Forgot to post this great new article by Campbell Harvey on gold. It's easily the most balanced and informative piece yet and makes it clear both why gold can be a valuable diversifier in small doses AND why most of us are better off not owning any apart from in jewelry. https://www.researchaffiliates.com/content/dam/ra/publications/pdf/1079-gold-5000.pdf
While you've written this with the best of intentions you don't really understand how gold works when deployed in a portfolio, while trotting out the familiar (and incorrect) clichés about it not being an inflation hedge, having no intrinsic value, etc. Meanwhile portfolios that contain a judicious (5-20%) slice of gold deployed strategically in combination with other assets continue to offer risk-adjusted returns that trounce plain vanilla stock:bond allocations as they have for decades. I should also say right upfront that I personally HATE owning gold not only because it's a PITA to deal with and is wildly volatile and unpredictable< but also because of the crowd it often draws (I don't own a bunker filled with ammo and MRE's, for example). But as a diversifier to protect against sequence-of-returns-risk and guard against the deep, long-lasting drawdowns that are a retiree's worst enemy it has no rivals. Case in point: my Golden Butterfly portfolio is up almost 4% YTD and its worst drawdown has been 0.4% - in keeping with its record of having the highest risk-adjusted returns and lowest and shallowest drawdowns of any lazy portfolio for over 50 years. This article explains the basics and serves as a necessary corrective to your post: https://portfoliocharts.com/2020/08/21/metal-money-and-the-measurable-value-of-gold/ /
Speaking of Warren Buffett, his famous quote "only when the tide goes out do you see who's been swimming naked" certainly applies to these times. Which is to say, for individual investors, this is when you find out what your actual, rather than hypothetical, risk tolerance actually is. At times like these (or better yet, before experiencing times like these), especially for retirees, It can be instructive to look at which kinds of portfolios have performed well during the very worst markets. There are lessons about diversification to be learned that go well beyond holding buckets of stock index funds, U.S. bonds and cash. https://portfoliocharts.com/2025/04/09/how-to-succeed-in-the-worst-stock-markets/
What we're actually doing in response to this is thanking our lucky stars that we're invested in an extremely resilient portfolio that is only down 1.81% YTD (see the Golden Butterfly on this real-time list of lazy portfolio returns: https://portfolioslab.com/lazy-portfolios). Other than that, not much we can do except to remind our elected representatives that they can stop and reverse this madness at any time. Tariffs are the purview of Congress unless they cede their authority to someone else - which is what has happened Fantastic post today by Cullen Roche on how we got here. Can't recommend it highly enough: https://disciplinefunds.com/2025/04/04/weekend-reading-how-did-we-get-here/
Jonathan Clements and William Bernstein,among others, recommend an agnostic world market cap equity weighting with a value tilt. But this statement of yours caught my eye: "In short, countries with autocratic governments have generally not delivered the same level of economic growth as countries with more democratic regimes."If you believe in this I assume you're rapidly divesting yourself of US stocks given the reality of what we have become.
Well what an article about the value of pictorial representation really needs is.....pictures, and no investing site does a better job of showing the virtues of this than Portfolio Charts: https://portfoliocharts.com/portfolios/ The innovative tools on this site really give you a visceral feel for what it would be like to own any of the featured portfolios (or a custom allocation of your devising) through every market condition and include things like maximum drawdown and years to recover, safe and perpetual withdrawal rates and the all-important (for retirees especially) "ulcer index." Also of note is that the actual data shows that your claims about gold are incorrect. No asset (including equities) has an "inherent" rate of return, but gold has been a store of value for thousands of years. In judicious amounts in some (but obviously not all) portfolios its a useful diversifier and helps with sequence-of-returns risk more than any other asset. There are plenty of great portfolios that don't include it, but I challenge you (or anyone else) to find a portfolio with better risk-adjusted returns than the Golden Butterfly and other similar portfolios on this site that combine a slice of gold with stocks and bonds. IMHO Portfolio Charts and Humble Dollar are probably the two most valuable investing sites on the web.
