The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: neonlight on August 04, 2017, 03:59:46 AM
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
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Only if you want to go full-on scrooge mcduck and pour all the gold in a vault and go swimming in it!
Its not "common wisdom" here, gold is generally a terrible long-term investment. Its had two periods in the last 40 years where it beat the market, once when we went off the gold standard in the early 70s until the early 80s, then it barely beat the market between the peak of the tech boom and 2012, which included two historic market crashes and gold ending 40% higher than where it is today after a quick pull-back.
If you bought gold five years ago, you're down 40% vs. the market being up over 50%.
The biggest challenge with gold is it doesn't produce income - It has the same investment thesis and buying undeveloped land: Limited supply, inflation hedge, ect. I think all the arguments people use for gold could also apply to buying certain REITs. You can get the same protection and lower "risk" by buying a near debt-free REIT holding income producing property. It'll plod along and give you 5-6% in dividends a year that go up at the rate of inflation. Like gold, the price of the REIT shares can be volatile depending on real estate value and interest rates, but long term you'll plod along with mid single-digit returns and they pay most of those returns out each year in cash.
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I hear time and again that a prolong bear market is arriving.
People who predict the market are wrong a shocking amount of the time. It's best not to put your faith in fortune tellers.
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
5 Year CD's are paying 2.2% right now.......why the fuck would you even consider buying a speculative asset like gold to "preserve" anything?
PS - This is from someone who owns a healthy amount of gold, but not for that reason at all.
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
Hi neonlight, welcome to the forums here, and excellent question. Generally around here we view trying to time markets by jumping asset classes as extremely un-wise. While it sounds simple enough to expect a market correction, buy gold to preserve wealth, then buy back into the market at a lower price, the reality is that more people lose money trying to do this kind of market timing than people lose by just riding out market corrections and dollar-cost-averaging into a diversified portfolio. Here is a list of hurdles to overcome to beat the market with this kind of move, and some questions to ask yourself.
- The first problem is you have to be correct about calling the top of the market, and if you look back at years of evidence through threads on this forum, you can see loads of people saying "The top is in!" and being completely wrong. These people have lost boatloads of cash if they were putting their money where their mouth was. Are you ok with missing 10, 20 or 30% gains + years of dividends because you were "a little early" with your guess of where the top of the market was?
- The second problem is it will cost you money to switch asset classes, especially if you are talking about buying gold, it generally comes at a high premium that isn't recouped when sold. Are you ok with losing ~5% of your wealth the moment you switch?
The third problem is that while gold is generally not correlated to the stock market, theres no guarantee that it will hold its value during a market downturn. Most of the gains in gold came AFTER the bottom of the market was long gone during the great recession. Are you prepared to buy back into the bottom of the stock market even if gold is also down?
- The fourth and BIGGEST problem is that you have to know when to sell your gold and buy back into the markets. This is where the downfall of most market timers occurs. What if you are expecting a 25% drop, and it only drops 22%, then rockets back up to record highs? Then your stuck with gold, the cost of selling it, and have to buy back into the market at little or no discount. It always sounds easy to buy back in at the bottom, but it is by far the hardest thing in reality to get right. Do you know exactly where the market will bottom out?
So, if all that sounds good, move all your money to gold and see if you can outsmart the market (and keep us updated on how thats going). If that sounds like a lot of stress, risk and guesswork, then do what we generally do around here which is to follow an Investor Policy Statement. Pick an asset allocation for your portfolio that you are comfortable with, as an example 50% US stocks, 20% International stocks, 25% bonds and 5%Gold. You then dollar cost average your money over time into each category keeping the ratio the same NO MATTER WHAT THE MARKETS DO. Over the long term you will be loads richer investing this way.
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Oh, and this is also from someone who owns some gold. I keep 3% of my portfolio in silver, 1% in gold. For me its an asset that i purchase at below market value (i buy and sell coins as a side hustle, and therefore pay no premiums, and actually make a healthy profit on them). I keep some as a tool to rebalance my portfolio as needed and as a way to have an emergency fund that generally keeps up with inflation over long periods. That way, every spare dollar i have can go into my index funds, and i've got some metals i can sell in an emergency.
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2% of my Net Worth (NW) is in physical gold. I use it as my emergency cash.
Since I basically never plan on using it, paying everything out of current cash flow, I wanted something that would have a hope of keeping up with inflation.
As an investment? Pah, bttthh, meh. As speculation, meh, a great way to get poor, fast or slow.
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I use it as my emergency cash.
How exactly? Seriously.
Like a water-heater-goes-out emergency? Or a post-apocalyptic world emergency? Whichever one you are talking about, please explain how gold is going to help.
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I use it as my emergency cash.
How exactly? Seriously.
Like a water-heater-goes-out emergency? Or a post-apocalyptic world emergency? Whichever one you are talking about, please explain how gold is going to help.
Usually, I hear "breakdown in societal order" as the scenario. Interestingly, you can put this hypothesis to the test in real time. Go to Somalia, Afghanistan, El Salvador, Yemen, or Venezuela and see if you can transact your gold bars / coins for living essentials and a ride out of that country. My bet is you end up dead.
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I hear time and again that a prolong bear market is arriving.
My crystal ball is foggy, can I borrow yours?
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Only if you want to go full-on scrooge mcduck and pour all the gold in a vault and go swimming in it!
Still prefer sandy beach and blue ocean ;)
Its not "common wisdom" here, gold is generally a terrible long-term investment. Its had two periods in the last 40 years where it beat the market, once when we went off the gold standard in the early 70s until the early 80s, then it barely beat the market between the peak of the tech boom and 2012, which included two historic market crashes and gold ending 40% higher than where it is today after a quick pull-back.
If you bought gold five years ago, you're down 40% vs. the market being up over 50%.
Exactly, both 3 and 5 year period gold investment lost value, while the market went up and up.
The biggest challenge with gold is it doesn't produce income - It has the same investment thesis and buying undeveloped land: Limited supply, inflation hedge, ect. I think all the arguments people use for gold could also apply to buying certain REITs. You can get the same protection and lower "risk" by buying a near debt-free REIT holding income producing property. It'll plod along and give you 5-6% in dividends a year that go up at the rate of inflation. Like gold, the price of the REIT shares can be volatile depending on real estate value and interest rates, but long term you'll plod along with mid single-digit returns and they pay most of those returns out each year in cash.
REIT is something that should def look into. Since I am in based in East Asia my plan is to look at the REITs in this region.
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I use it as my emergency cash.
How exactly? Seriously.
Like a water-heater-goes-out emergency? Or a post-apocalyptic world emergency? Whichever one you are talking about, please explain how gold is going to help.
Usually, I hear "breakdown in societal order" as the scenario. Interestingly, you can put this hypothesis to the test in real time. Go to Somalia, Afghanistan, El Salvador, Yemen, or Venezuela and see if you can transact your gold bars / coins for living essentials and a ride out of that country. My bet is you end up dead.
I mean my x months expenses type thing. Really nothing more than that.
The most Apocolypic scenario is identity theft, where my normal reserves are temporarily unaccessable.
It is there, I've checked off emergency fund, but since I'll hopefully never need it, gold is very slightly better than paper cash.
