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.

Sunday, 29 July 2012

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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