I was having a bad toothache (plus severe headache) from a cracked molar over the long weekend and had to visit the dentist on Monday to fix it. Don’t know whether is it a good thing or not but I ended up with the chance to read “The Singapore Permanent Portfolio” by Alvin Chow while waiting in between dental appointments.
The idea or methodology of Permanent Portfolio is not new. What I liked about this book is the ease of reading and its contextualised contents.
It is similar to what was mentioned in “Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School” by Andrew Hallam.
Balancing the different asset classes
It talks about have different asset classes in your portfolio (Stocks, Bonds, Cash, and Gold) and keeping them balanced (rebalancing) periodically (e.g. 6 or 12 months review, or when there are market corrections).
The idea of rebalancing is to reduce those asset classes that have capital gain to increase those asset classes that have not gain as much (or dropped). Essentially, using capital gains to purchase the asset class that has better value (lower priced). Now that you got more units of the lower priced item and if they were to gain in value, you would have capital gain again and the rebalancing happens again.
Contextualised and Comparisons
Alvin made the idea/methodology easy to digest and had contextualised it to Singapore’s context. Citing examples for each asset classes and the pros/cons of each of them. For example, UOB Gold Savings Account versus holding Gold Bullion versus Gold ETF as Gold component or keeping cash in Savings Account versus short term (1 to 3 years) bonds versus treating SRS as Cash component.
With the examples given, seems like one would be ready to build their own Singapore Permanent Portfolio the moment they finish the book. That’s provided if the necessary accounts have been set up (CDP, trading account, etc.)
At the end of the day, the authors (of both books) have gave examples/evidence that such portfolios are able to take some harsh beating from the market and requires little maintenance (rebalancing annually or when there are big events). Hence, it is suitable for people who do not have the eye for stock picking.
The book isn’t that expensive so I would say it is a good read for novice (like me).
I started out with the intention to build such a portfolio but I guess I was attracted by those dividends dishing stocks. I guess it is time to accumulate my bonds component. A good wake up call!