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Here is the famous "Gold cube" essay from Warren Buffett:
http://fortune.com/2012/02/09/warren-buffett-why-stocks-beat-gold-and-bonds/
Discussion of gold starts about half way down -- but the whole thing is worth a read.
Thanks for the share, will read it :)
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
5 Year CD's are paying 2.2% right now.......why the fuck would you even consider buying a speculative asset like gold to "preserve" anything?
PS - This is from someone who owns a healthy amount of gold, but not for that reason at all.
1 year CD is < 1% in Singapore which is where I keep most of my USD savings. But I get your point :)
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Hi neonlight, welcome to the forums here, and excellent question.
Thanks! Your reply is very informative :)
Generally around here we view trying to time markets by jumping asset classes as extremely un-wise. While it sounds simple enough to expect a market correction, buy gold to preserve wealth, then buy back into the market at a lower price, the reality is that more people lose money trying to do this kind of market timing than people lose by just riding out market corrections and dollar-cost-averaging into a diversified portfolio. Here is a list of hurdles to overcome to beat the market with this kind of move, and some questions to ask yourself.
- The first problem is you have to be correct about calling the top of the market, and if you look back at years of evidence through threads on this forum, you can see loads of people saying "The top is in!" and being completely wrong. These people have lost boatloads of cash if they were putting their money where their mouth was. Are you ok with missing 10, 20 or 30% gains + years of dividends because you were "a little early" with your guess of where the top of the market was?
- The second problem is it will cost you money to switch asset classes, especially if you are talking about buying gold, it generally comes at a high premium that isn't recouped when sold. Are you ok with losing ~5% of your wealth the moment you switch?
Interesting. I haven't purchased gold before so am not sure if they come in the form of funds-ish, bond-ish or just purely gold bars. If it's just gold bar the last time I checked you have to pay for all sorts of "collateral fees" eg: vault, and transfer fees if you want to hold the gold itself etc.
The third problem is that while gold is generally not correlated to the stock market, theres no guarantee that it will hold its value during a market downturn. Most of the gains in gold came AFTER the bottom of the market was long gone during the great recession. Are you prepared to buy back into the bottom of the stock market even if gold is also down?
- The fourth and BIGGEST problem is that you have to know when to sell your gold and buy back into the markets. This is where the downfall of most market timers occurs. What if you are expecting a 25% drop, and it only drops 22%, then rockets back up to record highs? Then your stuck with gold, the cost of selling it, and have to buy back into the market at little or no discount. It always sounds easy to buy back in at the bottom, but it is by far the hardest thing in reality to get right. Do you know exactly where the market will bottom out?
So, if all that sounds good, move all your money to gold and see if you can outsmart the market (and keep us updated on how thats going). If that sounds like a lot of stress, risk and guesswork, then do what we generally do around here which is to follow an Investor Policy Statement. Pick an asset allocation for your portfolio that you are comfortable with, as an example 50% US stocks, 20% International stocks, 25% bonds and 5%Gold. You then dollar cost average your money over time into each category keeping the ratio the same NO MATTER WHAT THE MARKETS DO. Over the long term you will be loads richer investing this way.
Currently my stock portfolio is only 5%, about half in US blue chips and another half in Asia.
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I was interested in Gold and found the replies and comments interesting.
https://forum.mrmoneymustache.com/investor-alley/is-gold-anti-mustachian/
Share your thoughts!
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Here's how you can earn income off of gold:
Today's approx GLD price: 119.50
Price you could get selling a 119.50 strike price put option that expires Sept. 1: 1.22
That's a yield of about 1% in less than a month.
Repeat monthly.
If assigned to buy the shares, sell covered calls until assigned to sell the shares. Calls also sell for about 1%/month.
Repeat and rinse.
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No gold here, but I do have a precious metals and mining fund with Vanguard that correlates somewhat with gold. When I first purchased it quite a few years back, it was my best performer, but then it dropped and hasn't done much since while everything else has gone up significantly. The metals/mining fund also has a higher expense ratio than pretty much everything else.
Fortunately, that's only about 1% of my non-retirement and retirement stache combined.
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Yes you should have some gold. Go read portfolio charts golden butterfly information. It can be used in a balanced portfolio to lower overall volatility. If you have no emotion and can handle 50% of your fresh investment disappearing, then you probably are better off with no gold. But if you are like me, you want the lowest possible volatility with the highest gain, gold makes sense based on back testing. Back testing does not always predict the future, but it is better then guessing and listening to the news media trying to scare you to death to keep you watching and spending more time looking at their commercials to make them more profit. You will get some hostile responses here (and everywhere) on gold, you need to filter the super bias ones that are not being objective, otherwise you will go mad.
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Thing is, gold doesn't lower portfolio volatility very much. It's a myth.
Most people don't know that the correlation between the S&P500 and GLD is about the same as the S&P and the Russell 2000!
https://www.etfscreen.com/correlation.php
If you want lower volatility, picking low-beta stocks or using options are your best bets.
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I use it as my emergency cash.
How exactly? Seriously.
Like a water-heater-goes-out emergency? Or a post-apocalyptic world emergency? Whichever one you are talking about, please explain how gold is going to help.
I know you were asking the other poster, but I do the same, and NOT for ethier of those kinds of emergencies. Post-apocalyptic situations having gold or not would be the least of anyone's problems and I have enough credit/income to handle a hot water heater or even a vehicle replacement sort of "emergency". I would use it more for a real emergency like a sudden $20k medical bill, family crisis, or some kind of crisis where banks or electronic assets were closed for an extended period. And yes, there's always a guy ready to hand you local currency for gold in any town in the world, and under any economic circumstances, I know because I'm one of those guys. That said I currently keep it to just 4% of my portfolio and will likely decrease that further as my assets grow.
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I think the main issue here is not whether to have good or not (though I am in the anti camp) but why you think you need to do some defensive moves in anticipation of the inevitable market ups and downs. The conventional wisdom around these parts is that you figure out an asset allocation that fits your goals and risk tolerance and you stick with it, thick and thin. Notice that what the market is doing or what you feel it will do has no consideration in choosing your AA. There is a ton of research showing that people who try to time the market underperform buy-and-hold investors. Figure out what will make you comfortable and how much volatility you can live with. Hell, trick yourself by purposefully not looking at that markets or your balances for years on end if that is what it takes. But don't fall I to the trap of thinking you can predict ups and downs or that a dip in the market is a compelling reason to adjust your investments.
Remember: you only lose if you sell in a downturn. Everyone here with income sees downturns as buying opportunities to take advantage of, not a reason to panic.
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Hi neonlight, welcome to the forums here, and excellent question.
Thanks! Your reply is very informative :)
Generally around here we view trying to time markets by jumping asset classes as extremely un-wise. While it sounds simple enough to expect a market correction, buy gold to preserve wealth, then buy back into the market at a lower price, the reality is that more people lose money trying to do this kind of market timing than people lose by just riding out market corrections and dollar-cost-averaging into a diversified portfolio. Here is a list of hurdles to overcome to beat the market with this kind of move, and some questions to ask yourself.
- The first problem is you have to be correct about calling the top of the market, and if you look back at years of evidence through threads on this forum, you can see loads of people saying "The top is in!" and being completely wrong. These people have lost boatloads of cash if they were putting their money where their mouth was. Are you ok with missing 10, 20 or 30% gains + years of dividends because you were "a little early" with your guess of where the top of the market was?
