The application of permanent portfolio in financial management and retirement scheme

  • Kevin Chi-Keung Li
  • Tommy Man-Hung Wong

Abstract

In our previous research on permanent portfolio
(PP), we have demonstrated that the permanent portfolio
significantly outperforms an all-stocks portfolio based on
the Hong Kong Hang Seng Index, and it makes a good
portfolio for investors who want to keep investing simple
and non-labor intensive while earning a satisfactory and
stable return. In this paper, we tried to investigate
whether the PP can be improved by replacing the cash
component with another component, which has a
phenomenal long-term growth history – REITS, using
MSCI World REITs Index. The results are very
encouraging, with the portfolio returns significantly
improved without sacrificing any stability.
We also compared the performance of the PP, both the
original version and this enhanced version, with the
average performance of the Mandatory Provident Fund
(MPF) schemes in Hong Kong. The MPF schemes are
regulated retirement schemes in Hong Kong that comes
into existence since December 2000. The outcome was that
both the original PP and enhanced PP using lump sum or
dollar cost averaging (DCA) perform better than the
average MPF schemes. We believe that this simple assetallocation
approach to investment can be broadly and
usefully applied to any investment management of a longterm
nature, and particularly of relevance to investment
for retirement purposes.


“The work described in this paper was supported by the
Institute of International Business and Governance, which had
been established and supported by a grant from the Research
Grants of the Hong Kong Special Administrative Region,
China (UGC/IDS/16/15).”

Published
2018-06-05
How to Cite
CHI-KEUNG LI, Kevin; MAN-HUNG WONG, Tommy. The application of permanent portfolio in financial management and retirement scheme. GSTF Journal on Business Review (GBR), [S.l.], v. 5, n. 3, june 2018. ISSN 2251-2888. Available at: <http://dl6.globalstf.org/index.php/gbr/article/view/1730>. Date accessed: 17 dec. 2018.