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We hold buillion at 5% of a portfolio, as a hedge against government policy stupidity. If it dips much below 4% we buy more. If it gets to 8% we sell back to 5%. Pretty simple. We use CEF for our bullion choice.
My first attempts at investing on my own were to fling a few grand into gold coins at around $800 in the early 80s. The hype was unreal back then. Inflation was getting worse & this was your ticket to eternal happiness. (OK - a bit exaggerated). Needed the cash few years later & sold em at maybe $600. However, gold looked "really cheap" at around $500 in the mid-90s. Bought again. Needed cash a few years later and (you guessed it) sold again at under $400. Fortunately, was contributing to a good equity fund thru a workplace TSA during those years whose management was left to a capable advisor. So, the self-inflicted damage was minimal. In retrospect, the experiences chasing gold down was maybe the best investing lesson I ever had.
Bob's got a good strategy for a fixed allocation. Indeed, that's pretty much most folks will ever need - some fixed percentage of their wealth in physical bullion. Note that I said physical bullion and not paper bullion. Paper bullion is for portfolios where you can't hold the real stuff but it's not for a 'hedge against government policy stupidity'. There's simply way too much divergence between the price of paper gold and the price of real gold for paper gold to be that much of a true hedge. Lots of ways to own physical bullion. A roll of 20 AGEs fit in a plastic tube the size of a quarter and about 2" tall. A gold eagle is selling for ~$1700 so a roll would be worth ~$35K. And if you can't hide this, think of non-designer bling. Gold chain is gold chain is gold chain.
How large should your security blanket be? feh. 5-10% is more than sufficient. More than that is more of a speculation than an investment.
So where to now St. Peter? I'm very comfortable with the prospects for gold. I'm not really a gold bug but have collected coins for over 50 years and have been following this bull market from a momentum investing approach. In addition to the trend since 2002, the fundamentals are enormously bullish. The demand for gold is so broad and deep it's amazing. You've got central banks, sovereign treasuries, investment portfolios of all sizes, industry, survivalists and collectors all adding to their 'security blanket' on pullbacks - in much the same way that Bob described above - if they're wise.
Much of this is being driven by the developed central banks racing to dabase their currencies in an effort to monetize gov't spending and promises and gain a brief competitive trading edge. Via QE . . . nth, they're literatlly dropping dollars from helicopters. The reason why the dollar is strong vs. other currencies is that everyone elses it doing it also and we're the least smelly pair of dirty sox in the basket. This is the only reason gold is looking cheap right now - to us it's priced in dollars. This resulting in a divergence between the price of paper gold and the price of gold on the street. Whenever the paper price strays too much from the perceived true value, two things occur - supply of physical bullion starts to shrink and the premium (vigorish) for physical bullion over the official price increases.
Anywho, I think everyone should own some gold as a 'hedge against gov't policy stupidity'. My grandsons have stuffed animals they call their 'bed buddies'. Well, my we stash of gold and silver is my bed buddy.
I suppose my other view regarding gold is that it's just an element of protection in terms of what I think are long-term trends - I think people should also have some exposure to water (the Allianz fund or one of the ETFs) and Agriculture (MOO, PAGG or one of the ag commodity futures ETFs, although be careful with the commodity futures ETFs, as many of them result in a K-1 at tax time.)
I think it's basic needs, as well. I'm not saying Wal-Mart necessarily (although that's up on a bad day), but I think it's a good idea to devote some part of the portfolio to basic needs as I think a lot of people in this country are still not in great shape, so personally, I'd lean more towards Wal-Mart (PG, J & J, etc) than luxury at this point. I'd look at a consumer staples ETF if there was a pullback, and many of those appear to offer nice yields. The income/spending figures this morning were not very good (http://www.zerohedge.com/news/2013-03-01/consumer-taps-out-income-plunges-most-20-years-savings-rate-crashes-2007-levels?page=1)
Apartment REITs, while volatile - people need a place to live and you get a nice yield.
Own a bit of health care. Energy is volatile, but that's an option for a little as I think many names haven't done that great in the last couple of years and some that I've looked at seem reasonably valued.
I think there should be some portion devoted to metals. However, I think that people have to focus on what are "real needs" with some portion of their portfolio.
You know, the funny thing is that there are plenty of "Real Assets" funds - it would be interesting if someone came up with a "Real Needs" (specific REITs, some utilities, staples, some health care, some food/ag, etc) fund.
Comments
"hedge against government policy stupidity"
Yep.
Bob's got a good strategy for a fixed allocation. Indeed, that's pretty much most folks will ever need - some fixed percentage of their wealth in physical bullion. Note that I said physical bullion and not paper bullion. Paper bullion is for portfolios where you can't hold the real stuff but it's not for a 'hedge against government policy stupidity'. There's simply way too much divergence between the price of paper gold and the price of real gold for paper gold to be that much of a true hedge. Lots of ways to own physical bullion. A roll of 20 AGEs fit in a plastic tube the size of a quarter and about 2" tall. A gold eagle is selling for ~$1700 so a roll would be worth ~$35K. And if you can't hide this, think of non-designer bling. Gold chain is gold chain is gold chain.
How large should your security blanket be? feh. 5-10% is more than sufficient. More than that is more of a speculation than an investment.
So where to now St. Peter? I'm very comfortable with the prospects for gold. I'm not really a gold bug but have collected coins for over 50 years and have been following this bull market from a momentum investing approach. In addition to the trend since 2002, the fundamentals are enormously bullish. The demand for gold is so broad and deep it's amazing. You've got central banks, sovereign treasuries, investment portfolios of all sizes, industry, survivalists and collectors all adding to their 'security blanket' on pullbacks - in much the same way that Bob described above - if they're wise.
Much of this is being driven by the developed central banks racing to dabase their currencies in an effort to monetize gov't spending and promises and gain a brief competitive trading edge. Via QE . . . nth, they're literatlly dropping dollars from helicopters. The reason why the dollar is strong vs. other currencies is that everyone elses it doing it also and we're the least smelly pair of dirty sox in the basket. This is the only reason gold is looking cheap right now - to us it's priced in dollars. This resulting in a divergence between the price of paper gold and the price of gold on the street. Whenever the paper price strays too much from the perceived true value, two things occur - supply of physical bullion starts to shrink and the premium (vigorish) for physical bullion over the official price increases.
Anywho, I think everyone should own some gold as a 'hedge against gov't policy stupidity'. My grandsons have stuffed animals they call their 'bed buddies'. Well, my we stash of gold and silver is my bed buddy.
peace,
rono
I think it's basic needs, as well. I'm not saying Wal-Mart necessarily (although that's up on a bad day), but I think it's a good idea to devote some part of the portfolio to basic needs as I think a lot of people in this country are still not in great shape, so personally, I'd lean more towards Wal-Mart (PG, J & J, etc) than luxury at this point. I'd look at a consumer staples ETF if there was a pullback, and many of those appear to offer nice yields. The income/spending figures this morning were not very good (http://www.zerohedge.com/news/2013-03-01/consumer-taps-out-income-plunges-most-20-years-savings-rate-crashes-2007-levels?page=1)
Apartment REITs, while volatile - people need a place to live and you get a nice yield.
Own a bit of health care. Energy is volatile, but that's an option for a little as I think many names haven't done that great in the last couple of years and some that I've looked at seem reasonably valued.
I think there should be some portion devoted to metals. However, I think that people have to focus on what are "real needs" with some portion of their portfolio.
You know, the funny thing is that there are plenty of "Real Assets" funds - it would be interesting if someone came up with a "Real Needs" (specific REITs, some utilities, staples, some health care, some food/ag, etc) fund.