- The second problem is it will cost you money to switch asset classes, especially if you are talking about buying gold, it generally comes at a high premium that isn't recouped when sold. Are you ok with losing ~5% of your wealth the moment you switch?
Interesting. I haven't purchased gold before so am not sure if they come in the form of funds-ish, bond-ish or just purely gold bars. If it's just gold bar the last time I checked you have to pay for all sorts of "collateral fees" eg: vault, and transfer fees if you want to hold the gold itself etc.
The third problem is that while gold is generally not correlated to the stock market, theres no guarantee that it will hold its value during a market downturn. Most of the gains in gold came AFTER the bottom of the market was long gone during the great recession. Are you prepared to buy back into the bottom of the stock market even if gold is also down?
- The fourth and BIGGEST problem is that you have to know when to sell your gold and buy back into the markets. This is where the downfall of most market timers occurs. What if you are expecting a 25% drop, and it only drops 22%, then rockets back up to record highs? Then your stuck with gold, the cost of selling it, and have to buy back into the market at little or no discount. It always sounds easy to buy back in at the bottom, but it is by far the hardest thing in reality to get right. Do you know exactly where the market will bottom out?
So, if all that sounds good, move all your money to gold and see if you can outsmart the market (and keep us updated on how thats going). If that sounds like a lot of stress, risk and guesswork, then do what we generally do around here which is to follow an Investor Policy Statement. Pick an asset allocation for your portfolio that you are comfortable with, as an example 50% US stocks, 20% International stocks, 25% bonds and 5%Gold. You then dollar cost average your money over time into each category keeping the ratio the same NO MATTER WHAT THE MARKETS DO. Over the long term you will be loads richer investing this way.
Currently my stock portfolio is only 5%, about half in US blue chips and another half in Asia.
Out of curiosity, what's the other 95% of your portfolio? Around here US equities in the form of low-fee S&P500 or Total US Market funds usually make up the larger percentages of people portfolios.
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Here is the famous "Gold cube" essay from Warren Buffett:
http://fortune.com/2012/02/09/warren-buffett-why-stocks-beat-gold-and-bonds/
Discussion of gold starts about half way down -- but the whole thing is worth a read.
Good infobites
Today annual production of gold is 16 billion USD worth, if gold were to sustain it's value this 16 billion will have to be absord by someone annually. The current value of all golds combined is almost 10 trillion, half of US annual GDP.
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I was interested in Gold and found the replies and comments interesting.
https://forum.mrmoneymustache.com/investor-alley/is-gold-anti-mustachian/
Share your thoughts!
Thanks @tomsang! Checking out the thread now
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Hi neonlight, welcome to the forums here, and excellent question.
Thanks! Your reply is very informative :)
Generally around here we view trying to time markets by jumping asset classes as extremely un-wise. While it sounds simple enough to expect a market correction, buy gold to preserve wealth, then buy back into the market at a lower price, the reality is that more people lose money trying to do this kind of market timing than people lose by just riding out market corrections and dollar-cost-averaging into a diversified portfolio. Here is a list of hurdles to overcome to beat the market with this kind of move, and some questions to ask yourself.
- The first problem is you have to be correct about calling the top of the market, and if you look back at years of evidence through threads on this forum, you can see loads of people saying "The top is in!" and being completely wrong. These people have lost boatloads of cash if they were putting their money where their mouth was. Are you ok with missing 10, 20 or 30% gains + years of dividends because you were "a little early" with your guess of where the top of the market was?
- The second problem is it will cost you money to switch asset classes, especially if you are talking about buying gold, it generally comes at a high premium that isn't recouped when sold. Are you ok with losing ~5% of your wealth the moment you switch?
Interesting. I haven't purchased gold before so am not sure if they come in the form of funds-ish, bond-ish or just purely gold bars. If it's just gold bar the last time I checked you have to pay for all sorts of "collateral fees" eg: vault, and transfer fees if you want to hold the gold itself etc.
The third problem is that while gold is generally not correlated to the stock market, theres no guarantee that it will hold its value during a market downturn. Most of the gains in gold came AFTER the bottom of the market was long gone during the great recession. Are you prepared to buy back into the bottom of the stock market even if gold is also down?
- The fourth and BIGGEST problem is that you have to know when to sell your gold and buy back into the markets. This is where the downfall of most market timers occurs. What if you are expecting a 25% drop, and it only drops 22%, then rockets back up to record highs? Then your stuck with gold, the cost of selling it, and have to buy back into the market at little or no discount. It always sounds easy to buy back in at the bottom, but it is by far the hardest thing in reality to get right. Do you know exactly where the market will bottom out?
So, if all that sounds good, move all your money to gold and see if you can outsmart the market (and keep us updated on how thats going). If that sounds like a lot of stress, risk and guesswork, then do what we generally do around here which is to follow an Investor Policy Statement. Pick an asset allocation for your portfolio that you are comfortable with, as an example 50% US stocks, 20% International stocks, 25% bonds and 5%Gold. You then dollar cost average your money over time into each category keeping the ratio the same NO MATTER WHAT THE MARKETS DO. Over the long term you will be loads richer investing this way.
Currently my stock portfolio is only 5%, about half in US blue chips and another half in Asia.
Out of curiosity, what's the other 95% of your portfolio? Around here US equities in the form of low-fee S&P500 or Total US Market funds usually make up the larger percentages of people portfolios.
Sure, and you are dead right. Most people have S&P500 or some major blue chips. Rightly so since it's proven to be the most resilient and espoused by Wareen buffet himself.
I have ~25% in crypto, ~25% in property, about ~25% in cash most of which are not in TD yet and this is where I plan to shift to other assets. I am in East Asia so my properties and cash are here.
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The price of gold is high relative to its average historical real price over the past 40 years. It is also high compared to the cost to mine more. Neither of these is necessarily predictive, but now is not an unusually good time to buy, price wise.
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Hi neonlight, welcome to the forums here, and excellent question.
Thanks! Your reply is very informative :)
Generally around here we view trying to time markets by jumping asset classes as extremely un-wise. While it sounds simple enough to expect a market correction, buy gold to preserve wealth, then buy back into the market at a lower price, the reality is that more people lose money trying to do this kind of market timing than people lose by just riding out market corrections and dollar-cost-averaging into a diversified portfolio. Here is a list of hurdles to overcome to beat the market with this kind of move, and some questions to ask yourself.
- The first problem is you have to be correct about calling the top of the market, and if you look back at years of evidence through threads on this forum, you can see loads of people saying "The top is in!" and being completely wrong. These people have lost boatloads of cash if they were putting their money where their mouth was. Are you ok with missing 10, 20 or 30% gains + years of dividends because you were "a little early" with your guess of where the top of the market was?
- The second problem is it will cost you money to switch asset classes, especially if you are talking about buying gold, it generally comes at a high premium that isn't recouped when sold. Are you ok with losing ~5% of your wealth the moment you switch?
Interesting. I haven't purchased gold before so am not sure if they come in the form of funds-ish, bond-ish or just purely gold bars. If it's just gold bar the last time I checked you have to pay for all sorts of "collateral fees" eg: vault, and transfer fees if you want to hold the gold itself etc.
