Permanent Portfolio is a self-directed long-term passive investment strategy, introduced in 1981 by Harry Browne and Terry Coxon and simplified into 4 asset class in 1987. It aims to provide consistent market returns and protections in different economic cycles of growth, inflation, recession and deflation. The strategy does not rely on market timing, and requires yearly management and minimal monitoring. This site is to provides educational information for learning about my research and implementation of Singapore version of Permanent Portfolio. Readers can also use the Permanent Portfolio knowledge to diversify their stock heavy portfolio into long term government bonds and gold for better portfolio protections in recession, deflation and inflation. Disclaimer: Use of information on this site represents acceptance of the disclaimer at bottom of this page and Disclaimer page.

Monday, 30 July 2012

How do I keep track of Permanent Portfolio performance

How do I keep track of Permanent Portfolio performance?

I use Android app Stock Watcher to watch my Singapore Permanent Portfolio performance. Warning: looking at the portfolio frequently can induce anxiety or happiness according to the day’s market situation! It is advisable to look at the portfolio performance less frequently, preferably once a year, once a quarter or when market seems likely to make major moves that would cause one of your asset to rise or drop by 40% or more, which is when it would likely cause the 15% or 35% rebalance band to be hit. According to my research with available data, after the portfolio is started or rebalanced, it may take minimum one to three months before the portfolio starts to show consistent positive profits, if any. A good thing is that Permanent Portfolio volatility is not so high so any drop in total portfolio value looks more bearable.

ES3.SI is the Yahoo! Finance symbol for STI ETF (ES3) that trades on Singapore Stock Exchange.
PH1S.SI is the Yahoo! Finance symbol for Singapore Government 30-year bond (PH1S) that trades on Singapore Stock Exchange.
XAUSGD=X is the Yahoo! Finance symbol for price of gold in Singapore dollars. Whether I invest in UOB Gold savings account (which counts gold in grams instead of ounce), or whether I bought gold ETF (O87) in US dollars, I would find the equivalent Singapore dollar spot gold price (XAUSGD) at the time of purchase and use it as the buy price of my gold. This way I can use XAUSGD to directly evaluate the performance of gold investment in my local country currency.
A screen shot example of how the Stock Watcher app is setup here. This app shows an example Permanent Portfolio started on 4 April 2012 with the price of ES3, PH1S and XAUSGD on that day and the current performance. For a more complete view of the portfolio performance, I keep track of portfolio results including cash performance manually in a spreadsheet. 
To add 'PH1S.SI' and 'XAUSGD=X' symbols to the 'Portfolio' tab:
Under [Portfolio] tab,
-> press the phone's [menu] button
-> select [Add] button
-> select [Add Symbol] tab
-> key in '' and press [Add Symbol] button. Do the same for 'xausgd=x'.
See picture example below:


Why do I choose Singapore stocks and bonds instead of US stocks and bonds with proven track record

Why do I choose Singapore stocks and bonds instead of US assets with proven track record?

As I live and plan to retire in Singapore, my retirement fund should preferably be invested mostly in Singapore dollars. Also, I find that Singapore STI index stocks performs reasonably well over time. Singapore government bonds are rated highest AAA, and Singapore government's first 30 year bonds are brand new (first issued 1 April 2012) and probably has more room to grow in price compared to US treasuries. My analysis of Singapore Permanent Portfolio of past 10 years also gave me confidence that Singapore Permanent Portfolio will work for my purpose - results are here:  Since I have no foreign currency exposure, there is no trouble and added cost of creating and adjusting my currency hedge monthly/quarterly. I prefer my investment assets to be near me and for me to know who is the asset custodian, which in this case is Central Depository of Singapore (CDP). Also, Singapore stocks and bonds are not subject to capital gains tax, interest tax and estate duty tax. There is also no added cost due to higher foreign currency exchange rate charged by brokers during transactions.

