classes that respond well to these cycles no matter when they happen or for how long.

The four asset classes listed above are the only ones you need to own in order to prosper in all types of markets. No matter what economic cycle the country is experiencing, one or more of our asset classes will be rising to provide a positive return for the year. In 2008, while the stock market lost 38%, our US Treasury component gained 34% and our gold allocation gained 5% so the overall portfolio gained 6%. A 6% gain in the worst year since the great depression. In 2009 the stock portion gained 27% and the gold portion gained 24% which offset the 21% loss in US Treasuries for a total return in 2009 of 8%.

Another key ingredient in the success of this portfolio is the rebalancing. By strictly adhering to set allocation percentages, we are always selling high and buying low. At the end of 2008 we sold US Treasuries at the high and bought stocks at the low. In 2009, we sold stocks at the high and bought Us Treasuries at the low.

This allocation provides growth and income while controlling volatility. You will not be subjected to the wild crazy swings in the stock market that cause people to lose their life savings. These assets are always present in the portfolio in a balanced way no matter what is going on in the economy. They are designed to offset each other so that a majority of the assets in the portfolio are always rising no matter which economic cycle the economy is experiencing.

In fact, over the 38 year history of this portfolio strategy it has averaged annual growth of 9-10% and made money in 2008! This portfolio has made and protected money through bear and bull markets alike.

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