The third problem is that while gold is generally not correlated to the stock market, theres no guarantee that it will hold its value during a market downturn. Most of the gains in gold came AFTER the bottom of the market was long gone during the great recession. Are you prepared to buy back into the bottom of the stock market even if gold is also down?
- The fourth and BIGGEST problem is that you have to know when to sell your gold and buy back into the markets. This is where the downfall of most market timers occurs. What if you are expecting a 25% drop, and it only drops 22%, then rockets back up to record highs? Then your stuck with gold, the cost of selling it, and have to buy back into the market at little or no discount. It always sounds easy to buy back in at the bottom, but it is by far the hardest thing in reality to get right. Do you know exactly where the market will bottom out?
So, if all that sounds good, move all your money to gold and see if you can outsmart the market (and keep us updated on how thats going). If that sounds like a lot of stress, risk and guesswork, then do what we generally do around here which is to follow an Investor Policy Statement. Pick an asset allocation for your portfolio that you are comfortable with, as an example 50% US stocks, 20% International stocks, 25% bonds and 5%Gold. You then dollar cost average your money over time into each category keeping the ratio the same NO MATTER WHAT THE MARKETS DO. Over the long term you will be loads richer investing this way.
Currently my stock portfolio is only 5%, about half in US blue chips and another half in Asia.
Out of curiosity, what's the other 95% of your portfolio? Around here US equities in the form of low-fee S&P500 or Total US Market funds usually make up the larger percentages of people portfolios.
Sure, and you are dead right. Most people have S&P500 or some major blue chips. Rightly so since it's proven to be the most resilient and espoused by Wareen buffet himself.
I have ~25% in crypto, ~25% in property, about ~25% in cash most of which are not in TD yet and this is where I plan to shift to other assets. I am in East Asia so my properties and cash are here.
Cool, I would definitely consider holding stocks with that 25% cash you plan on putting to work. And I'd recommend setting up an asset allocation listing a firm percentage of each category you plan to buy and hold (and stick to when markets go up, down and sideways). Also, congrats, looks like your crypto currencies might have just had a big bump, bitcoins up like $350 in the last couple hours.
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Cool, I would definitely consider holding stocks with that 25% cash you plan on putting to work. And I'd recommend setting up an asset allocation listing a firm percentage of each category you plan to buy and hold (and stick to when markets go up, down and sideways). Also, congrats, looks like your crypto currencies might have just had a big bump, bitcoins up like $350 in the last couple hours.
Thanks! BTC hit a record high today :) It finally crossed the $3000 line today. For those who sold off BCC earlier this week and kept BTC, they have made a killing.
That's my plans too, maybe changing the weightage from 5% to 20% over time for stocks.
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
5 Year CD's are paying 2.2% right now.......why the fuck would you even consider buying a speculative asset like gold to "preserve" anything?
PS - This is from someone who owns a healthy amount of gold, but not for that reason at all.
1 year CD is < 1% in Singapore which is where I keep most of my USD savings. But I get your point :)
Synchrony Bank is paying 2.35% for Jumbo (25k minimum) 5 year CDs right now. Smaller CDs are 2.30%
With global, internet based banking there is rarely a good reason to buy USD denominated CDs at significantly lower rates.
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Yes you should have some gold. Go read portfolio charts golden butterfly information. It can be used in a balanced portfolio to lower overall volatility. If you have no emotion and can handle 50% of your fresh investment disappearing, then you probably are better off with no gold. But if you are like me, you want the lowest possible volatility with the highest gain, gold makes sense based on back testing. Back testing does not always predict the future, but it is better then guessing and listening to the news media trying to scare you to death to keep you watching and spending more time looking at their commercials to make them more profit. You will get some hostile responses here (and everywhere) on gold, you need to filter the super bias ones that are not being objective, otherwise you will go mad.
Eliminate the year or two of massive price rebound from an artificially low level after the US went off the gold standard and that all falls apart.
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Yes you should have some gold. Go read portfolio charts golden butterfly information. It can be used in a balanced portfolio to lower overall volatility. If you have no emotion and can handle 50% of your fresh investment disappearing, then you probably are better off with no gold. But if you are like me, you want the lowest possible volatility with the highest gain, gold makes sense based on back testing. Back testing does not always predict the future, but it is better then guessing and listening to the news media trying to scare you to death to keep you watching and spending more time looking at their commercials to make them more profit. You will get some hostile responses here (and everywhere) on gold, you need to filter the super bias ones that are not being objective, otherwise you will go mad.
Eliminate the year or two of massive price rebound from an artificially low level after the US went off the gold standard and that all falls apart.
The problem with portfolio charts is that people using it don't understand what they are doing. All of those portfolios that use gold to get great returns compared to volatility fail a couple of key points. The first point is you could probably never have actually been able to hold that portfolio. Buying gold wasn't as simple as what it is now. Then you have to realise that there has been some great performances from gold but those performances were unique.
The way to develop a portfolio is to think through what has worked in the past and think why it worked. Lots of people think through what has worked in the past but fail to think through why it worked. If you are trying to get returns that have been historically great you've probably already missed the boat.
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The thing about gold is that it's always irrationally high. You can make money off it by buying when it's only stupidly high, and selling when it's batshit crazy high, but -- ugh. Leaves a bad taste in my mouth.
In any case, the time to buy anything is exactly NOT when everyone is saying it's time to buy it :-)
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Thing is, gold doesn't lower portfolio volatility very much. It's a myth.
Most people don't know that the correlation between the S&P500 and GLD is about the same as the S&P and the Russell 2000!
https://www.etfscreen.com/correlation.php
If you want lower volatility, picking low-beta stocks or using options are your best bets.
Huh?
The chart you link to show GLD has -0.19 correlation to SPY, and IWM has 0.83 correlation to SPY?
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Seems fine to me to have some % of ones allocation to "real assets". Gold is just one thing you can put in that bucket.
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
5 Year CD's are paying 2.2% right now.......why the fuck would you even consider buying a speculative asset like gold to "preserve" anything?
PS - This is from someone who owns a healthy amount of gold, but not for that reason at all.
1 year CD is < 1% in Singapore which is where I keep most of my USD savings. But I get your point :)
Synchrony Bank is paying 2.35% for Jumbo (25k minimum) 5 year CDs right now. Smaller CDs are 2.30%
With global, internet based banking there is rarely a good reason to buy USD denominated CDs at significantly lower rates.
How I wish that's true. As a non US residents am not sure how Synchrony bank would allowed to open a bank account. The closest thing I have to a SSN is an ITIN.
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I would only own gold so that the golden hue could reflect off my eyes and I could stroke it while saying, My precious!"
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Yes you should have some gold. Go read portfolio charts golden butterfly information. It can be used in a balanced portfolio to lower overall volatility. If you have no emotion and can handle 50% of your fresh investment disappearing, then you probably are better off with no gold. But if you are like me, you want the lowest possible volatility with the highest gain, gold makes sense based on back testing. Back testing does not always predict the future, but it is better then guessing and listening to the news media trying to scare you to death to keep you watching and spending more time looking at their commercials to make them more profit. You will get some hostile responses here (and everywhere) on gold, you need to filter the super bias ones that are not being objective, otherwise you will go mad.
Eliminate the year or two of massive price rebound from an artificially low level after the US went off the gold standard and that all falls apart.
