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In this paper, we would investigate whether the performance of the permanent portfolio can be further improved by varying the frequency of rebalancing or by doing rebalancing on a non-month end day. The performance of the portfolio rebalanced on an annual basis was compared with rebalancing on a quarterly basis. The result was negative and the more frequent rebalancing would adversely affect the performance. Another factor we investigate was whether there would be advantage for rebalancing on the in the middle of the month, comparing with rebalancing at the end of the month. The result was again negative.

INTRODUCTION

In our previous paper: A Portfolio for All Seasons: Does it make sense?(Wong & Li, 2015) We investigated whether the so-called permanent portfolio (Rowland & Lawson, 2012); with its components consist of cash, long-term bonds, gold, and equity in equal proportions; can live up to its name, and provide superior risk-adjusted return under all market situations. The result was clearly affirmative with the permanent portfolio producing a superior risk-adjusted return.

In this paper, we would try to investigate whether the performance of the permanent portfolio can be improved by a number of measures. These measures are: (i) varying the frequency of the rebalancing - instead of doing that annually, we would investigate whether rebalancing on a more frequent basis (quarterly and monthly) could improve the performance, and (ii) varying the day of rebalancing - our original portfolio was based on rebalancing at the end of each calendar year, we would like to see whether rebalancing on the 15th of the month would affect the performance to a significant degree. The effects of these two measures are studied separately.

We would also lengthen the period of study from 15 years in our previous paper to 30 years to make the result more representative over a longer period of time.

The reasons for doing rebalancing are the different rebalancing strategies outperform the buy and hold investment strategies according to the US benchmark data (Dichtl, Drobetz, & Wambach, 2014). The permanent portfolio using rebalancing strategy will provide a superior risk-adjusted return was confirmed by our paper and some other authors(Anderson, Marshall, & Miao, 2014).

In the following discussion, we would demonstrate the effects of changing the frequency of...

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