should I add Gold Fund to my portfolio?

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gixxer
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should I add Gold Fund to my portfolio?

Post by gixxer »

I'm new to investing. Just opened a couple index funds last month with Vanguard. I'm 38 years old. MY allocation is 38% S&P 500, 16% International Stock, 32% Bonds, and 15% REIT's. Wondering if i should add Gold/Mining Fund that Vanguard has, to further diversify?
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galeno
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Re: should I add Gold Fund to my portfolio?

Post by galeno »

No. Unless you want to speculate.
KISS & STC.
Amishman
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Re: should I add Gold Fund to my portfolio?

Post by Amishman »

No. xx
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gixxer
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Re: should I add Gold Fund to my portfolio?

Post by gixxer »

Thanks :D
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pennstater2005
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Re: should I add Gold Fund to my portfolio?

Post by pennstater2005 »

I agree with the others. Initially, at least, keep it simple and see how you like managing those four funds. You've got your bases covered.

Read here and on the wiki and then maybe you might tinker a little bit. Personally, I'm in a lifestrategy fund and like the auto re balancing feature.

Good luck.
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson
lumberingc
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Re: should I add Gold Fund to my portfolio?

Post by lumberingc »

I think that gold is riskier than people would like to imagine because...

1) secondary gold selling is on the rise [see cash-for-gold and other similar businesses]
2) advances in fusion technology could eventually lead to the production of heavy metals such as gold at a cost lower than its current value which would drop the price
3) The use of gold in electronics may decrease as alternatives become available.
dc81584
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Re: should I add Gold Fund to my portfolio?

Post by dc81584 »

Nope. Keep it simple. I'm a firm believer that diversifying within stocks and bonds is sufficient.
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gixxer
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Re: should I add Gold Fund to my portfolio?

Post by gixxer »

Thanks all! ..Much appreciated. I'm new to all this and am grateful that I stumbled on this Forum for help.
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Re: should I add Gold Fund to my portfolio?

Post by abuss368 »

Only if you want to speculate!
John C. Bogle: “Simplicity is the master key to financial success."
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Taylor Larimore
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Re: should I add Gold Fund to my portfolio?

Post by Taylor Larimore »

gixxer wrote:I'm new to investing. Just opened a couple index funds last month with Vanguard. I'm 38 years old. MY allocation is 38% S&P 500, 16% International Stock, 32% Bonds, and 15% REIT's. Wondering if i should add Gold/Mining Fund that Vanguard has, to further diversify?
gixxer:

Welcome to the Bogleheads Forum!

You may be new to investing but somehow you put together a beautiful portfolio. Don't mess it up. Forget about gold.
The enemy of a good plan is the dream of a perfect plan. -- Jack Bogle
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Valuethinker
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Re: should I add Gold Fund to my portfolio?

Post by Valuethinker »

lumberingc wrote:I think that gold is riskier than people would like to imagine because...

1) secondary gold selling is on the rise [see cash-for-gold and other similar businesses]
I don't know if it is 'on the rise'? Seems to go up and then down again with every price cycle of the metal. The big retail buyers are Indians and other parts of S Asia and economically they are growing, so probably demand increases.
2) advances in fusion technology could eventually lead to the production of heavy metals such as gold at a cost lower than its current value which would drop the price
Commercial nuclear fusion was 50 years away when I first learned about it -- in the 1970s. It's still 50 years away ;-). If it does happen, gold won't be the only material affected.
3) The use of gold in electronics may decrease as alternatives become available.
I know very little about this. My thought is since there are so many rare earths (which are not necessarily rare in a chemical sense, but 90% of production is concentrated in China) that if designers can use a relatively common heavy metal (like gold) they will?

Let me tell you about my intuition with Precious Metals (PM). Platinum is a genuinely useful PM: autocatalysts and the emerging fuel cell market. And yet, this counts aginst Platinum as a PM because it is not just a store of value. That's the topsy turvy logic of the PM market.

The real reason to avoid Gold and Precious Metals is not because we can call the price on gold (I certainly can't at least) it's that you are adding volatility and reducing portfolio return. Now (see Wm Bernstein's article on Efficient Frontier) there *is* a case that it zags when the rest of the portfolio zigs-- Bernstein basically views it as the most patient asset. In the long run it's a hedge against bear markets, and against US dollar inflation.

What I have noticed more recently is that it became another asset buoyed by negative real returns (expected) on US government debt. ie super market sensitive.

The other factor is the stock prices don't track the metals prices. The industry seems cursed with management and other issues.
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Re: should I add Gold Fund to my portfolio?

Post by Valuethinker »

gixxer wrote:I'm new to investing. Just opened a couple index funds last month with Vanguard. I'm 38 years old. MY allocation is 38% S&P 500, 16% International Stock, 32% Bonds, and 15% REIT's. Wondering if i should add Gold/Mining Fund that Vanguard has, to further diversify?
Gold is the sort of thing to add when you've got $1m in investments, and you are thinking 'what comes next'? On the way, you want returns with a degree of stability (hence the 32% bonds). Rebalancing through bear markets, sure as one can be that in the next 27 years of investing, you will experience both bear markets and the bull markets that follow them, and vice versa.

