The “Cockroach” Portfolio: The Strategy That Survives Everything (Even Nuclear Winter)
The “Cockroach” Portfolio: The Strategy That Survives Everything (Even Nuclear Winter)
COACHING POINTS
- The Origin: Building on Harry Browne’s “Permanent Portfolio,” the Cockroach Portfolio (popularized by Jason Buck of Mutiny Fund) is designed to withstand not just market cycles, but regime changes (e.g., from 40 years of falling rates to rising rates).
- The Structure: It splits assets into four equal buckets: Stocks (Growth), Bonds (Deflation), Gold/Trend (Inflation), and Volatility (Chaos). Unlike the 60/40, half the portfolio loves it when the stock market crashes.
- The Goal: It is not about maximizing returns in a bull market. It is about maximizing survival. It aims for a steady 6-8% real return with minimal drawdowns, allowing you to compound wealth without the psychological trauma of a 50% crash.
Why name a portfolio after a pest? Because cockroaches have survived for 300 million years, outliving dinosaurs and ice ages. Most portfolios are “fragile”โthey die if inflation spikes (2022) or if growth slows (2008). The Cockroach Portfolio is “robust.” It assumes you have no idea what the future holds, so it bets on everything simultaneously. Source: Jason Buck (Mutiny Fund) / Harry Browne
Scenario: $100,000 Portfolio. Divided into 4 distinct quadrants.
- Quadrant 1 (Stocks): Global Equities. Wins in “High Growth / Low Inflation.”
- Quadrant 2 (Bonds): Long-Term Treasuries. Wins in “Low Growth / Deflation.”
- Quadrant 3 (Trend/Gold): Managed Futures & Gold. Wins in “High Inflation.”
- Quadrant 4 (Volatility): Long Volatility (Options). Wins in “Instant Crash.”
- Result: No matter what the economy does, at least one quadrant is “partying” and carrying the others.
Max Drawdown Comparison (Crisis Resilience)
| Portfolio Type | Max Loss in Crisis (%) |
|---|---|
| S&P 500 (100% Stock) | 55 |
| 60/40 Portfolio | 35 |
| Cockroach Portfolio | 15 |
*The Cockroach Portfolio sacrifices the “moonshot” returns of a tech bubble to ensure you never lose more than ~15%, making it psychologically easier to stick with.
What-If Scenario: The 1970s Stagflation
Comparison: Stocks/Bonds vs. Cockroach (Gold/Commodities).
| Asset Class | Real Return (1970s Decade) |
|---|---|
| Stocks & Bonds (Traditional) | -2 |
| Gold & Trend (Cockroach Element) | 25 |
Execution Protocol
You can approximate this with ETFs.
25% VT (Global Stocks)
25% TLT (Long Bonds)
25% DBMF/KMLM (Managed Futures/Trend)
25% GLD/TAIL (Gold & Tail Risk)
Since 25% allocation to each might feel “light” on stocks, advanced investors use stacked ETFs (like RSST) to get 100% Stock exposure + 100% Trend exposure, compressing the Cockroach into a more capital-efficient package.
The hardest part is psychological. When the S&P 500 is up 30% in a year, the Cockroach might only be up 10%. Your friends will call you conservative. You must be okay with “losing” to the neighbors during bubbles to beat them during busts.
COACHING DIRECTIVE
- Do This: Adopt the Cockroach mindset if you are already wealthy and your primary goal is “Staying Rich.” It is the ultimate preservation tool.
- Avoid This: Using this strategy if you have $10,000 and need to turn it into $1M in 10 years. This is a “Get Rich Slow” and “Stay Rich Forever” strategy, not a growth hack.
Frequently Asked Questions
Is this just the All Weather Portfolio?
Similar, but more aggressive. Ray Dalio’s All Weather relies heavily on Bonds (Risk Parity). The Cockroach adds “Long Volatility” and “Trend Following” to handle environments where both Stocks and Bonds fall together (like 2022).
What is Long Volatility?
It means owning assets (like Put Options) that profit when fear spikes. It acts as insurance. In a flat market, it bleeds small premiums. In a crash, it explodes in value, refilling the rest of the portfolio.
Can I rebalance annually?
Yes. Rebalancing is crucial here. You are constantly selling what is expensive (e.g., Gold in a crisis) to buy what is cheap (e.g., Stocks in a crash). This automates “Buy Low, Sell High.”