Permanent Portfolio is designed to work using assets in the the investor's own country. If economic cycle goes normally, we could see both portfolio growth (consistent returns) and protection (avoid big losses) in Permanent Portfolio using investor's own country assets, such as in the U.S. There are also cases where there are disruptions to normal economic cycle, which is when we need our portfolio to automatically provide sufficient capital protection. An example is Japan where since 1989, deflation exists and the stock market has been in negative growth generally. A Japan Permanent Portfolio using Japanese assets would likely have almost no positive growth since 1989, yet the portfolio would likely provide much more protection to purchasing power of the Japanese Permanent Portfolio due to its long term bonds and gold allocations, compared to traditional portfolio such as a 50% stocks and 50% short or intermediate term bonds portfolio. In another extreme case such as Iceland, which let its banks default on their debt obligations in 2008, the Iceland stock market dropped drastically that year and Iceland currency krona lost its value significantly against other currency. The 25% 'only' in stock limited damage to Iceland Permanent Portfolio, while the 25% gold became worthed significantly more kronas and helped preserve or increase buying power of the portfolio. Iceland Permanent Portfolio would have given its investor much more protection compared to traditional portfolios that uses greater percentage of stock and lack gold protection. A case study for Iceland Permanent Portfolio can be seen here:
A comparison of different country's Permanent Portfolio can be seen here:

Different portfolio provides different benefits and disadvantages. There is no sure thing in investment, and investor always need to analyse the risks and rewards and decide what strategy is best for themselves according to their individual needs and wants, their risk tolerance level and their level of investment competency. It is my hope to provide enough insights to how Permanent Portfolio works so that new investors can have sufficient info to make an informed choice for themselves.

How do I invest CPF money in Permanent Portfolio

How do I invest CPF money in Permanent Portfolio?

In Singapore, the Central Provident Fund (CPF) is a compulsory comprehensive savings plan for working Singaporeans and permanent residents primarily to fund their retirement, healthcare and housing needs.

Investor first need to be aware of some rules relating to CPF money investment. You are allowed to invest 100% of investible Ordinary Account money in STI ETF (ES3), 100% in Singapore Government Securities 30-year Bond (PH1S) that trades on SGX, 100% on Unit Trusts/Mutual Funds, and 35% on stocks. You can invest only 10% of investible Ordinary Account money in UOB Gold Savings Account and Gold ETF (O87). The first 20,000 dollars in Ordinary Account cannot be used for investment purpose. Hence for gold, this makes it impossible to invest 25% gold with CPF money, and may make it difficult to rebalance gold if we were to allocate only 10% gold instead.

The first method is to invest CPF money with 30% in stocks (ES3), invest 30% in SGS 30-year bond (PH1S), leave 30% as cash in CPF Ordinary Account, and 10% in gold instruments. Second method is to create a CPF Portfolio consisting only 33% STI ETF, 33% Singapore Government 30 year bond, and 34% cash earning prevailing CPF OA interest rate - this method is easier and more cost effective to rebalance and maintain, and has performed almost as well as the first method in last 10 years, with about 1 % point diference in average returns - disadvantage is that this second method does not have any gold protection. Alternatively, you can plan to pool together your cash savings and CPF money and treat them as one, meaning, allocate CPF money among cash, STI ETF stock, and 30year bond, and allocate cash savings for gold, STI ETF and 30year bond, so that in total you have 25% of each asset.

