Asset Allocation

Has anyone considered gold as part of the asset allocation mix. No return I know but a useful hedge against the rest of the portfolio in case things get ugly?

 

Gold is part of two well thought-of portfolios - The Permanent Portfolio and Golden Butterfly Portfolio.

Portfolios

 

Generally speaking I think gold is one of those assets, whether owned directly or via some sort of proxy like a fund, that people have emotional as much as number rational reasons why they do or don’t include it.
Often if you trace the source of it, dates back to either;

- Prior bigger success/fail they had in having it in their portfolios which usually heavily related to timing - global volatility or relative calm that helped or hurt them
- Parent/Finacial mentor attitude towards gold

Let’s say you did “perfect” timing and happened to buy Gold around year 2000 (~250USD) and sold around 2012 (~1900USD) so abt an 18.4% annual growth rate. Good in anyone’s language over that long a period. You would likely be bullish on gold in your asset allocation as it out performed most general asset categories.

However if you took almost all other 12 yr periods in last 30 yrs you would have underperformed the S&P 500 index.

So does that make gold a good hedge? Or an asset that fundamentally relies on timing to pay off in overall benefit in a portfolio.

NB: because of the AUD at 2000 and 2012, this would likely have been a far worse return for. the avg Australian.

 

I wouldn't buy gold , but I have bought a goldmine, 12 months ago I thought I was paying a high price when I bought AMI for 5c after it rose from 3c, now it is about 90c. It wasnt bought as a hedge, buy when opportunity knocks, I use property as a hedge and some grain for some diversity and sort of hedge.

 

No interest in gold. There’s better ways to get the same protection with assets that actually pay you to hold them.

A great small book (rediculously cheap in Kindle format) to read is:
https://www.amazon.com.au/Deep-Risk-History-Portfolio-Investing-ebook/dp/B00EV25GAM


Inflation is the greatest risk. Again from “Deep Risk”:

Owning a globally diversified portfolio offers better protection than gold against the greatest risk being inflation. Although not mandatory commodities can assist but owning the producers rather than the commodity itself would seem to be a better option. Fortunately Aussie investors need own nothing more than the market index to be awash with commodity exposure.

 

I can't discuss but this is another example of a super fund having access to opportunities unavailable to the average investor:

https://www.smh.com.au/business/aus...usgrid-for-16189-billion-20161020-gs6kac.html

 

You should define "meaningful" explicitly as say 10% or 12.8% otherwise you will be in the same conundrum when it drops 9.9%.

 

My only direct exposure to gold was holding shares in Gasgoyne Gold. It paid some nice dividends and when it was taken over a rather good cash payment. Never bothered with gold or other producers since then.

 

The same problem I tend to face. I feel the SMSF is still light on for international exposure but my brain is saying to me the ones I prefer are pricey. At the same time there are a couple of Australian I'd like more of but if I do it puts out the Oz/Os split.

Personal holdings are more towards over allocation for international, if that is possible, so I may have to ignore the SMSF to some extent and focus elsewhere.

As is right and proper I it's all about me but why does it have to be difficult?

 

Perhaps a Bex & a good lie down is needed until all becomes clear.

 

That's soooo 1960's.

Was considering more STW but, but...

 

Oops,showing my age.

 

If you can remember the 60s, you were never there.........it's....it's.....all flooding back now.......the horror.......aaaaaahhhh.........that's better.

 

Reviving an older thread

Firstly happy easter

I have been investing on and off for about 20 years but properly with a plan and a vision for about the last 5. Prior to that was a lot of reactive, speculative, hap hazard, gut feeling with no real idea of what I was doing. Luck made me think I was better at all of it than I was (even recently I was lucky with APT but I came to the conclusion that it was gambling rather than investing)

Firstly that you to everyone here for the education that has been incredibly valuable

My currently portfolio has a split of about 50 50 Aus/International with Aus mostly VAS (some MLT) and world a combination of VTS/VEU some VGS and VVLU

The question of asset allocation is something that I have thought long and hard about and my portfolio is being set up with a 20 year plan. I am trying to structure it in a way that It will be doing well not just now or in 5 years but in 20 as well. Since I don't have a crystal ball I feel that setting it up to follow similar guidelines to what VDHG (interestingly Six Park Aggressive Growth is a similar mix)

AUS (eg VAS) 35%
International (eg VTS/VEU) 50%
Emerging market 5%
Property/Infrastructure 5%

I know that leaves 5% left over and my view is that long term that will be bonds/cash/fixed income etc but at this early stage I think that will be targeted to some small caps international

I haven't addressed the issue of hedging/non hedging but my idea would be to lean towards non hedging - after all part of my reason for wanting international exposure is to have some international currency exposure.

I have thought about just buying VDHG and keeping it all simple but I feel that I still like to be able to invest in other areas is an option I want to keep up my sleeve.

I am wanting to try to take away as many factors out of the equation like change of government and franking rule changes that may affect me not now but in 20 years time. Living off dividends is fantastic but I don't want to be set up for that scenario and factors beyond my control change that.

I feel this should give me a fairly mixed portfolio to achieve my goals

It would be really interesting to come back in 2040 and look at this and see if this is where we all ended up - over time I guess there is a natural progression to more conservative portfolio mixes but will the allocation still be valid

 

Have you considered the Vanguard Managed Payout Fund? It gives a similar allocation to my Australian Super Balanced fund (with the addition of commodities).

 

No I hadn't actually seen that - will look at it and see what its all about

 

It's a bit funky compared to the rest of Vanguard's offerings.

 

MINIMUM INVESTMENT AMOUNT

Initial investment: $500,000
Additional investment : $5,000

Vanguard International Shares Index Fund (Wholesale) 22.2%
Vanguard Australian Shares Index Fund (Wholesale) 15.1%
Vanguard International Fixed Interest Index Fund (Hedged) (Wholesale) 12.9%
Vanguard Global Minimum Volatility Fund (Wholesale) 10.0%
Vanguard Global Infrastructure Index Fund (Hedged) (Wholesale) 8.0%
Vanguard Australian Fixed Interest Index Fund (Wholesale) 8.0%
Vanguard Commodities Fund (Wholesale) 6.7%
Vanguard Global Value Equity Fund (Wholesale) 5.1%
Vanguard Australian Corporate Fixed Interest Index Fund (Wholesale) 4.0%
Vanguard Emerging Markets Shares Index Fund (Wholesale) 3.0%
Vanguard International Property Securities Index Fund (Hedged) (Wholesale) 3.0%
Vanguard Australian Property Securities Index Fund 2.0%
Total 100.0%

 

I believe it is Vanguard's attempt at a Yale-style portfolio.

 

I lump summed $150k today like a Buddhist monk!

I’ll have a seven figures to do soon and different story