Stay the course and don't worry about gold and precious metals.
lumberingc
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Re: should I add Gold Fund to my portfolio?

Post by lumberingc »

great post Valuethinker. You make very good points

-L
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BL
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Re: should I add Gold Fund to my portfolio?

Post by BL »

Taylor Larimore wrote:
gixxer wrote:I'm new to investing. Just opened a couple index funds last month with Vanguard. I'm 38 years old. MY allocation is 38% S&P 500, 16% International Stock, 32% Bonds, and 15% REIT's. Wondering if i should add Gold/Mining Fund that Vanguard has, to further diversify?
gixxer:

Welcome to the Bogleheads Forum!

You may be new to investing but somehow you put together a beautiful portfolio. Don't mess it up. Forget about gold.
The enemy of a good plan is the dream of a perfect plan. -- Jack Bogle
Best wishes.
Taylor
+1

By the way, gold was talked about a lot more here when it was at $1800/oz. a few years ago than now at $1200/oz. The excitement seems to have fizzled and promoters are very quiet.
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oldzey
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Re: should I add Gold Fund to my portfolio?

Post by oldzey »

Warren Buffett states it pretty well here, comparing the choice of having all the gold in the world, or... https://www.youtube.com/watch?v=aOYK0o7ydZg

There's better things to invest in besides gold (like low cost total stock market index funds, which Warren actually recommends to the average investor).

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backpacker
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Re: should I add Gold Fund to my portfolio?

Post by backpacker »

oldzey wrote:Warren Buffett states it pretty well here, comparing the choice of having all the gold in the world, or... https://www.youtube.com/watch?v=aOYK0o7ydZg
+1

Gold isn't a productive asset. Bernstein thinks regular rebalancing a gold allocation lets you pump money away from deranged gold bugs. I'm skeptical that the money pump works well enough to make up for the lack of productivity.
Valuethinker wrote:
gixxer wrote:I'm new to investing. Just opened a couple index funds last month with Vanguard. I'm 38 years old. MY allocation is 38% S&P 500, 16% International Stock, 32% Bonds, and 15% REIT's. Wondering if i should add Gold/Mining Fund that Vanguard has, to further diversify?
Gold is the sort of thing to add when you've got $1m in investments, and you are thinking 'what comes next'?
I don't see why a $1 million portfolio would be any different that a $100,000 portfolio. Gold is just as unproductive either way.
Last edited by backpacker on Sat Apr 25, 2015 1:23 pm, edited 1 time in total.
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Sammy_M
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Re: should I add Gold Fund to my portfolio?

Post by Sammy_M »

If you are among the top 10% of disciplined investors, own the stocks of gold miners (Precious Metal Equities), not the metal itself.

http://www.efficientfrontier.com/ef/adhoc/gold.htm
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Index Fan
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Re: should I add Gold Fund to my portfolio?

Post by Index Fan »

A small amount (say 5%) wouldn't hurt for insurance purposes, such as the collapse of the financial system. Almost happened in 2008, and historically it's happened to a number of countries. Black swans can happen.
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z3r0c00l
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Re: should I add Gold Fund to my portfolio?

Post by z3r0c00l »

Index Fan wrote:A small amount (say 5%) wouldn't hurt for insurance purposes, such as the collapse of the financial system. Almost happened in 2008, and historically it's happened to a number of countries. Black swans can happen.
Not sure how one cashes in a gold mutual fund after the world economy collapses. Do you mean hold actual gold? I think you will find shotguns and vodka more valuable in the mad max scenarios.
70% Global Stocks / 30% Bonds
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Index Fan
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Re: should I add Gold Fund to my portfolio?

Post by Index Fan »

Yes, that too.

Here's some other research for those not watching Mel Gibson flicks for hints-

https://en.wikipedia.org/wiki/Argentine ... %932002%29

https://en.wikipedia.org/wiki/Hyperinflation

Insurance is not a bad thing, except when involving things you don't want to contemplate I guess...
"Optimum est pati quod emendare non possis." | -Seneca
lack_ey
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Re: should I add Gold Fund to my portfolio?

Post by lack_ey »

I think the people who view gold as insurance and not some kind of volatile rebalancing tool are more likely to want to hold or store the physical stuff rather than rely on an ETF or other wrapper. Holding a small allocation of gold yourself is reasonable enough from a size and weight perspective, unlike commodities.
z3r0c00l
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Re: should I add Gold Fund to my portfolio?

Post by z3r0c00l »

Index Fan wrote:Yes, that too.

Here's some other research for those not watching Mel Gibson flicks for hints-

https://en.wikipedia.org/wiki/Argentine ... %932002%29

https://en.wikipedia.org/wiki/Hyperinflation

Insurance is not a bad thing, except when involving things you don't want to contemplate I guess...
So the global economy collapses, but the demand for gold jewelry remains high. Got it. Counting on hyperinflation in the US economy is a pretty long shot, however I suggest iBonds/international stocks as protection against this. Because if that unlikely scenario doesn't play out, you don't wind up throwing your money into a pointless, risky investment like gold.
70% Global Stocks / 30% Bonds
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