If DIY investing using above methods is beyond your capability to learn and do, and you have no choice but to invest CPF money in unit trusts or mutual funds through the help of your financial agents, then it is my opinion you will be better off sticking a few rules about unit trusts. Before that, I think it is almost impossible to implement Permanent Portfolio with unit trust due to lack of capability to invest directly in gold commodity and pure long term government bonds unit trusts, so a bond/stock unit trust portfolio would be next best thing. My recommended unit trust investment rules for new and unexperienced investors are:
1. If you invest only in one unit trust, choose a so-called 'balanced fund' that contains mainly both stocks and bonds components, with other asset types included if desired, so that the bonds can buffer extreme stock price moves and reduce overall price volatility - you can still be profitable if economic conditions are favorable, and you can have lesser heartache and smaller paper loss if economic conditions are not favorable. 'Balanced fund' with stocks and bond also usually recover from the losses due to economic downturns much faster than portfolio with pure equity unit trusts.
2. If you invest with several pure funds, ensure you have a good mix of pure stocks and pure bonds funds, for same reason as in previous. An example unit trust portfolio will be 50% global equities unit trusts, and 50% global bonds unit trusts (higher percentage of government bonds is preferred). This has advantage that you can rebalance the fund back to 50% stock, 50% bond at the end of every year using existing fund or fresh fund, thereby taking profits internally on the profitable asset and buying the other lesser performing asset on the cheap. When selecting unit trusts, try to keep unit trusts yearly management fees as low as possible to improve your returns. To get lower yearly management fees, try to select passively managed funds as opposed to actively managed fund where fund manager try to adjust the fund componentsa and incur higher yearly fees.
3. Avoid owning unit trusts based on emerging economies stock markets. Emerging economies may have high GDP numbers, but some research will show that fast economy growth does not equal fast stock market growth. I would suggest investing unit trusts that invest in developed market economies instead for more consistent stock market performance and less volatility.
4. As new investor, do not own only pure equity fund in your portfolio, without bond funds to act as buffer. In buying only or mostly pure equity fund in portfolio, you are trying to 'time the market', and most people especially new investors, will fail miserably in market timing more often than not. Owning a 'balanced fund' or 'balanced portfolio' will give you higher chances of being 'right' and walk away with profit. If you wish to 'market time', you are a speculator and do so only with money you can afford to lose.
5. Unit trusts contining gold mining companies act more like the stock market companies and not like commodities. Such unit trusts of commodity firms do not provide the same protection as direct investment in gold. Despite what your financial agent may say, such unit trust cannot replace the purpose of gold component in Permanent Portfolio.
6. Investor should be ready to hold unit trusts for the long term, at least 3 years or more. This is to maximize chance for investment to overcome temporary downturn in economy and become profitable. Once you decide the length of time to invest in (hopefully 3 years or more), be prepared to ride through possible downturns and try not to let other people influence you take loss during a downturn. If you use a balanced fund with stock and bonds and lower volatility, then it will be easier to stick to your investment during a downturn. Remember to rebalance your portfolio every year whether in downturns or good times, especially if fund switching is free.

There are a few financial agent who really have in-depth understanding of how stocks, bonds commodity, real estates and cash functions in the economy, and have experience how to make a workable investment portfolio and rebalance for clients. For the rest, it is not hard to find financial agents who are really just unit trust sales people who just repeat what they have been told, who follows the crowd to talk about how their company can 'market time' and tell you when to buy and sell the unit trusts, and are clueless about how and what makes a good portfolio works. Market timing does not work for investment. Market timing is for speculators who have a totally different trading approach and work with money they can afford to lose. If you are investing and the cash is important to you, definitely you cannot use market timing approach. Remember that financial agents may come and go, and the quality of different agents differ. Listen to what your financial agent have to say and balance that against points 1 to 6 above, and I believe you will have a better chance to be profitable with unit trusts in the long term.

Can unit trusts/mutual funds be used for the assets found in Permanent Portfolio

Can unit trusts/mutual funds be used for the assets found in Permanent Portfolio?

Generally no, unless you really have no choice. Unit Trust have typical high management fee of 0.75% to 2.5% - that’s a rough average of 1.5% less profit per year. Over 25 years that accumulative 1.5% less profit per year could lower your portfolio returns by about 31.5%! Imagine getting 30% to 40% less than what you could have! Search online for the relevant maths, compound interest works in reverse too. If you wish to implement your own Permanent Portfolio, you should be savvy enough to directly invest in passively managed index funds, ETF, bonds, gold and Short-term Treasuries instead. I liquidated my unit trust investments and put the cash into my Permanent Portfolio instead - I expect my Permanent portfolio to do better than my previous unit trusts investment and it did. Also note that unit trust or funds consisting of gold mining companies cannot be used in place of gold commodity itself.

What else I should know before I begin on my own Permanent Portfolio

What else I should know before I begin on my own Permanent Portfolio?

Before you start this portfolio, be an educated investor and learn as much as you can about Permanent Portfolio. Recommended readings are Harry Browne's book "Fail-safe Investing", and Craig Rowland’s Learn the pros and cons of Permanent Portfolio. Ignore what Gurus predict about economy. Come up with many reasons why you will not do market timing. Learn basic knowledge about stocks, bonds and gold by reading relevant news from Bloomberg. Plan out your stock, bonds and gold purchases so that you keep your yearly running expenses low, meaning keep commission costs and management fees as little as possible. From my research, best time to start and rebalance Permanent Portfolio with fresh funds is end/start of every year. Second best period is to start portfolio in February to April and rebalance with fresh funds at every year end thereafter. Timing to start Permanent Portfolio is not so important, and the best way to start Permanent Portfolio is to plan the purchases first then invest in all 4 assets at once! If you plan to market time each asset and buy into each asset at separate times, you could likely time wrongly and reduce the returns instead! Your best chance of getting favourable returns is to buy all 4 assets within a day or a week. If your brokerage account has buy limits, use several brokerages to execute your order on same day. DBSV cash-upfront account has no buy limits. If you do not have enough cash, you may also opt to save your money first, until you can afford to implement the full Permanent Portfolio at once.

