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

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.


  1. What are you thoughts on incorporating some US ETFs as such:

    20% ES3
    5% VT

    20% PH1S
    5% TLT

    25% IAU

    20% Cash Deposit in SG
    5% SCHO

    It's almost like having 2 portfolios (one SG and one international) incorporated into one.

  2. I suppose this can be done. Just that its complicating portfolio by adding extra counters, and you have to figure out how to rebalance. You are also subject to some foreign exchange risk. In my opinion might be better to keep things simple, like using a single Asia Pacific ETF for stocks. For cash, you can consider partially investing in a 1-3 years Asia sovereign bond ETF as mentioned in "What to invest in to start Singapore Permanent Portfolio". Its up to you to weight the pros and cons. Personally I prefer simplicity and ease of execution.

  3. As to bond..what do you think about holding some foreign bond etfs like TLT? Our local bond market movement is pretty flat. So even in the event that stocks dip, most locals don't really go into bonds.

  4. Holding TLT is possible, just note that TLT is in USD which depreciated in value against SGD at average of 4% per year for last 10 years. TLT may be easier to buy and rebalance. You can hedge 80%~100% of TLT back to SGD. If no hedge, just accept the currency risk. Also, if there is localised Singapore deflation, local long band may go up while US long bonds TLT may not move up.

    I think local bond market seems still ok. Bond and stock index dont have 100% negative correlation, means not every dip in stock market will produce movement in long bond. The local long bond buy/sell price changes everyday to reflect changes in demand/supply of bonds by the primary dealers, even though there may not be actual bond sales in the secondary stock exchange market. What matter most is whether the local long bond moves during severe market distress? I observed that the local 20yr bond moved significantly up during August last year (i think) and 30 year bond moved significantly up during around june this year. So i believe local long bond will move when there is severe market distress, which is what really matters.