Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is 35/55/3/3/4 the Ultimate Investment Portfolio Today?

Portfolio / Investing 2019 Apr 04, 2019 - 05:26 PM GMT

By: Jared_Dillian

Portfolio

Lot of strong feelings on gold.

Some people think it has no utility. Other people have pretty reasoned arguments about how gold maintains purchasing power across the centuries.

It was in a bubble eight years ago that sucked a lot of people in. There were some sketchball commercials for gold on Fox News. The people who missed the bubble spent the next eight years mocking the people who got sucked into it.

(I got sucked into it.)


Also, a lot of people think gold is obsolete in a digital world, with bitcoin and all. But crypto (as much as I am warming up to it) is an unreliable store of value, at least for now.

Now, most people are kind of neutral on gold and are off arguing about other things. I am thankful we are done yelling about gold. Because now we can talk about the real reason you should own gold.

The Real Reason

I have been talking a lot about portfolio construction lately.

Most idiots have an 80/20 portfolio (80% stocks/20% bonds) or a 90/10 portfolio or even a portfolio that is 100% stocks.

Recently, I’ve made the case for a portfolio that is 35% stocks and 65% bonds. Over the last 20 years, that portfolio has been giving you a little less return, with a lot less risk.

In hedge fund terms, you would say that it has a better “Sharpe Ratio.”

I have been also experimenting with variations on the 35/65 portfolio, with some incredible results. For example, a 35/55/10 portfolio (35% stocks, 55% bonds, 10% commodities) has even better risk/return characteristics. And if your view is that commodities are underpriced, terrific.

But wait, there’s more.

How about a 35/55/3/3/4 portfolio? That’s 35% stocks, 55% bonds, 3% broad commodities, 3% gold, and 4% REITs. If you think about what this is, it’s a stock/bond portfolio with a really good inflation hedge.

Want to know the risk/return of that portfolio? It gives you almost the return of the 80/20 portfolio with half the risk.

And it’s mostly because of the gold. Add gold to any portfolio (including gold mining equities) and the risk characteristics improve.

In the old days, the miners used to be negatively correlated with the broad stock market. That isn’t quite true anymore, but the correlation is very low.

The 80/20 portfolio is ridiculous with this amount of volatility. The main reason financial advisors put people in this portfolio is because of FOMO.

They are afraid that if they put a client in a more conservative portfolio, that client will fire them in two years after watching all their friends make more money.

You actually can have it both ways.

You can have a portfolio that returns a lot, with a lot less risk. You just have to get creative! And you have to be willing to own some things that you wouldn’t ordinarily own.

The Real Reason 2

Of course, there are other reasons to own gold.

There’s been a big shift in the Fed’s thinking in the last couple of months. Big… as in, really big… as in, dramatic. At least partially because of the political pressure.

There is a lot to say here, but the TLDR is that the Fed doesn’t seem to care a great deal about high inflation.

Who can blame them? It is a bit like fighting the last war. Our last bout with high inflation was almost 50 years ago. And it seems like no matter what we do, we can’t cause inflation if we try.

Editor’s note: we will keep trying, and eventually we will.

President Trump just nominated a guy to the Board of Governors who, if confirmed, would be the most dovish person at the Fed.

Interestingly, he used to be a hard-money guy and had a change of heart. Or an ideological transformation. Or maybe his metamorphosis was born of political expediency. Whatever.

There is yet another seat to be filled, and there is zero chance that a hawk will be appointed. There won’t be a hawk on the Fed for years.

Off in the peanut gallery, you have this whole discussion on Modern Monetary Theory and how deficits don’t matter. Gold likes those kinds of discussions. Plus, central banks are buying it for the first time in a while.

There are also not a lot of gold discoveries out there, and the existing ones are in unhappy places that are hard to get to.

The fundamentals of gold are lining up for the first time in a while. I am not the first to observe this. I think people are being very conservative about their gold forecasts, after being burned pretty badly the last time.

I’m bullish, I own it. I think other people should own it, maybe with a bit of risk management this time around.

Free Report: 5 Key ETF Trading Strategies Every Investor Should Know About

From Jared Dillian, former head of ETF trading at Lehman Brothers and renowned contrarian analyst, comes this exclusive special report. If you’re invested in ETFs, or thinking about taking the plunge into the investment vehicle everyone’s talking about, then this report is a clever—and necessary—first step. Get it now.

By Jared Dillian

© 2019 Copyright Jared Dillian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in