If your initial investment is too small so that it is difficult to rebalance your portfolio easily every year, or if you need mroe than a year to save up before investing fresh cash into the portfolio, you can also leave the portfolio alone for a few years and rebalance when one of the asset reaches 35% or 15% of total portfolio. This is actually the third way of rebalancing Permanent Portfolio. The three ways of rebalancing have almost the same returns in the long run, so choose one of the rebalancing method that is most suitable for you.

Can I modify the Permanent Portfolio allocation from time to time to improve performance

Can I modify the Permanent Portfolio allocation from time to time to improve performance?

There is no need to modify the 25% 4 way split of asset allocation. I simulated various way of improving Permanent Portfolio - leveraging, hedging, adding other asset classes, market timing, optimising asset allocation etc., and I finally decided to stick with the original Permanent Portfolio system. I do not consider myself a very experienced or professional investor, hence I conclude I am rookie investor. As a rookie, my best chance to achieve my minimum 6%-10% annualised returns target is to let the original Permanent Portfolio's simplicity, ease of use and reliability work in my favour. If I wish to speculate and increase my stock, bond or gold holdings, I will start a variable portfolio to hold these speculative purchases, while not making changes to my Permanent Portfolio.

How I initially learn about stocks, bonds and gold

How do I initially learn about stocks, bonds, gold?

Initially, i was not too savvy about how stocks, bond and gold prices react in various economic environments. Then I researched about these instruments and started reading news in the Bloomberg app on my Android phone every day. I read the sections: Worldwide, Bonds, Commodities, Economy, and U.S. and little by little, from the daily new and analysis on the different markets, I developed a better understanding of how market participants react to stocks, bonds and gold adn cash in various market events and macro economic cycles. I also learnt to ignore market predictors and not place little attention on their predictions.

Should leverage be used to increase potential profits in Permanent Portfolio

Should leverage be used to increase potential profits in Permanent Portfolio?
In short, do not use leverage for this portfolio. If you use leverage, depending on situation, you can lose all your investments, and even owe money - this is not something you wish for money you cannot afford to lose! To recap, invest money that you cannot afford to lose, speculate with money you can afford to lose. If you use only cash and own only actual assets, there is almost no chance to lose your entire investment fortune. I believe most retail investors are rookie investors, as opposed to experienced or professional investors. Rookie investors should use a grounded approach and only invest using cash. For this portfolio investment, invest in the actual assets such as STI ETF shares, government bonds or government bond ETFs, physical gold or ETF backed by physical gold. Do not invest in their derivative leveraged instruments such as CFD, futures and options. Actual assets can provide dividends and interests, give you a more grounded feeling that you are owning something, and reduce or eliminate counterparty risk that your asset will become worthless if the counterparty defaults on the derivative instruments. If you think you are savvy enough to invest with leveraged instrument, you can start another portfolio with money you can lose to invest with leveraged instruments, and see for yourself how you would perform. Leveraged instruments comes with potentially higher operating costs, and may need more monitoring. In addition, leveraged instruments normally do not pay out interests and dividends.

Sunday, 29 July 2012

When to top up fresh fund or rebalance Permanent Portfolio

When to top up fresh fund or rebalance Permanent Portfolio?

Top up fresh fund to this portfolio every 12 months, by buying the worst performing 1 or 2 assets at end of every year, this way investor buy assets on the cheap, and try to get the portfolio back to 25% for each asset. This is called rebalancing. Investor can also rebalance my assets back to 25% if any asset drops below 15% or rise more than 35% of entire portfolio. Some uses a rebalance band trigger of 20% to 30% which is also another acceptable method. Use of either rebalance band is up to individual preference and tolerance.

What are some common questions about Permanent Portfolio allocation

What are some common questions about Permanent Portfolio allocation?

