Parky wrote:Gold is a store of value, right? Not this year though. It's fallen 11% in sterling since January 5th (9.5% in $US). I'm glad I didn't pile into gold last year when all the "experts were telling me to do so. My equities have continued to creep up.
Apply a extreme SWR of 8% to all-stock and compare that with all-gold and in around 60% of cases yes stocks did OK, 40% of cases they didn't and when they didn't the gold comparison tended to do well. US data (ease of availability) and a start year of 2000 for instance saw all-stock with 8% SWR failing after a decade - wiped out. Even cash deposited earning a inflation rate of return would last 12.5 years at a 8% SWR. For the 2000 start year at the end of 2009 the gold value was 25% up in real terms - after the 8% SWR. If you'd 50/50 at the start, left to run and drawn 8% SWR from stocks that failed a decade later, left gold untouched (no withdrawals) for a overall 4% portfolio wide withdrawal rate, then the gold value gains would more than have offset the stock losses. Not that you'd run a portfolio that way though, instead you might 50/50 and leave as-is drawing 4% from both equally, or in ongoing proportions, or rebalance back to 50/50 yearly and draw from each equally, whatever.
Fundamentally no asset is consistently good, each have their bad times. Diversification helps avoid over-concentration risk (which is a significant risk factor). You might try and predict what might be the best/worst assets at the start date and adjust your weightings in reflection of that, however such predictions often prove to have been wildly inaccurate.
Gold and stocks are two polar opposites. Some investors 50/50 long dated (20 year) and short dated (1 year) bonds that equates to a central 10 year bond bullet, stocks and gold 50/50 is similar, combines to a bullet. Stocks will tend to do well during periods of positive real yields and/or declining yields, gold tends to do well when real yields are negative and/or spiking.
Gold isn't a store of value, other than over non-human timescales (centuries) it can be highly volatile, can lose you your shirt. As can stocks. Shouldn't be looked at or held in isolation, but instead held as part of a diverse portfolio, where that diversification helps lower overall risk. Yes you can hold stocks, or gold, alone, as you might hold cash, or long dated Gilts alone, but so doing isn't generally as good as more broadly diversifying.
Stocks tend to be global, gold is a form of global currency as well as being a commodity. 50/50 barbell could be considered as being like a global bond bullet. Harry Browne combined that with a domestic bond bullet, held via a barbell of long and short dated Treasury bonds, and called that portfolio his Permanent Portfolio. Historically that has provided modest gains with low portfolio volatility, as collectively its very 'bond like'