We live a stone's throw away from you in a long-established 55+ mobile home park near Starr Pass resort. Tucson is unique in having not only a plethora of such parks that help keep lot rent fairly competitive, but also in having at least three resident-owned parks where you pay a higher price for your old mobile but own the land it sits on and are thereby protected from lot rent spikes and the ever-present threat of the park as a whole being sold to a new corporate owner who either jacks up the rent to unaffordable levels or razes the place and builds condos or single-family homes. You may be interested in this U of A study on this issue: https://www.mapazdashboard.arizona.edu/sites/default/files/2021-10/MAP_MH_Final_Oct5_2021%20V2.pdf
This is just fantastic! Thank you so much for sharing your well thought-out and organized approach. I hope you'll consider writing a separate piece on this for Humble Dollar.
I appreciate the wise reminders Mr. Clements. Recency bias seems to be part of human nature - especially when "recent" spans more than a decade. For what it's worth VT is 66% U.S. stocks and has been at that level for some time, reflecting of course the incredible valuations of the so-called Magnificent Seven tech stocks. I believe I read that Nvidea alone is worth more than the entire stock markets of several countries. Also of interest to me is that U.S. small cap value stocks have been a better diversifier than total international funds like VXUS. But of course championing them is likely to get one an even colder reception than touting the benefits of global diversification. And heck, going international is basically a small (ish) cap play anyway, given that all of the mega cap firms are U.S.-domiciled. I just stick with VT and am grateful to not be able to meddle with U.S./Int'l. percentages anymore.
Comments
Forgot to post this great new article by Campbell Harvey on gold. It's easily the most balanced and informative piece yet and makes it clear both why gold can be a valuable diversifier in small doses AND why most of us are better off not owning any apart from in jewelry. https://www.researchaffiliates.com/content/dam/ra/publications/pdf/1079-gold-5000.pdf
Post: Go for the Gold?
Link to comment from May 11, 2025
While you've written this with the best of intentions you don't really understand how gold works when deployed in a portfolio, while trotting out the familiar (and incorrect) clichés about it not being an inflation hedge, having no intrinsic value, etc. Meanwhile portfolios that contain a judicious (5-20%) slice of gold deployed strategically in combination with other assets continue to offer risk-adjusted returns that trounce plain vanilla stock:bond allocations as they have for decades. I should also say right upfront that I personally HATE owning gold not only because it's a PITA to deal with and is wildly volatile and unpredictable< but also because of the crowd it often draws (I don't own a bunker filled with ammo and MRE's, for example). But as a diversifier to protect against sequence-of-returns-risk and guard against the deep, long-lasting drawdowns that are a retiree's worst enemy it has no rivals. Case in point: my Golden Butterfly portfolio is up almost 4% YTD and its worst drawdown has been 0.4% - in keeping with its record of having the highest risk-adjusted returns and lowest and shallowest drawdowns of any lazy portfolio for over 50 years. This article explains the basics and serves as a necessary corrective to your post: https://portfoliocharts.com/2020/08/21/metal-money-and-the-measurable-value-of-gold/ /
Post: Go for the Gold?