Some may think that this allocation sounds very different than what they’ve seen elsewhere, and some questions will probably pop up in your mind.

-Only 25% in stocks, that’s seems very little. What good reasons are there to invest only so little in stocks?
-Long term bonds prices tend to drop significantly when interest rates rises, and interest rates have nowhere else to go but up. What good reason is there to own long term bonds now instead of short term bonds?
-Gold is a non-yielding asset, it seems to be just a yellow metal with few industrial use and valuable only as jewellery. What good reasons are there to invest 25% in gold?
-What good reasons are there to keep as much as 25% as cash in low yield Money Market Funds and not invest them for higher yield?
-Stocks and bond prices move in opposite directions, and since there are equal amount of stocks and bonds, what good reasons are there why their price movements will not cancel each other and provide zero growth?
-There are only 4 assets, what good reason is there to believe this is a well diversified portfolio?

Notice how I phrase these questions. If you ask the questions this way, then you may have a more open mentality and be glad to discover that there are good reasons for such asset allocation. First, to answer these questions, do not just look at how each asset will perform individually. Next, learn to look at how each asset performs relative to one another and affect the portfolio as a whole during a particular macroeconomic cycle (prosperity, inflation, recession, deflation). You probably need some help to answer these questions, so for some insights to the answers, you may visit

Here I also attempt to provide brief summary of the answers.

In a prosperous economy, smart money flows into stock markets which provide higher growth potential than bonds and commodities, causing stock prices to rise quickly. On the other hand, stock markets can also experience decades of no growth, such as the 1970s and 2000s where the US stock market hardly grows during the decade. Also, from 1989 onwards, the Japanese stock market has experienced long term negative growth, so 25% in stocks would reduce exposures in case these major negative events occur. We all think stock markets will always rise, yet we will not know exactly when the next lost decade of stock market growth or recession will happen.

When there is deflation, smart money flows into long term bonds which is now more valuable than cash and commodities. Choosing long term bonds is because during deflationary periods, long term bond prices rise faster that short term bonds and can hence do a better job of covering for losses due to drops in commodity and stock prices.

In inflation, smart money flows into commodities where prices are being push up due to sudden increase in monetary supply or currency depreciation acts of central banks and governments. Gold is a commodity and is a store of wealth for several thousand years, even now. Notice that central banks around the world are currently hoarding large amounts of this yellow metal. Gold as a hard asset performs well during monetary inflation and serves to preserve fortune especially when central banks are printing more paper money. In extreme cases when a country's government fail and their paper money depreciates in value drastically or disappears, gold will still retain its value and can be exchanged for the goods and currencies of other nations.

In recession, commodity and stock prices move lower and smart money exit these assets and increase their cash pool to retain their fortune, and await for better time when they can use their cash to buy these assets more cheaply. Some smart money flows into bonds during recession. Cash also comes in handy for investors for sudden big expenses and the 25% cash can also be used as emergency fund so there is no need for investore to set aside another emergency fund.

Although long term bonds and stocks prices generally move in opposite directions, a rising asset will normally rise faster than the falling asset. To understand this simply, let's think that 30-years long term bonds and stocks have similar volatility in their price range movements, which in fact they do have similar price volatility. It is easier for people to start a new position to chase after a rising asset (stock), hence more people buy and rising asset (stock) price rise faster. It is more difficult to close a losing position in a declining asset (bond), as some people hold on to positions hoping for asset (bond) price to turn around, hence price of declining assets drops more slowly than rising assets, in general. This is why a simple 50% stocks and 50% bond portfolio can still provide positive annualised growth, in the long run.

A well diversified portfolio avoids big losses and provides growth in different economic conditions, and this is what Permanent Portfolio does, and does it better than many other portfolio allocations. The simple 4 assets class also makes it simpler and cheaper to manage the portfolio, as there are only 4 assets to manage, so this portfolio will be simpler to implement for many retail investors compared to portfolio with more assets. The simple 4 way 25% split among the 4 assets are not arbitrary. The reason for the equal split is so that in each economic cycle, the asset that performs best in that cycle will have enough mass to bring up the entire portfolio and provide portfolio growth. If one is to decrease the percentage of an asset, for example if we reduce long term bonds to 10% of portfolio (while we have 30% gold, 30% stocks, 30% cash) then in deflationary times, the 10% of long term bonds will not grow enough to offset the drops in 30% of stocks and 30% of gold. Since we cannot predict when long term bonds, stocks, gold and cash will perform particularly well, we maintain equal amount of each of these assets so that each of them can do its job when the time comes for them to carry the load. The past performance speaks for itself that such equal 4 way split of the assets works in Permanent Portfolio. For other types of portfolio, such equal splits among assets may or may not work as desirably as in Permanent Portfolio. It all depends on the characteristics of the assets in the portfolio and what they are used for.