No it doesn't. Tyler has already talk about that on his website and you can do that backtest yourself. If you backtest the golden butterfly excluding the 70's, you still get a 5% SW rate with very low volatility, if you backtest the "lost" decade in the 2000 you still are doing well. Go try it and show me a portfolio that has lower volatility with the highest possible gain in both accumulation and withdraw phases. I will gladly switch.
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No gold here, but I do have a precious metals and mining fund with Vanguard that correlates somewhat with gold.
I just bought a couple gold mining stocks directly. Having the entire basket seemed like overkill when the highest weighted components of the fund make up a huge percentage of it. And you can cut out the high expenses.
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Yes you should have some gold. Go read portfolio charts golden butterfly information. It can be used in a balanced portfolio to lower overall volatility. If you have no emotion and can handle 50% of your fresh investment disappearing, then you probably are better off with no gold. But if you are like me, you want the lowest possible volatility with the highest gain, gold makes sense based on back testing. Back testing does not always predict the future, but it is better then guessing and listening to the news media trying to scare you to death to keep you watching and spending more time looking at their commercials to make them more profit. You will get some hostile responses here (and everywhere) on gold, you need to filter the super bias ones that are not being objective, otherwise you will go mad.
Eliminate the year or two of massive price rebound from an artificially low level after the US went off the gold standard and that all falls apart.
No it doesn't. Tyler has already talk about that on his website and you can do that backtest yourself. If you backtest the golden butterfly excluding the 70's, you still get a 5% SW rate with very low volatility, if you backtest the "lost" decade in the 2000 you still are doing well. Go try it and show me a portfolio that has lower volatility with the highest possible gain in both accumulation and withdraw phases. I will gladly switch.
Sounds great but it probably won't happen in the future. You use the past as a guide but you invest today for the future. Gold has a high holding cost and it may not provide even mediocre diversification in the future.
The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
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The goldbugs are being slowly replaced (as they die on their couches watching Ron Paul shill gold companies on Fox) by BitCoin/LiteCoin/Etherium/etcCoin bugs.
-W
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The goldbugs are being slowly replaced (as they die on their couches watching Ron Paul shill gold companies on Fox) by BitCoin/LiteCoin/Etherium/etcCoin bugs.
-W
Ooohh, where can i buy some etcCoin?? Are there any mining platforms for it yet? j/k. But i think you may be on to something, a lot of the traditional money that would have gone into gold may now be going into crypto currencies. What that means for either is anyones guess, so i'll continue to buy both as a small part of my portfolio.
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Half the daytime commercials on the tv in the office:
"Hi, I'm someone the baby boomers might consider mildly famous. I'm here to inform you out of the goodness of my heart that the global economy is teetering on total collapse. The fundamentals of our economy will doom us all though I won't elaborate on it. Here's a couple guys in suits to give you sound bites to be more scared....Now, you can protect yourself from this collapse by buying gold coins, though probably not enough to act as a replacement currency. Why are we willing to take your paper money which we said is about to be worthless in exchange for these gold coins instead of hoarding them for ourselves if things are so bad? We're hoping you never ask us."
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I don't want to come off as a shill, but etcCoin is pretty great!
-Only one can ever be mined. It will never lose value, and is worth literally billions of times as much as *all the bitcoin in existence*!
-Mining it requires hundreds of thousands of dollars of gear (cooling accomplished via liquid helium) and many terawatt-hours of electricity. There's no way to know if you've mined the coin or not, so it's really exciting!
-Cannot be used as a medium of exchange (except on Etsy).
-Technobabble/gibberish terminology is being invented as we speak for it to make you EVEN COOLER than the BitCoin guys!
-W
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Pshaw. EtcCoin is what is known as "Steampunk Kitsch Crypto", so it can only be mined with Babbage engines communicating via 300 baud modem on the AOL HelloKitty chat room.
I'm grooming my mustache (with the same oil I use for the gears and crankshafts!) right now just thinking of how rich I'll be.
Get with the times indeed. The future is over, start living in the past with etcCoin!
-W
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The time to buy gold is when the top is in.
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Pshaw. EtcCoin is what is known as "Steampunk Kitsch Crypto", so it can only be mined with Babbage engines communicating via 300 baud modem on the AOL HelloKitty chat room.
I'm grooming my mustache (with the same oil I use for the gears and crankshafts!) right now just thinking of how rich I'll be.
Your post has wet my appetite for more stories from the world of crypto-steampunk economics.
But surely mustache wax should be used in crankshafts only as a last resort, while a man who oils his mustache with crankshaft grease is either very brave or has nothing left to lose.
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Who said mustache wax on the crankshafts? I'm using gear oil on my mustache!
The liquid helium keeps freezing up the gear oil when I stop the engines to consult my oracle bones (another crucial step if you want to set up a proper mining rig) but nobody said mining was easy.
Where is the constarned triumphantly-thumbing-suspenders emoticon on this crap-lousy website?!?
Perhaps when I am richer than all of you I will allow you to dance for my entertainment while I fire a small black-powder pistol at your feet from my sedan chair. Just like Elon Musk does.
-W
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I don't want to come off as a shill, but etcCoin is pretty great!
-Only one can ever be mined. It will never lose value, and is worth literally billions of times as much as *all the bitcoin in existence*!
-Mining it requires hundreds of thousands of dollars of gear (cooling accomplished via liquid helium) and many terawatt-hours of electricity. There's no way to know if you've mined the coin or not, so it's really exciting!
-Cannot be used as a medium of exchange (except on Etsy).
-Technobabble/gibberish terminology is being invented as we speak for it to make you EVEN COOLER than the BitCoin guys!
-W
etcCoin is so last Thursday. No one uses it anymore. Well, since the fork, that is. Get. with. the. times!
Since it's after the fork, shouldn't that be get with the tines?
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Pshaw. EtcCoin is what is known as "Steampunk Kitsch Crypto", so it can only be mined with Babbage engines communicating via 300 baud modem on the AOL HelloKitty chat room.
I'm grooming my mustache (with the same oil I use for the gears and crankshafts!) right now just thinking of how rich I'll be.
Your post has wet my appetite for more stories from the world of crypto-steampunk economics.
But surely mustache wax should be used in crankshafts only as a last resort, while a man who oils his mustache with crankshaft grease is either very brave or has nothing left to lose.
. . . or is going grey.
:P
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Saw this today:
http://www.businessinsider.com/ray-dalio-risks-are-rising-and-everybody-needs-to-put-5-to-10-of-their-money-in-gold-2017-8
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The time to buy gold is when the top is in.
And the question remains, when is the top?
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The time to buy gold is when the top is in.
And the question remains, when is the top?
At some point during the course of every day I'll be checking the stocks app on my phone or I'll catch a glimpse of business news on the tv and ask myself "is this the top?", then i go back to work and fund all my different investment vehicles and forget about it the rest of the day. I'll rebalance if theres a correction, to do anything else is against my best interests.
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A few years ago, I thought that gold or maybe silver would be good to invest in. We have a wholesaler nearby and I want and got a good education on both. After a few months, I bought $1000 in junk silver coins. Maybe 6 months later, did it again. I have a kid in college now and thought it's about time I dump this stuff. What can I get for it today? About $1500. Great.
Look at gold over the same time period. It was $1600 when I was considering buying. Today, it's about $1290 (ask) which means they'll probably buy from me at $1250 or so. Doesn't seem like much of an investment vs my 3 fund.
