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Consuelo Mack's WealthTrack: Guests: John Hathaway & Randy Swan: (TGLDX) - (SDRAX)
Obviously counter intuitive, but down markets are buying opportunities. For long term investors, down markets are the most important "buy & hold" time frames for investing success.
In periods of market stress (I'd mentally try and change this wording to market opportunity), non-correlated assets, that have a higher relative value than equities, can help re-balance portfolios and provide downside risk when equities sell off severely.
Cash or "near cash"(ST Treasuries): 1. You can spend cash to get you through the stressful period instead of selling equities low... Cash is what you spend so you can "hold" equities long term. 2. You can "buy" opportunistically with cash when equities are relatively low... The term "Cash is King" fits well here.
Gold (as part of a basket of commodities):
It may take a substantial allocation to commodities to enhance the risk-adjusted returns of a balanced portfolio. Our third graph shows the performance of four hypothetical balanced portfolios over the last 30 years and how they might have been affected by the introduction of a 10% stake in commodities. Only one portfolio—the 90% stock/10% bond portfolio, adjusted to become 81% stocks/9% bonds/10% commodities—would have recorded improved risk-adjusted returns, and the improvement would have been marginal. An allocation to commodities would have increased the volatility of a bond-heavy portfolio and would have reduced returns across the board.
Long Term Bonds (VUSTX): The Best Diversifier Has Been the Simplest
Bonds Get It Done As you can see, the (U.S. OE) long-government category is the only category with a strong negative correlation with both the U.S. large-blend and foreign large-blend equity categories, as well as the moderate-allocation category. That's not just a phenomenon of the bull market, either. While the correlation between long-government bonds and stocks isn't quite as strongly negative during the trailing 10-year period as it has been in the past three years, it's still the most negative relationship depicted on the 10-year chart.
This paper outlines the appropriate asset mix, based on that evaluation, for different types of investors and explains the process of constructing a diversified portfolio.
Comments
In periods of market stress (I'd mentally try and change this wording to market opportunity), non-correlated assets, that have a higher relative value than equities, can help re-balance portfolios and provide downside risk when equities sell off severely.
Cash or "near cash"(ST Treasuries):
1. You can spend cash to get you through the stressful period instead of selling equities low... Cash is what you spend so you can "hold" equities long term.
2. You can "buy" opportunistically with cash when equities are relatively low... The term "Cash is King" fits well here.
Gold (as part of a basket of commodities): Source:
researchcommentary/article/InvComVIPSCommodityInvestments
Articles related to Non-Correlated Assets & Portfolio Risk:
Long Term Bonds (VUSTX):
The Best Diversifier Has Been the Simplest Article:
morningstar.com/articles/697751/the-best-diversifier-has-been-the-simplest.html
Asset Allocation White paper from Schwab: https://intelligent.schwab.com/public/intelligent/insights/whitepapers/asset-allocation.html
Finally, will their be a place for a fund like Permanent Portfolio (PRPFX) as we move forward?
is-the-permanent-portfolio-permanently-broken