Who are the smart money? They are institutional investors, pension fund managers, mutual fund managers and hedge fund managers in the world who are responsible for about 90% of the total volume of trades in all the investment markets everyday. For Permanent Portfolio investors of the 4 assets, we aim to let smart money with their kings of fund managers, armies of analysts and mountains of wealth move the prices of these assets and grow our portfolio year after year while we enjoy some fruits of their labor and enjoy our lives.

So you may have one more important question, how did Permanent Portfolio strategy performed in the past? Here you can see the past 40 years track record of Permanent Portfolio strategy in the U.S.A: . This result shows the kind of long term portfolio performance I am looking for: to avoid big losses in value which could scare me to close the portfolio prematurely and take heavy losses, to grow my portfolio consistently over the years, and require very little time to manage. For in depth understanding of the answers, please read Harry Browne’s book “Fail-safe Investing” and also look at all posts about Permanent Portfolio at .

For someone new to investing, It may take you a few days or a few months to understand the inner workings of Permanent Portfolio strategy and prove to yourself that this is the portfolio investment strategy for you. It may be well worth the effort for you to learn indepth reasons about how and why Permanent Portfolio works, even if it is only to learn about how investment assets and economic cycles are related.

Why do I choose to invest with Permanent Portfolio strategy

Why do I choose to invest with Permanent Portfolio strategy?

I aim to grow my retirement fund at the minimum of 6%-10% of annualised returns, in order to reach my target retirement funds. I choose to invest with Permanent Portfolio strategy as it meets my following investment goals:
 -Avoid big losses.
This is possible due to the diversified 4 assets of stock index, governemnt long bond, gold and cash having low or negative corelation with one another, so chances of all the assets reducing in values at the same time are very slim. On the other hand, being very volatile assets, stock will outperform during economic growth, long bond will outperform in deflation, gold will outperform in inflation, and cash and long bond help portfolio remain stable during recession. The outperforming or stable asset can usually offset losses in the declining assets, hence helping the portfolio avoid big losses or provide positive gains.
-Gives consistent profits in most years.
The U.S. Permanent Portfolio has 40 recorded years of past results, and a Singapore Permanent Portfolio has 9 recorded years of past results, to demonstrate that Permanent Portfolio can generate positive returns in most of the years. Yearly positive profits is necessary in order to maximize compunding effects and grow the portfolio faster.
-Avoid having to study companies and pick individual stocks.
PP uses stock index fund, hence there is no need to analyze company reports or monitor news to pick individual companies. I am not so capable of staring at financial figures on the company reports to decipher their meanings. 
-Need no for market timing to predict the best time for buying and sellig assets.
I find that watching price action, technical indicators, company fundamentals and news to find turning points to buy and sell is speculative and less consistant than I like for my retirement funds, which i cannot afford to lose. A way to invest without needing to time the market is required, to remove an investor's chances of a wrong analysis causing portfolio value to drop drastically.
-No need to spend lots of time to monitor and manage this portfolio.
The portfolio should work without needing constant monitoring, so as to free time for my personal activities. This is also to avoid possible negative impact on the portfolio if I happen to be unable to monitor for a period of time and miss taking critical actions on the portfolio. Managing the portfolio should preferably be a boring and relatively simple task.
-Maximize profits and minimize running costs.
The projected annualised profits should be able to help achieve my retirement financial goals. To maximize chances of achieving this, the initial and running cost of portfolio should be as low as possible.
Permanent Portfolio is based on a logical economic cycles theory and has 40 years of track records in U.S.A. to back it up. A mutual fund based on the Permanent Portfolio (PRPFX) is also one of the top fund performer in recent years of high market volatility - this also gives me confidence the Permanent Portfolio passive investment strategy is workable in real life.
I have always wanted to invest in stocks, bonds and commodities. I know that investing separately in these 3 very volatile instruments carry high chances of both big wins and big losses. The Permanent Portfolio strategy allows me to invest and profit from stocks, bonds and commodities at all times, while lowing the overall risk of the total portfolio significantly.
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How has Singapore Permanent Portfolio performed in past 9 years

How has Singapore Permanent Portfolio performed in past 9 years?