Reminds me of an old Steve Martin skit. He bought into coal. He bought 400 tons. And he got a special deal where he only had to store 200 tons at his house.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
This is a risk profile question rather than a perfect asset allocation question. I completely agree with where you are coming from. I have bonds in my portfolio and I don't think it's the right approach to end up with the most amount of money but I do think it's the right approach for me based on wanting to avoid some volatility.
I have an issue with anyone assuming that the golden butterfly or the permanent portfolio with gold as a diversifying asset is going to work anywhere near like it has in the past.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
That's really well said. Thanks for sharing!
I think your story reflects what a lot of us have gone through, and it speaks to the real-world investing experience that is hard to capture in discussions that only focus on numbers. I've come to the same place from my own journey, and am extremely happy with both the financial and emotional benefits of a truly diversified portfolio including gold and other assets.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
Thanks so much, while young I remember how 2000 tech bubble came crashing. My country experienced monetary devaluation and everything went to shit. I didn't feel it at that time cause I was still at school, and the only think I could relate to was the pair of NIKE Air shoes dad bought for me. Post-2000 it was almost 4 times more expensive - I was like shit! So I have to pay 4 times the price to get my Nike shoes ;)
I am in tech, and invest in big tech stocks. So after reading I should probably divest.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
This is a risk profile question rather than a perfect asset allocation question. I completely agree with where you are coming from. I have bonds in my portfolio and I don't think it's the right approach to end up with the most amount of money but I do think it's the right approach for me based on wanting to avoid some volatility.
I have an issue with anyone assuming that the golden butterfly or the permanent portfolio with gold as a diversifying asset is going to work anywhere near like it has in the past.
Just wondering. Why do you think gold will not work in the future like it has in the past?
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
You sound like a classic "buy high, sell low" panic investor.
A buy and hold investor in a diversified mutual fund wouldn't have been "destroyed" in 1999/2000, nor would they have lost half their investment in 2008. They would have just held through the downturn, possibly rebalancing from some bonds.
I went through both of those crashes, invested 100% in stocks. Learned my lesson about stock picking in the first one. Held, and came out basically OK because I had bought Intel, AMD, Cra - not stupid stuff like Pets.com whose only apparent real asset was a sock puppet. 2008 was irrelevant to me, all VTSAX. Buy and hold. Ignore the gyrations, keep collecting ~2%/year in dividends....
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I am in tech, and invest in big tech stocks. So after reading I should probably divest.
Yes. It's extra risky to have both your job and investments riding on the same sector.
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I am in tech, and invest in big tech stocks. So after reading I should probably divest.
Yes. It's extra risky to have both your job and investments riding on the same sector.
Yeah, it didn't end well for those Enron employees that had all of their savings in Enron stock
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Diversify.
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Diversify.
You mean like holding bullion, coins, and gold futures? :P
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
This is a risk profile question rather than a perfect asset allocation question. I completely agree with where you are coming from. I have bonds in my portfolio and I don't think it's the right approach to end up with the most amount of money but I do think it's the right approach for me based on wanting to avoid some volatility.
I have an issue with anyone assuming that the golden butterfly or the permanent portfolio with gold as a diversifying asset is going to work anywhere near like it has in the past.
Just wondering. Why do you think gold will not work in the future like it has in the past?
If you read some of Bernstein's stuff he makes some good points. Firstly you couldn't have utilised gold as per the historical returns that people utilise to justify their asset selection. So the returns that we mimic as part of the PP or GB to make up our current portfolio are not really justified.
Secondly once an asset is deemed as having certain properties you may actually have missed the boat. Now people buy gold thinking it's going to be a great diversifier but what may happen is that it performs differently than what it has in the past.
I do believe in diversifying your assets. I do believe in diversifying within asset classes. I also believe in minimising your costs. Those are really good principles to follow. I have an issue where people think that the GB or PP are going to provide returns similar to what they have in the past. They might because we can't predict the future but I think the risk is really really high that you have just overfitted the data without understanding the context of the historical returns and because you've done that you missed the general principles that I just mentioned and you are going to be disappointed in your portfolio over the longer term.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
You sound like a classic "buy high, sell low" panic investor.
A buy and hold investor in a diversified mutual fund wouldn't have been "destroyed" in 1999/2000, nor would they have lost half their investment in 2008. They would have just held through the downturn, possibly rebalancing from some bonds.
I went through both of those crashes, invested 100% in stocks. Learned my lesson about stock picking in the first one. Held, and came out basically OK because I had bought Intel, AMD, Cra - not stupid stuff like Pets.com whose only apparent real asset was a sock puppet. 2008 was irrelevant to me, all VTSAX. Buy and hold. Ignore the gyrations, keep collecting ~2%/year in dividends....
Personally I don't have the balls to go 100% stocks but I can see the logic behind it. It's going to be the best performing asset because it's companies making profits. Yes it's tied to the economy but over time good companies survive and make money.
If you can hold stocks long term you should do pretty well.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
You sound like a classic "buy high, sell low" panic investor.
A buy and hold investor in a diversified mutual fund wouldn't have been "destroyed" in 1999/2000, nor would they have lost half their investment in 2008. They would have just held through the downturn, possibly rebalancing from some bonds.
I went through both of those crashes, invested 100% in stocks. Learned my lesson about stock picking in the first one. Held, and came out basically OK because I had bought Intel, AMD, Cra - not stupid stuff like Pets.com whose only apparent real asset was a sock puppet. 2008 was irrelevant to me, all VTSAX. Buy and hold. Ignore the gyrations, keep collecting ~2%/year in dividends....
Personally I don't have the balls to go 100% stocks but I can see the logic behind it. It's going to be the best performing asset because it's companies making profits. Yes it's tied to the economy but over time good companies survive and make money.
If you can hold stocks long term you should do pretty well.
No need for everyone to go 100% stocks, 80/20 or 70/30 is fine too, if you can stick to your planned asset allocation. Broad based, low-cost mutual funds or ETFs.
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The golden butterfly might have worked in the past but will a portfolio with a low stock allocation do well in the future ? Personally I doubt it and think you've already missed that boat.
Maybe, maybe not. I wish I could tell the future. What I know is in the 90s I had a high stock allocation, it was destroyed as well as my tech job around the same time (ouch!). Then I stabilize after several years of shit jobs I had to take and I started investing in the market again. 2008 rolls around, HALF everything I have been working so hard for GONE... Panic sets in, self doubt, maybe even some fantasies about jumping off the narrows bridge. I pick myself up after the steamroller of life, and start diversifying into real estate even though everyone said that was stupid and risky (in 2009). I started holding too much real estate (3 properties) and starting getting back into stocks again. Around 2013 I start getting flashbacks of 1999 and 2006ish. I then read many books, blogs, etc like Larry's black swan book, permanent portfolio, and much of Tyler's research. I know I want volatility in parts of the portfolio but not the entire thing at once. These strategies work and hold 30 to 60% in stocks. I rather risk getting a little less gain so I can sleep at night next time I get layed off in my tech job at the same time the market is crashing. I now believe in a heavy dose of uncorrelated asset diversity, and gold is a healthy little portion.
You sound like a classic "buy high, sell low" panic investor.
