Correction, in a portfolio with 30% stocks a 50% decline in stocks is a 15% decline in the portfolio (likely much less because your bonds and/or gold would likely be appreciating at the same time). This isn't a debate of one asset vs another, it's a debate between a diversified portfolio or a 100% all in bet on cash.Jeffreyalan wrote: ↑Mon Apr 01, 2019 11:16 am The case for 100% cash is a lot stronger than 100% Gold or Stocks IMO. 100% stocks could easily lose you 50% in a year and make take many, many years to recover. Cash will not ever do that to you unless you are talking about runaway inflation. Correct me if I am wrong on that.
When I say I think about going to cash, I don't mean for a certain period of time and then trying to jump back in. I am thinking of going to cash permanently. I often think instead of putting my money at risk (even if it is a small risk) squeezing a 4-6% return out of the Desert Portfolio, why don't I just keep my money in 2.5% bank accounts and Treasury bills and focus on trying to save more, cutting my cost of living, having no debt, buying things in bulk, taking advantage of special bank offers of promotional rates, working an extra hour of overtime each week? Those would be certain returns instead of hopeful returns.
Cash over the long term keeps up with inflation and nothing more. While it appears like you are making money, you aren't. Those 2.5% rates are also likely to go bye bye as odds are looking like a 25-50 bp rate cut in the next year or two (possibly more). That "4-6%" return you quoted for desert portfolio is also real after inflation expected return, comparing a real return to a nominal return is apples to oranges. The 4-6% real expected return for a desert portfolio sure beats the hell out of the 0% real expected return of cash to me.
The Fed has also stated they are going to start moving their balance sheet over to the short end of the curve, placing more downward pressures on short term treasuries, even if the fed funds rate stays the same. Cash has lost money to inflation every year for the last decade other than 2018. Negative interest rates are also a possibility that the Fed is on record as considering in the next turn down. So holding 100% cash could actually cost you money in nominal terms at some point. You're better off just staying pat.