Swenson question

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fishdrzig
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Swenson question

Post by fishdrzig »

I just re read unconventional success and was wondering why he didn't make any mention at all about precious metals as a hedge against inflation. In fact he didn't even mention gold at all even as a non-core asset to not invest in. I wonder why no mention of this asset class either way?
Call_Me_Op
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Re: Swenson question

Post by Call_Me_Op »

fishdrzig wrote:I just re read unconventional success and was wondering why he didn't make any mention at all about precious metals as a hedge against inflation.
Because it's not - unless you plan to hold it for 100 years.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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telemark
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Re: Swenson question

Post by telemark »

Swensen prefers asset classes that generate a decent return, and gold generates no return at all.
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Phineas J. Whoopee
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Re: Swenson question

Post by Phineas J. Whoopee »

Better to invest in good men's suits. If they go out of style, after several hundred years you can still earn a decent return renting them to museums and theatre companies, textile preservation costs excluded.
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midareff
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Re: Swenson question

Post by midareff »

LOL..... I'm thinking those that bought gold at 1800 something are not all that happy with the inflation hedging ability.
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RyeWhiskey
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Re: Swenson question

Post by RyeWhiskey »

fishdrzig wrote:I just re read unconventional success and was wondering why he didn't make any mention at all about precious metals as a hedge against inflation. In fact he didn't even mention gold at all even as a non-core asset to not invest in. I wonder why no mention of this asset class either way?
Gold has a place in some portfolios but not in most Boglehead portfolios. It is a good hedge against massive unexpected inflation but not so much against steady inflation (look to TIPS and I-Bonds for this). Furthermore, it generates no income over time and hence amounts to a speculative bet on commodity prices. That said, if you're interested in gold as a part of your portfolio I'd say keep no more than 15% of a Boglehead portfolio in it or opt for the Permanent Portfolio which has 25% in gold but does so for a very specific reason.
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Day9
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Re: Swenson question

Post by Day9 »

Swenson suggests a healthy allocation to TIPS to serve the role of protecting against inflation. As others have pointed out, TIPS achieve this much better than gold for retirement portfolios.

Swenson does not recommend any commodities to individuals. The closest thing he recommends to individuals is a heavy tilt to REITS. He invests a lot in Timberland. Like others have said, he likes diversified yet high-yielding assets.
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fishdrzig
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Re: Swenson question

Post by fishdrzig »

I am ready to allocate what I have saved in cash to the portfolio presented by Swenson in Unconventional success. My question to the forum is

Why would it not be wise to go all in tonight? Thanks for all the help
Call_Me_Op
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Re: Swenson question

Post by Call_Me_Op »

Turns out that the best inflation hedge for a portfolio is............stocks - and most Bogleheads own plenty of that.
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ogd
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Re: Swenson question

Post by ogd »

fishdrzig wrote:I am ready to allocate what I have saved in cash to the portfolio presented by Swenson in Unconventional success. My question to the forum is

Why would it not be wise to go all in tonight? Thanks for all the help
Well, the market is closed for starters, and the dimly lit alleys of after hours trading are populated by shady characters :)

But seriously, going all in tomorrow is the most rational thing to do; after all, it's what all of us who are already invested are in effect doing every day and waiting generally costs you money because the expected return is always positive. The reasons to go in slowly are psychological -- if you think you'll have a panic attack and pull out if the market crashes right after you invest, then it might make sense to invest gradually. But even that to me has a psychological downside, because you might stop going in during a crash at what might turn out to be the best time to buy. It's IMHO better to just refuse any notion of timing and tell yourself that this is your investment allocation come what may.
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Whiggish Boffin
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Re: Swenson question

Post by Whiggish Boffin »

I went all-in on a Swensen allocation in January 2007. By March 2009, REITs had dropped 74%, US stocks 52%, and developed-world stocks 54%. I learned that I possess the self-discipline to stay the course and rebalance in major downturns. I also learned why you have to have some bonds.
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