Gold, is anybody holding some gold to diversify their portfolio?


(Adam) #21

I’ve got some iShares Physical Gold in my portfolio to diversify in choppy markets. It’s up almost 4% in the past two weeks while my S&P 500 is down 6.5% over the same period. Gold miners looking good too.


#22

Can I ask, what purpose does having the gold serve? I’m keen to understand how people use things like gold when the market is down.

Are you planning to sell the gold at some point (i.e. when it has grown higher) and use the money to buy something at the bottom? e.g. buy more S&P?

Or will you just hold gold in your portfolio and then one day when the markets go back up, watch your gold go back down (and maybe go negative)?


(Ben Baygan) #23

A well diversified portfolio should have between 5 and 10 percent gold in a portfolio. Taking account that you want risk-adjusted portfolio or even better
Harry Brownes all weathers permanent portfolio. Historically, gold has made portfolios better by being negatively correlated to equities in times of crisis. For example, a 60/40 portfolio became 0.55% better per year during the 30-year period between 1987-2017.

Crises Period S&P 500 USA interest rates Gold
Crashes 1987 870825 – 871019 -33,2% -7,2% 5,0%
Iraq invades Kuwait 900717 – 901012 -17,6% -0,4% 7,6%
Asia crisis 971007 – 971028 -6,2% 0,0% -4,6%
Russia crisis / LTCM-krisen 980720 – 980810 -18,7% 5,3% 1,2%
9/11 attack 010910 – 011011 -22,3% 11,2% 16,6%
Financial crisis 071011 – 090306 -54,5% 15,8% 25,6%
EU crisis and flash crash 100420 – 100701 -14,5% 4,5% 5,1%
US credit rating downgrading 110725 – 110809 -12,3% 3,6% 7,8%
China troubles 150818 – 160211 -11,8% 3,5% 11,5%
Average -19,6% 3,4% 6,9%

Nine periods of disturbance, the period between the market falling and its lowest point, shows that the gold was a better protection than fixed income and bond funds. You can say that Gold can function like a Hedge. Check this video about Bloomberg - Is Gold Really a Good Hedge?.

In a permanent portfolio you keep the gold. Is not a short-term investment but rather long-term - time is your best friend here. :timer_clock: :sunglasses:


#24

Thanks for this, I appreciate you putting this together - I need to go through your post again once I am more awake and decide if I should start looking again at gold. :+1:


(Adam) #25

TL;DR if the world is going to shit you’re probably going to want some gold (along with tinned beans and bottled water).


(Dave Smith) #26

If things get that bad no way am I swapping my beans for your gold :smiley:


#27




#28

So I am still a little confused. If the markets are depressed and my ftse100 etf drops 10% but my gold etf rises 10% then what is the point? All I have done is flat lined, if I want my portfolio to hover around 0% net growth then I may as well put the cash in a savings account.

And if gold only makes up 10% of my portfolio anyway then it will need to rise a lot to cover the drop on my equities.

However if I sell my gold at +10% and use the proceeds to buy more ftse100 then I can start to understand that.

If I believe I have solid equities then if they drop in value surely I should be buying more of them, not buying gold? (Which is now going up in price)


(Dave Smith) #29

I think the idea is to see Gold as insurance rather than look for profit from it, so in the event of a huge crash you still have something that’s valuable that you can sell if you need to.

Of course you can sell the gold and buy more equities if you think equities will recover. I think it just adds a bit of flexibility


(Henry) #30

Personally I’m of the perspective that holding gold as part of your normal portfolio is a waste of resources but that very much depends on the goals of your portfolio and your take on risk.


(Kim Ditlefsen) #31

In my mind holding Gold is all about rebalancing your portfolio. Rebalance your portfolio to its original percentage allocation every 6months makes you buy assets at a low price and selling high price. By adding Gold to your portfolio that does not correlate to stocks you make sure that when the stock prices crash you will be able to use your gold assets to rebalance your portfolio and buy stock when they are at a really good price. Which will make your recovery time after a crash much faster. Therefore you will hopefully have a less volatile portfolio than one without gold.


(Kenny Grant) #32

I have some (ETF) and treat it like cash in my portfolio (though of course it’s not, but it’s another asset which is not very well correlated with stocks). Plan to sell it in the next month or two as market volatility increases and hopefully the gold price increases, and get that money back into stocks. So I think yes this is what people tend to use it for. Of course this requires buying it when everything seems fine, and selling when everything seems terrible.

I feel like the next few months are going to be a great time to buy stocks though, not gold - most of the indexes have seen significant corrections, and some tech stocks have seen very high reductions (almost 40%).


#33

iShare Physical Gold is all well and good (I have some in my FT account), but I’m literally holding physical gold… does this count? :stuck_out_tongue_winking_eye:

Disclaimer: 1 gram for research purposes costs a fair whack more than the market rate…


#34

I love physical gold, I used to have some 1 ounce coins - so lovely to feel the weight in your hand.


#35

I’ve got gold. 1 share but it’s performing well for me atm