A buy and hold investor in a diversified mutual fund wouldn't have been "destroyed" in 1999/2000, nor would they have lost half their investment in 2008. They would have just held through the downturn, possibly rebalancing from some bonds.
I went through both of those crashes, invested 100% in stocks. Learned my lesson about stock picking in the first one. Held, and came out basically OK because I had bought Intel, AMD, Cra - not stupid stuff like Pets.com whose only apparent real asset was a sock puppet. 2008 was irrelevant to me, all VTSAX. Buy and hold. Ignore the gyrations, keep collecting ~2%/year in dividends....
Personally I don't have the balls to go 100% stocks but I can see the logic behind it. It's going to be the best performing asset because it's companies making profits. Yes it's tied to the economy but over time good companies survive and make money.
If you can hold stocks long term you should do pretty well.
No need for everyone to go 100% stocks, 80/20 or 70/30 is fine too, if you can stick to your planned asset allocation. Broad based, low-cost mutual funds or ETFs.
I agree. Some bonds are probably fine. Well diversified low cost index funds and simply stocks/bonds as per your risk profile is the safest bet.
I usually add a little sub-point and that is if you have a WR less than 4% then it's okay to put some of that into a commodity index fund or gold but the more I think about that the more I realise it's probably stupid. You probably don't need the extra diversification and it's probably going to be a drag on your overall returns. So if you want to save up more why not just add more to your existing asset allocation or put more into bonds or cash.
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Just curious... When you buy gold, do you get actual gold bars in your basement, or some kind of "certificate for buying gold" BS from a financial institution or reserve?
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Just curious... When you buy gold, do you get actual gold bars in your basement, or some kind of "certificate for buying gold" BS from a financial institution or reserve?
Either. I suspect most advocates here are the "certificate" route.
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Just curious... When you buy gold, do you get actual gold bars in your basement, or some kind of "certificate for buying gold" BS from a financial institution or reserve?
Either. I suspect most advocates here are the "certificate" route.
For the "certificate" route, which are Mustachian's preferred offerings?
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Just curious... When you buy gold, do you get actual gold bars in your basement, or some kind of "certificate for buying gold" BS from a financial institution or reserve?
Gold in the basement route for me, but i don't have a lot, just 2 coins which are 1/2 ounce each so it's pretty easy to find a good hiding spot for those. I have a couple dozen silver rounds too, but even when you add those, i could put everything in the tape slot of an old vcr (no, thats not where they are hidden, but similar idea)
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For the "certificate" route, which are Mustachian's preferred offerings?
The easiest way to add gold to your portfolio is to purchase shares in a gold ETF like GLD, IAU, or SGOL. I personally like IAU because of its low expense ratio.
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Keep in mind, that "paper" gold is a far cry from real, physical gold; neither of which I possess or plan to purchase. Self-sufficiency, along with a good cache of water, food, and bullets, would go a lot further if the SHTF or it's TEOTWAWKI.
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Keep in mind, that "paper" gold is a far cry from real, physical gold; neither of which I possess or plan to purchase. Self-sufficiency, along with a good cache of water, food, and bullets, would go a lot further if the SHTF or it's TEOTWAWKI.
I've always felt this way whenever anyone brings up gold. A lot of the pro-gold talk seems to be kind of prepper-y (and I say this as a recovering quasi-prepper) which just doesn't make any sense to me. If the SHTF, who care about gold? I'd much rather have food, water, fire, etc. I've always felt that gold can only have value when things are going pretty good (at least for some of the people) because it is fundamentally useless.
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Keep in mind, that "paper" gold is a far cry from real, physical gold; neither of which I possess or plan to purchase. Self-sufficiency, along with a good cache of water, food, and bullets, would go a lot further if the SHTF or it's TEOTWAWKI.
I've always felt this way whenever anyone brings up gold. A lot of the pro-gold talk seems to be kind of prepper-y (and I say this as a recovering quasi-prepper) which just doesn't make any sense to me. If the SHTF, who care about gold? I'd much rather have food, water, fire, etc. I've always felt that gold can only have value when things are going pretty good (at least for some of the people) because it is fundamentally useless.
Agreed - food, shelter, water and the ability to forage, hunt or farm. And the ability to find other people to tribe up with. Strength in numbers and all that. But IMO the best guard against SHTF is being rich already, and having the ability to move away from wherever things are falling apart. But I do find preppers amusing, since we're one of the greatest periods of prosperity in all of history.
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I'm curious about how gold is supposed to work logistically as a portfolio stabilizer. Say things really do go south: what do you do? Do you pull out a gold coin and go to the nearest gold hawker/pawn shop and try to get something for it, hoping to not get too screwed in the process or robbed on the way to the store? If things really go south and the foundations of society are collapsing, how do you use gold currency? Do you have a precise mechanical balance to weigh the gold the tools to cut it down into small enough chunks to facilitate transactions, and the physical muscle to ensure you can stay safe while doing that? It all sounds pretty implausible to me frankly.
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I'm curious about how gold is supposed to work logistically as a portfolio stabilizer. Say things really do go south: what do you do? Do you pull out a gold coin and go to the nearest gold hawker/pawn shop and try to get something for it, hoping to not get too screwed in the process or robbed on the way to the store? If things really go south and the foundations of society are collapsing, how do you use gold currency? Do you have a precise mechanical balance to weigh the gold the tools to cut it down into small enough chunks to facilitate transactions, and the physical muscle to ensure you can stay safe while doing that? It all sounds pretty implausible to me frankly.
I was curious about this myself and brought some of my silver coins to a coin show. I first checked the APMEX price to have something to base from. Well, the coin dealers all had very similar offers. They were all about 75% of what APMEX would give me. So that's not the way to go. We have to remember that buying physical silver and gold comes with costs when you buy and costs when you sell. On top of that, if you make a profit when you sell, you're supposed to pay ordinary income on these "collectibles".
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Hee! I always have the same thought: let's see, we're in a world where Proctor & Gamble can no longer sell toothpaste and shampoo for American dollars, but there's a boutique around the corner where I can buy ammo and canned goods for Krugerrands? Uh... sure.
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For the "certificate" route, which are Mustachian's preferred offerings?
The easiest way to add gold to your portfolio is to purchase shares in a gold ETF like GLD, IAU, or SGOL. I personally like IAU because of its low expense ratio.
That's an interesting approach. Gonna read up on that.
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Hee! I always have the same thought: let's see, we're in a world where Proctor & Gamble can no longer sell toothpaste and shampoo for American dollars, but there's a boutique around the corner where I can buy ammo and canned goods for Krugerrands? Uh... sure.
Thats an excellent way to put it to those that think gold's going to save their ass if society collapses, made my day with that comment LOL
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I read an interesting article on http://economictimes.indiatimes.com/markets/commodities/news/gold-prices-are-likely-to-jump-to-a-4-year-high-of-1400-by-2017-end/articleshow/60072633.cms (http://economictimes.indiatimes.com/markets/commodities/news/gold-prices-are-likely-to-jump-to-a-4-year-high-of-1400-by-2017-end/articleshow/60072633.cms) which states that price of gold should jump to 1400 dollars by the end of 2017. Whether that might actually happen, I am not certain. I am now trying trading Ethereum, but I am in the beginnings.
