The portfolio is designed to endure the four main “economic configurations, characterized by combinations of rising/falling inflation (inflation or disinflation) and rising/falling economic growth (growth or recession),” says Morningstar analyst Samuel Lee.
“Inflation and economic growth can’t explain every asset-class movement, nor are they always the most important factors in the short run, but over the long run they are determinative,” he wrote in the latest edition of Morningstar’s ETF newsletter.
“Naturally, in each phase of the business cycle, different assets are king. Stocks do best when the economy is growing and inflation is falling, coinciding with the recovery phase after a recession; bonds do best when the economy is tanking and inflation is falling, coinciding with the downward leg of a conventional recession,” Lee said.
The analyst offered a more diversified, ETF version of the Harry Browne portfolio that invests in more asset classes and adjusts weightings for volatility.
“It’s not designed to shoot the lights out, but rather ensures no one economic environment devastates your wealth,” Lee said.
Morningstar’s Risk-Balanced Portfolio
