How to Start Malaysia Permanent Portfolio?

Permanent Portfolio Components

18 Jul How to Start Malaysia Permanent Portfolio?

Finally, we are doing a portfolio for our Malaysian readers!

Craig Rowland, the author of The Permanent Portfolio, mentioned that Permanent Portfolio (PP) should be implemented in their own country. Since we have done a version of Singapore PP, we think there is value to create a Malaysia PP.

Stocks – 25%

For stocks, the most suitable index-tracking ETF will be FTSE Bursa Malaysia KLCI (0820EA). It fulfills a few criteria:

  • No active management or stock selection by the fund manager
  • Tracks the big cap stocks of the Malaysian Stock Index
  • Low cost (0.5% per annum)
  • Reputable company (AmInvestment Services is part of AmBank, one of the largest bank in Malaysia)

The component stocks of KLCI are well known big cap stocks (as at 25 Jun 13):

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  1. Public Bank Berhad
  2. Malayan Banking BHD
  3. CIMB Group Holdings BHD
  4. Sime Darby Berhad
  5. Axiata Group Berhad
  6. Tenaga Nasional BHD
  7. Genting BHD
  8. Petronas Chemicals Group BHD
  9. IOI Corporation BHD
  10. DIGI.com BHD
  11. Petronas Gas BHD
  12. Maxis BHD
  13. Telekom Malaysia BHD
  14. AMMB Holdings BHD
  15. Kuala Lumpur Kepong BHD
  16. Genting Malaysia BHD
  17. YTL Corporation Berhad
  18. Hong Leong Bank Berhad
  19. Felda Global Ventures
  20. UMW Holdings BHD
  21. British American Tobacco BHD
  22. PPB Group Berhad
  23. IHH Healthcare BHD
  24. Petronas Dagangan BHD
  25. RHB Capital BHD
  26. Astro Malaysia Holdings BHD
  27. UEM Sunrise BHD
  28. SapuraKencana Petroleum
  29. MISC
  30. Hong Leong Financial Group

Bonds – 25%

For bonds, I was not able to find any Malaysian Government Bonds traded on the Exchange. Malaysians can either buy the bonds through bidding in the Primary market or another easy way is to buy the ABF Malaysia Bond Index Fund (0800EA), which is listed on Bursa Malaysia. Similarly to FBM KLCI ETF, this bond fund qualify for Permanent Portfolio on these criteria:

  • No active management and selection of bonds
  • Tracks the iBoxx ABF Malaysia Bond Index
  • Low cost (0.1% per annum)
  • Reputable company (AmInvestment Services is part of AmBank, one of the largest bank in Malaysia)

Gold – 25%

Bursa Malaysia does not have any Gold ETF. Malaysians can buy gold bullion from reputable banks like MayBank and CIMB. Otherwise, open a US Stock Account and buy iShares Gold Trust listed on the New York Stock Exchange. The annual management fee of the Trust is 0.25% which is considered low compared to other Gold ETFs.

Cash – 25%

Cash would be the easiest. Keep it in the bank or money market fund. Another way is to buy short term Malaysia Government Bonds.

There you go – An easy to set up Malaysia Permanent Portfolio for you. 25% in FBM KLCI ETF, 25% in ABFMY1, 25% in iShares Gold Trust and 25% in cash! For more details on the maintenance and the purpose of the portfolio, refer to these posts for a start:

 The Permanent Portfolio by Craig Rowland and J.M. Lawson

How to start Singapore Permanent Portfolio?

You may wonder how this portfolio will perform in terms of returns and drawdowns. We will be running a model of this Malaysia Permanent Portfolio and review its performance going forward. Stay tune!



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1Comment
  • Bron Suchecki
    Posted at 21:19h, 18 July Reply

    Alvin,

    I work for the Perth Mint and would suggest Malaysians (and Singaporeans) consider our Australian Stock Exchange listed product Perth Mint Gold (ticker/code: PMGOLD). It has a management fee of 0.15% which is lower than iShares and is guaranteed by the Government of Western Australia (AAA rated).

    I think gold accounts from a reputable Malaysian bank are also an option for those who don’t want the risk of storing gold at home.

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