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):
- Public Bank Berhad
- Malayan Banking BHD
- CIMB Group Holdings BHD
- Sime Darby Berhad
- Axiata Group Berhad
- Tenaga Nasional BHD
- Genting BHD
- Petronas Chemicals Group BHD
- IOI Corporation BHD
- DIGI.com BHD
- Petronas Gas BHD
- Maxis BHD
- Telekom Malaysia BHD
- AMMB Holdings BHD
- Kuala Lumpur Kepong BHD
- Genting Malaysia BHD
- YTL Corporation Berhad
- Hong Leong Bank Berhad
- Felda Global Ventures
- UMW Holdings BHD
- British American Tobacco BHD
- PPB Group Berhad
- IHH Healthcare BHD
- Petronas Dagangan BHD
- RHB Capital BHD
- Astro Malaysia Holdings BHD
- UEM Sunrise BHD
- SapuraKencana Petroleum
- MISC
- 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!
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.