![]() ![]() Let’s explore the worst Drawdown and Underwater Period for US Large Cap Equities since 1972.įrom Nov 2007 until Feb 2009 US Large Cap stocks got sliced in half with a drawdown of -50.97% Given the “impatience level” of an average investor, staying the course with a 100% equity or 100% gold portfolio when everything unravels would be nearly impossible. The worst case scenario low roll period of 3 years for US Stocks, Gold and 50/50 Combo paints an interesting picture. What about when they’re combined together 50/50?Ī far more palatable -0.32% low roll period of 5 years. Gold one upped equities and provided investors with a low roll period of -3.63% over 15 years. US Large Cap equities frustrated investors with a low roll period of -3.51% over 10 years. US Large Cap and Gold Rolling Returns Low Period Source: Let’s explore all of the ugliness in detail. Stocks and gold are most unremarkable when viewed as individual line-items in the portfolio.įerocious quarter century underwater periods. ![]() Unremarkable Attributes of Individual Asset Classes vs Combined Asset Classes The leveraged 90/90 results in these backtests does not include borrowing costs. There could be considerable errors in the data I gathered. Hey guys! Here is the part where I mention I’m a travel blogger! This investing opinion blog post is entirely for entertainment purposes only. Source: Pixabay Magic Happens When You Add Gold To Your Portfolio We’ll explore the returns decade by decade of a 100% US Large Cap portfolio, 100% gold portfolio, 50/50 stocks/gold portfolio and leveraged 90/90 equities/gold to see how these asset classes perform individually and combined (with and without leverage). What happens when gold is causing pain in your portfolio?įurthermore, what happens when you combine leveraged stocks and gold in equal measures 50/50 over long periods of time? The 1970s and 2000s were just that for aggressive equity only investors.īut what happens when you combine gold and stocks during those decades?ĭoes it protect your portfolio from disastrous roll periods? We’re aware of the downsides of a 100% US Large Cap portfolio (basically the S&P 500) when it comes to lost decades. Given that gold is uncorrelated with both stocks and bonds does it deserve a place in your portfolio? Sprinkling in a bit of gold into a 60/40 portfolio helped improve returns, standard deviation, sequence of return risk and Sharpe/Sortino ratios. Roll period lows that’ll send shivers down your spine.īut then I started to explore the asset class a little bit more. Isn’t gold just meant to be a tiny sliver in your portfolio if you allocate anything to the asset class at all? As investors we’re well aware of what happens when you combine stocks and bonds in a portfolio, but what about the unlikely duo of stocks and gold? ![]()
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