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

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.

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