Should You Build A Singapore Permanent Portfolio?

As the portfolio that I publish on this site heads north towards the $300k mark, I do notice my balls shrinking ever so slightly.  😳

That’s not surprising since $300k is a significant sum to both the Mrs and me and will go a long way towards fulfilling our semi-retirement dream. If we were given a 50/50 bet that would either double the amount or halve it, we probably wouldn’t take that bet. (Yeah, that’s how conservative we are now.)

Therefore, we are holding a little more cash than what we previously espoused half a year ago in this asset allocation post.

In that post, I also briefly mentioned about the Permanent Portfolio, which is basically allocating 25% of your funds into these 4 asset classes: equities, hard assets, cash and bonds. Even though I did not implement it, I did use that knowledge to tailor my allocation to my risk appetite and investment aptitude. And I actually thought it might be useful to many others or maybe even myself some years down the road.  Otherwise, why would I mention it then? 😎

And lo and behold, Alvin Chow (a dear friend from BigFatPurse) has actually written a book to educate Singaporeans on how to create their own Singapore Permanent Portfolio. Since I was privileged to receive an autographed copy, I shall share a little below on how to “Grow Your Wealth Through Good and Bad Times with Lower Risk and Less Effort” (simply love this tagline in the book)

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Before we delve into the nuts and bolts of the book, let me share with you my views on the author, especially since I do know him personally. After all, I do believe that a book’s true purpose doesn’t deviate far away from the author’s values.

If you’re an avid reader of this blog, you should recall my review of VIMC. VIMC is a course created by Alvin and his partners at BigFatPurse to educate people on their CNAV strategy for selecting individual stocks. Stating potential returns of 10-15%, they were not promising the sky. Nonetheless, if the stated returns materialise, they would still outperform indexes by a few good percentages.

It’s been a year or two and so far from what I have heard and seen, this strategy has been doing well, rewarding their followers and members.

So you must be thinking, why is Alvin espousing this lower-return Singapore Permanent Portfolio strategy now then? Isn’t he taking business away from himself and stepping on his own foot?

From their actions, I guess Alvin and his partners are really intent on championing financial education in Singapore and they are actively reaching out to the local community. They understand that more often than not, it’s not the technical investment skills and knowledge that matters but the investor’s own psyche and temperament.

An all-stock portfolio is highly likely to be volatile at some point in time, and many investors cannot stomach this, which likely leads to a “buy high, sell low” situation, which Alvin dedicated one full chapter in the beginning to illustrate.

However, with the Permanent Portfolio (a concept created by Harry Browne), it is likely that at least one of the four different asset classes will do well in any economic environment, thus largely preserving the value of your portfolio. The book goes on to show the different returns if one had implemented the Permanent Portfolio in various countries (US, Europe, Japan and Singapore). The results were pretty convincing as each portfolio generated stable and good returns. In Singapore, one would have achieved a respectable 7% return per annum over the past 15 years.

The most beneficial part of this book to a newbie (or someone with little interest in investment but lots of interest in returns… duh) would be the 4th and 5th chapter where the author illustrates some actionable steps to create a Singapore Permanent Portfolio and how to rebalance it to milk the most of the volatility of each asset class. You can find out more about it when you get your hands on the book.  😉

Well, the review is not over. It’s not all “sugar and spice, and everything nice”. In the FAQs (last part of the book), the author mentioned that a Regular Savings Plan (RSPs) into an ETF probably isn’t suitable to form the equity portion of the Singapore Permanent Portfolio. I do have reservations on this view since I do believe RSPs is one of the best ways for a new investor to start building his portfolio. I shall leave you to think through how a young investor can do both RSPs and maintain a Singapore Permanent Portfolio.

Although the author did not explicitly limit the Singapore Permanent Portfolio to retirees, I have little doubt that it’s especially useful when one reaches the decumulation phase. At that stage, our mental faculties might no longer be what it once was and protection of the portfolio’s value is paramount. That’s when I feel the Permanent Portfolio is most useful. And since the author also stated that the Singapore Permanent Portfolio is more about capital gains rather than providing cash flow, I thought it would be useful to add in another chapter regarding the decumulation part for retirees. Especially considering that this book isn’t exactly lengthy at less than 100 pages.

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So should you buy the book?

Honestly speaking, most of the information in the book (even the step-by-step guide to building and maintaining the Singapore Permanent Portfolio) can be researched on the Internet. But Are you likely to do it? Having spent almost two years in this blogging sphere, I have to admit people like me, who love spending hours trolling financial and investment articles to get that one piece of useful nugget, are a rarity. And seriously, there’s quite a few nuggets of wisdom to be found in this book.

Moreover if you’re an investment layman keen on finding out more or even implementing a Singapore Permanent Portfolio, this book will be a god-send. And in case you’re thinking I am saying this because I got a complimentary book, I sort of “paid” for it since I bought Alvin lunch when he passed the book to me last week. #Noregrets

And you can get it roughly at the same “price” as me since one can get a 15% discount off the retail price of $19.90 when you buy it here. Free delivery to a Singapore address too!

P.S. I generally recommend people to get their books from the library. However, this book probably isn’t available in the local library at this point in time. Furthermore, I have come to realise that local authors generally don’t make much money from selling books. Therefore, do show your support.  🙂

 

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    7 thoughts on “Should You Build A Singapore Permanent Portfolio?

    1. Alvin

      Thanks for the lunch and the kind review 😀

      I support RSP too as I started that way. Currently RSP caters for stocks. SGS Bonds and gold ETF are tough.

      1. My 15 HWW Post author

        Hi Alvin,

        You are right! I actually meant RSP for the stocks part only. As for achieving the 25% weightage, one just has to be a little more flexible with regards to Gold and Bonds. I still feel it can be useful for someone just starting out.

    2. Raymond

      Thank you for your review.
      Am just wondering where I can find out more about the research, particularly on Singapore:

      “The book goes on to show the different returns if one had implemented the Permanent Portfolio in various countries (US, Europe, Japan and Singapore). The results were pretty convincing as each portfolio generated stable and good returns. In Singapore, one would have achieved a respectable 7% return per annum over the past 15 years.”

    3. Cedric

      Hi Alvin,

      Thanks for the post, it’s sure gonna provide lasting value for aspiring investor

      Question:
      I am currently using a Regular Savings Plan to buy into Nikko ETF
      Would you be able to share why it is Bad ?
      And given the amt less than 1k I can invest monthly are there any option besides RSF ?

      1. My 15 HWW Post author

        Hi Cedric,

        Let me attempt to answer your question.

        I think the problem with RSPs with regards to Permanent Portfolio is that it is much harder to rebalance. And since 2/3 of the time, the market is rising, it might make more sense to go in with a lump sum rather than RSP it.

        I think for an amount less than 1k, you will incur less fees through RSP so it’s still probably the best option.

        A point to think through with regards to making Permanent Portfolio work with RSP. If you’re putting in $500 a month, after 4 years, you would have put in close to $25,000 and thereafter you could stop the RSP and focus more on the principles of PP. Hopefully, you will have another $25k each in the other 3 or 4 asset classes and rebalance when necessary.