Here is a table of the annual returns from a Singapore Permanent Portfolio for the last 9 years. This table shows average returns of 7.4% per annum excluding interest and dividends. All returns are in terms of Singapore dollars. The portfolio was rebalanced back to 25% for each asset at the start of each year. Data is taken on first trading day of each year.

Return %
TLT in
Return %
Gold in
Return %
Return %
Return %
17.9% 0.5% 11.3%

(Update 8/12/2012: Table updated to make it easier to read annual returns)

This theoretical Singapore Permanent Portfolio returns is based on:
25% stocks: Singapore Straits Times Index (STI),
25% long term government bond: iShares Barclays 20+ Yr Bond ETF (TLT), price converted to Singapore dollars according to prevailing exchange rate. TLT was used because there was no 30-year Singapore Government Bond prior to 1 April 2012,
25% gold: gold price calculated in Singapore dollars using Yahoo! Finance ticker XAUSGD=X,
25% cash: assuming cash returns are at 0.5% per annum due to lack of interest rate data.

Conclusion: This portfolio would have a positive average annual returns of at least 7.4% (exclude dividends and interests) at the end of last 10 years and avoided big losses in 2008. The compounded annualised returns is at least 7.3%.

My current Singapore Permanent Portfolio consists of:
25% Stocks: STI ETF (ES3). Alternatively use Nikko AM STI ETF100 (G3B)
25% Bond: Singapore Government 30-years Bond (PH1S). Alternatively use TLT.
25% Gold: UOB Gold Savings Account. Alternatively buy physical gold bullion or coins after 1 Oct 2012, when the 7% GST will be removed for investment grade gold. Another alternative is SPDR Gold ETF (O87).
25% Cash: Singapore Government 3 to 12 months Treasury Bills. Alternatively, use money market funds or bank fixed deposits.

Note 1: the average annual returns of 7.4% beats inflation. This achieve the aim of "consistent growth".
Note 2: the Permanent Portfolio maximum loss in 2008 was -3.9%, compared to stock heavy portfolio which could have suffered up to 49% loss in 2008. Permanent Portfolio achieved the aim of "avoiding big loss".
Note 3: in 2009 stock heavy portfolio could have boasted returns of 64%, compared to Permanent Portfolio's 15% gain. Examining 2008 and 2009 data again, we see stock heavy portfolio losing up to 49% in 2008 and gaining 64% in 2009 - the 64% gain is not sufficient to recover the initial loss of 49% (stocks would have to grow almost 96% in 2009 in order to bring the value of stock assets back to 100%) and gives a total negative return of up to (-16.4%) in 2008 to 2009 for a stock heavy portfolio. Comparatively, Permanent Portfolio has a loss of -3.9% in 2008 and a gain of 15% in 2009, giving a total positive returns from 2008 to 2009 of 10.5% instead. This extreme case highlights the advantage of avoiding big losses when designing an investment portfolio.
Note 4: the returns of TLT and gold have been converted to Singapore dollars before calculating the profits, using the day's prevailing USDSGD currency exchange rate. This portfolio should be tracked in investor's own country currency.
Note 5: the annual returns excludes stock dividends and bond interest due to lack of data. If actual dividends and interest were included, the average annual returns would probably have risen by about 1% or more.
Note 6: the returns of TLT has been negatively impacted by the falling USDSGD currency exchange rate over the years. If currency hedging was performed, then the portfolio could have risen by about another 1%.
Note 7: to simplify calculations, cash has been assumed to grow by 0.5% per year only. If cash had been placed in higher yielding 1-2 years bond or treasury bill, then the total returns would have been higher.
Note 8: Some may find that Permanent Portfolio asset allocation sounds very different from what they have seen elsewhere. Remember that one has to see the total portfolio results, and not just focus on individual asset performance. For your questions about this choice of assets and allocation, you can first have a look at some common questions about Permanent Portfolio here:

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