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I hear time and again that a prolong bear market is arriving. Some say it's time to move assets and shares to gold, not to grow your money but simply to preserve when things come crashing.
Is that a common wisdom here?
Thanks! :)
No. It's not common wisdom here, for two huge RED FLAG reasons:
- It's a horrible idea that historically speaking is very unlikely to accomplish it's stated goal
- It presumes you have the ability to predict a prolong bear market. You do not. Neither do the people telling you to buy Gold. They just have something to sell...and you're falling for it.
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I'm surprised that the gold discussions on most financial forums aren't more nuanced. There are plenty of people who hold gold as part of a diversified portfolio and they're not getting murdered when they rebalance out of their gold ETFs or sell their gold bullion to load up on stocks, bonds or whatever.
There are just periods of time when gold will do way better than stocks and others when stocks will do way better than gold (and, no, I can't tell you in advance which is which). For example, in the 2000s a $10,000 investment in the S&P 500 with reinvested dividends ended the decade worth about $8,680 (not inflation adjusted). That same $10,000 investment in gold went up to about $37,700 (again, not inflation adjusted).
Stocks are a great assets because owning them lets us reap the benefits of a growing economy. Gold can moderate investment returns over time because it tends to be pretty much uncorrelated with stocks. Not trying to sell anyone on anything. I just don't understand why people get so dug into their gold/stock positions.
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Personally my opinion is because gold doesn't produce anything, unlike what I will call "real" investments. It isn't an investment in the same way that your house you live in is not an investment. Gold produces no dividends, it doesn't bring in rent, it isn't being used to produce anything that benefits society like a piece of land growing crops or even if it were put to use in an industrial setting. It just sits there collecting dust. Hell, it doesn't even provide a roof over your head or decorate your wrist. Its value is entirely up to the whims of other people who think it will be valuable when other income-producing investments are having a slow moment.
If I wanted something uncorrelated to stocks to make me feel better about a doomsday scenario or just smooth out the ride, I'd be more interested is somethjhg people actually need. Platinum, rare earth metals, petroleum, whatever. Most of us can live a long and fulfilling life without *needing* gold for anything.
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I'm surprised that the gold discussions on most financial forums aren't more nuanced. There are plenty of people who hold gold as part of a diversified portfolio and they're not getting murdered when they rebalance out of their gold ETFs or sell their gold bullion to load up on stocks, bonds or whatever.
There are just periods of time when gold will do way better than stocks and others when stocks will do way better than gold (and, no, I can't tell you in advance which is which). For example, in the 2000s a $10,000 investment in the S&P 500 with reinvested dividends ended the decade worth about $8,680 (not inflation adjusted). That same $10,000 investment in gold went up to about $37,700 (again, not inflation adjusted).
Stocks are a great assets because owning them lets us reap the benefits of a growing economy. Gold can moderate investment returns over time because it tends to be pretty much uncorrelated with stocks. Not trying to sell anyone on anything. I just don't understand why people get so dug into their gold/stock positions.
Yep, totally agree with you. I like a well diversified portfolio, and even though mine isn't huge yet I've got small amounts of metals and crypto currencies to compliment the vast majority of what i have which is stocks and some bonds (and in the future, Real Estate, just haven't got there yet)
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I'm surprised that the gold discussions on most financial forums aren't more nuanced. There are plenty of people who hold gold as part of a diversified portfolio and they're not getting murdered when they rebalance out of their gold ETFs or sell their gold bullion to load up on stocks, bonds or whatever.
There are just periods of time when gold will do way better than stocks and others when stocks will do way better than gold (and, no, I can't tell you in advance which is which). For example, in the 2000s a $10,000 investment in the S&P 500 with reinvested dividends ended the decade worth about $8,680 (not inflation adjusted). That same $10,000 investment in gold went up to about $37,700 (again, not inflation adjusted).
Stocks are a great assets because owning them lets us reap the benefits of a growing economy. Gold can moderate investment returns over time because it tends to be pretty much uncorrelated with stocks. Not trying to sell anyone on anything. I just don't understand why people get so dug into their gold/stock positions.
That's actually true, sharing the screenshot data.
PS: does anyone know how I can crop or resize the image in this forum? thanks
(https://image.ibb.co/bSR2rk/Screen_Shot_2017_08_20_at_5_47_19_PM.png)
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Personally my opinion is because gold doesn't produce anything, unlike what I will call "real" investments. It isn't an investment in the same way that your house you live in is not an investment. Gold produces no dividends, it doesn't bring in rent, it isn't being used to produce anything that benefits society like a piece of land growing crops or even if it were put to use in an industrial setting. It just sits there collecting dust. Hell, it doesn't even provide a roof over your head or decorate your wrist. Its value is entirely up to the whims of other people who think it will be valuable when other income-producing investments are having a slow moment.
If I wanted something uncorrelated to stocks to make me feel better about a doomsday scenario or just smooth out the ride, I'd be more interested is somethjhg people actually need. Platinum, rare earth metals, petroleum, whatever. Most of us can live a long and fulfilling life without *needing* gold for anything.
I don't disagree with you on most of this. Just a few thoughts though... I just bolded that one part because I think that's exactly the kind of scenario when gold can help to moderate investment returns. Let's look at the timeframe since gold became easily obtainable/tradable again in the 1970s, and let's forget about 1973 & 1974. There was pent up demand for something that had been difficult to obtain or whatever. But from 1975-1980 gold demolished financial assets. Then we had the period from 1981 to 1999 when owning stocks (and bonds and cash) was absolutely paramount to building wealth. Gold was a drag on any portfolio during that time. But barring the existence of crystal balls, someone who holds gold for when it outperforms has to accept that they'll also hold it for long periods when it underperforms. It "moderates" overall returns in both directions - lower highs and higher lows, in general. But stocks also moderate gold's return when it is doing well. From 2000 to 2011 or so, stocks really went nowhere while gold pretty much went straight up.
In recent years stocks have clearly been the winning hand and, yes, over time they probably will continue to be the best asset to hold in significant proportions. Let's hope so! Stocks doing well usually indicates an economy that is productive and moving in the right direction to the benefit of many.
I hold some gold because I am very close to the end of my earnings potential and I can't afford to have a long period of bad returns. Sequence of returns risk is greater for me than it is for someone with skills that are valued in today's economy. Mine no longer are, or at least not to the extent that they used to be.
Lastly, gold is nothing more than a tool in the investing toolbox. There's nothing sacred about it. It's just different enough for me that I believe holding some is wise. It's definitely not for everyone and I get that. Again, I am not selling anything... just looking at numbers and trying to figure out what makes sense for me.
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I hold some gold because I am very close to the end of my earnings potential and I can't afford to have a long period of bad returns. Sequence of returns risk is greater for me than it is for someone with skills that are valued in today's economy.
That is pretty much the argument I will use for having a much higher percentage of bonds in my AA as we approach FIRE. I agree with you on the sequence of returns risk, especially if you are planning on a long retirement. I like the idea of the reverse glide path for AA at and after retirement. We'll see how that plays out in reality once it is more than theory for me. ;)
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PS: does anyone know how I can crop or resize the image in this forum? thanks
Shrink the photo before posting it.
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Insert a width={width} and or height={height} into the first part of your image tag. For example:
[img width=500]https://i.imgur.com/7I6ojpE.jpg[/img]