About a year ago, I spent a good bit of time analyzing the Permanent Portfolio concept created by Harry Browne in the 1980's, both in a post on my own site and also a guest post for Flexo on Consumerism Commentary.
If you're not familiar with the Permanent Portfolio that Harry Browne popularized in his book, Fail Safe Investing, it is a passively managed asset allocation strategy constructed by components in such a way that at least one component is favored by any of the possible broad economic movements. The Portfolio components are as follows: 25% in stocks, which do well in times of prosperity, 25% in gold, which does well in times of inflation, 25% in bonds, which increase in price during times of deflation, 25% in cash, which does well in times of tight money/recession when interest rates rise.
For the most part, I have covered 3 out of 4 of the Permanent Portfolio components pretty completely on my site. However, the one remaining (and fairly fascinating) component that I haven't really dissected all that much is the gold / precious metals component.
As such, the purpose of today's post will be to examine the in's and out's of how to decide if adding a gold / precious metals mutual fund to your asset allocation is appropriate.
Side note: Today is Great Friday (Good Friday) on the Orthodox Church calendar so I'm going to be very busy for the next few days. Bear with me if I don't respond to posts for a while.
Trumpism is not a philosophy or a movement. It's a cult.
So in other words, you should incorporate gold in your asset allocation, but not if you are too immature to stick to your allocation for the long term?
Luckily that could never happen with other assets, like stocks!
For example, in 2008, precious metals lost 56% of its value, whereas the total US stock market only decreased 37%. Now that's what I call one volatile asset class, eh?!
I call B.S.!
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes
Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet. I should not be considered as legally permitted to render such advice!
It sounds like his main reason for not buying gold is because the so-called experts say not to (or only up to 3%). All other evidence is rationalized away.
How is 3% of any asset going to have any significant impact on your portfolio?
* Where did 3% come from vs 5% for a limited allocation? And nothing about the change in volatility, just absolute performance
* While they is a point about tracking error and timing, moving from 70/30 to 65/25/5 would cause one to bail when the 5% is doing badly?
* Seems a bit unfair to have just a comparison scenario that excludes the last decade (bad for stocks, good for gold) To be equitable, give a third performance example excluding the 90s (good for stock, bad for gold)
But hey, did bring it up (any press...), and how many folks reading it will think that they are above average And would stay the course?