Link to comment from May 10, 2025
Speaking of Warren Buffett, his famous quote "only when the tide goes out do you see who's been swimming naked" certainly applies to these times. Which is to say, for individual investors, this is when you find out what your actual, rather than hypothetical, risk tolerance actually is. At times like these (or better yet, before experiencing times like these), especially for retirees, It can be instructive to look at which kinds of portfolios have performed well during the very worst markets. There are lessons about diversification to be learned that go well beyond holding buckets of stock index funds, U.S. bonds and cash. https://portfoliocharts.com/2025/04/09/how-to-succeed-in-the-worst-stock-markets/
Post: Spreading Your Bets
Link to comment from April 12, 2025
What we're actually doing in response to this is thanking our lucky stars that we're invested in an extremely resilient portfolio that is only down 1.81% YTD (see the Golden Butterfly on this real-time list of lazy portfolio returns: https://portfolioslab.com/lazy-portfolios). Other than that, not much we can do except to remind our elected representatives that they can stop and reverse this madness at any time. Tariffs are the purview of Congress unless they cede their authority to someone else - which is what has happened Fantastic post today by Cullen Roche on how we got here. Can't recommend it highly enough: https://disciplinefunds.com/2025/04/04/weekend-reading-how-did-we-get-here/
Post: Tariffs and our retirement assets
Link to comment from April 5, 2025
Jonathan Clements and William Bernstein,among others, recommend an agnostic world market cap equity weighting with a value tilt. But this statement of yours caught my eye: "In short, countries with autocratic governments have generally not delivered the same level of economic growth as countries with more democratic regimes." If you believe in this I assume you're rapidly divesting yourself of US stocks given the reality of what we have become.
Post: Index Three Ways
Link to comment from March 22, 2025
Well what an article about the value of pictorial representation really needs is.....pictures, and no investing site does a better job of showing the virtues of this than Portfolio Charts: https://portfoliocharts.com/portfolios/ The innovative tools on this site really give you a visceral feel for what it would be like to own any of the featured portfolios (or a custom allocation of your devising) through every market condition and include things like maximum drawdown and years to recover, safe and perpetual withdrawal rates and the all-important (for retirees especially) "ulcer index." Also of note is that the actual data shows that your claims about gold are incorrect. No asset (including equities) has an "inherent" rate of return, but gold has been a store of value for thousands of years. In judicious amounts in some (but obviously not all) portfolios its a useful diversifier and helps with sequence-of-returns risk more than any other asset. There are plenty of great portfolios that don't include it, but I challenge you (or anyone else) to find a portfolio with better risk-adjusted returns than the Golden Butterfly and other similar portfolios on this site that combine a slice of gold with stocks and bonds. IMHO Portfolio Charts and Humble Dollar are probably the two most valuable investing sites on the web.
Post: Picture This
Link to comment from March 16, 2025
We live a stone's throw away from you in a long-established 55+ mobile home park near Starr Pass resort. Tucson is unique in having not only a plethora of such parks that help keep lot rent fairly competitive, but also in having at least three resident-owned parks where you pay a higher price for your old mobile but own the land it sits on and are thereby protected from lot rent spikes and the ever-present threat of the park as a whole being sold to a new corporate owner who either jacks up the rent to unaffordable levels or razes the place and builds condos or single-family homes. You may be interested in this U of A study on this issue: https://www.mapazdashboard.arizona.edu/sites/default/files/2021-10/MAP_MH_Final_Oct5_2021%20V2.pdf
Post: My Humble Abode
Link to comment from December 21, 2024
The 66.10% figure is from Vanguard's own website for the ETF: https://investor.vanguard.com/investment-products/etfs/profile/vt#portfolio-composition
Post: Stuck at Home
Link to comment from November 23, 2024
This is just fantastic! Thank you so much for sharing your well thought-out and organized approach. I hope you'll consider writing a separate piece on this for Humble Dollar.
Post: What’s on Your List?
Link to comment from November 23, 2024
I appreciate the wise reminders Mr. Clements. Recency bias seems to be part of human nature - especially when "recent" spans more than a decade. For what it's worth VT is 66% U.S. stocks and has been at that level for some time, reflecting of course the incredible valuations of the so-called Magnificent Seven tech stocks. I believe I read that Nvidea alone is worth more than the entire stock markets of several countries. Also of interest to me is that U.S. small cap value stocks have been a better diversifier than total international funds like VXUS. But of course championing them is likely to get one an even colder reception than touting the benefits of global diversification. And heck, going international is basically a small (ish) cap play anyway, given that all of the mega cap firms are U.S.-domiciled. I just stick with VT and am grateful to not be able to meddle with U.S./Int'l. percentages anymore.
Post: Stuck at Home
Link to comment from November 23, 2024