Golden Butterfly
Enhanced permanent portfolio with small-cap value
Philosophy
Start with the Permanent Portfolio's balance, then enhance returns by tilting toward small-cap value stocks.
Origin
2015 — Developed around 2015, it modifies the Permanent Portfolio by adding small-cap value exposure.
Key Principles
- ✓ Builds on the Permanent Portfolio foundation
- ✓ Splits equity into total market and small-cap value
- ✓ Small-cap value tilt captures the size and value factor premiums
- ✓ Five equal 20% slices keep rebalancing simple
Target Allocation
| Asset | Category | Weight |
|---|---|---|
| US Total Market (VTI) | Equity | 20% |
| Small-Cap Value (VBR) | Equity | 20% |
| Long-Term Treasuries (TLT) | Bonds | 20% |
| Gold (GLD) | Gold | 20% |
| Cash / Short-Term Bonds (SHY) | Cash | 20% |
Advantages
- Higher expected returns than the original Permanent Portfolio
- Small-cap value tilt adds factor diversification
- Maintains crisis protection via gold and cash
- Simple equal-weight rebalancing
Considerations
- Small-cap value can underperform for extended periods
- More complex than the base Permanent Portfolio
- 20% cash allocation still creates drag in bull markets
- Factor premiums are not guaranteed going forward
Best For
Investors who like the Permanent Portfolio's stability but want higher return potential.
About the Author
Tyler is the creator of portfoliocharts.com, an independent research site that analyses portfolio performance.
Frequently Asked Questions
What is the Golden Butterfly portfolio?
The Golden Butterfly is a five-asset portfolio (20% each) that enhances the Permanent Portfolio by splitting the equity portion into total market and small-cap value. It was developed by Tyler at Portfolio Charts around 2015.
How does the Golden Butterfly differ from the Permanent Portfolio?
Both use equal-weight allocations with stocks, bonds, gold, and cash. The Golden Butterfly replaces the single 25% stock allocation with two 20% equity slices (total market + small-cap value), adding factor diversification while slightly reducing the cash and gold allocations.
Related Strategies
Track Golden Butterfly with Chillfolio
Set up this strategy in minutes. Get drift alerts, rebalance calculations, and performance tracking — all free.
Start with Golden Butterfly