50% VTSAX (VANGUARD) & 50% Gold (One Gold)

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Newtothis92
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50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Newtothis92 » Mon Jun 29, 2020 11:11 am

I’m trying to diversify but still try to achieve positive real returns on my portfolio. Is still a smart buy and hold?

Please give your pros and cons and whether I should maybe go 60/40 or 70/30? I don’t really want to hold bonds at this time.

I trust the mind pool that is the boglehead community to provide some insight on such a portfolio.

Goal: 2% real over the next 40 years.

Robot Monster
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Robot Monster » Mon Jun 29, 2020 12:48 pm

Holy hand grenades, bro! So! Much! Gold! I thought Ray Dalio's recommendation of holding between 5% to 10% was a lot. 50%? That not only takes the cake, it takes the entire bakery. Where'd you come up with that?

Living Free
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Living Free » Mon Jun 29, 2020 12:53 pm

Why do you expect gold to return 2% real? I expect it to return 0% real, as it does not do anything (doesn't pay rent or sell products or give interest or etc).

ChrisBenn
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by ChrisBenn » Mon Jun 29, 2020 1:03 pm

You might take a look at this re: gold as an inflation (CPI specifically) hedge:
https://fredblog.stlouisfed.org/2019/03 ... n=fredblog

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by jason2459 » Mon Jun 29, 2020 1:18 pm

I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100

Robot Monster
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Robot Monster » Mon Jun 29, 2020 1:37 pm

jason2459 wrote:
Mon Jun 29, 2020 1:18 pm
I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Its performance at the beginning of that chart is very impressive up till 1981, when high inflation began simmering down. Commodities also did very well during this period. Seems both gold and commodities are good hedges for this kind of high inflationary environment.

retiredjg
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by retiredjg » Mon Jun 29, 2020 1:51 pm

If you trust the mind pool, I don't think you'll have anywhere near that much gold. Sorry. :?

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cos
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by cos » Mon Jun 29, 2020 2:20 pm

Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I don’t really want to hold bonds at this time.
So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?

retired@50
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by retired@50 » Mon Jun 29, 2020 4:14 pm

Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am

I trust the mind pool that is the boglehead community to provide some insight on such a portfolio.

Goal: 2% real over the next 40 years.
This puts the entire growth burden of your portfolio on the 50% in stocks.

Maybe get your feet wet with 2% in gold to see if you can tolerate how it behaves.

Regards,
This is one person's opinion. Nothing more.

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firebirdparts
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by firebirdparts » Mon Jun 29, 2020 4:22 pm

Gold is high. People talk about gold using a lot of phrases that aren't true. I would certainly caution you there.

The price of gold is well-known since forever and just know it's high right now. No philosophy needed. It's high. That's not an opinion.

If you backtest gold, you will find that it performs fabulously because of a tiny sample of information. The information is that it shot up in the 1970s, and then crashed so that it could shoot up again in the "lost decade". If you were using it for diversification, then you were thrilled beyond belief. I choose to consider these random events. That's just my way of avoiding thinking I can predict what it'll do next.

I decided to hold 10% in gold, but I certainly don't expect more than it's already done for me. If it does great, great. I don't feel entitled.
A fool and your money are soon partners

Robot Monster
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Robot Monster » Mon Jun 29, 2020 5:52 pm

firebirdparts wrote:
Mon Jun 29, 2020 4:22 pm
Gold is high. People talk about gold using a lot of phrases that aren't true. I would certainly caution you there.

The price of gold is well-known since forever and just know it's high right now. No philosophy needed. It's high. That's not an opinion.

If you backtest gold, you will find that it performs fabulously because of a tiny sample of information. The information is that it shot up in the 1970s, and then crashed so that it could shoot up again in the "lost decade". If you were using it for diversification, then you were thrilled beyond belief. I choose to consider these random events. That's just my way of avoiding thinking I can predict what it'll do next.

I decided to hold 10% in gold, but I certainly don't expect more than it's already done for me. If it does great, great. I don't feel entitled.
If you didn't hold any gold, would you buy at today's prices? Or is it too high of a price as an entry point?

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Blue456 » Mon Jun 29, 2020 6:05 pm

Robot Monster wrote:
Mon Jun 29, 2020 1:37 pm
jason2459 wrote:
Mon Jun 29, 2020 1:18 pm
I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Its performance at the beginning of that chart is very impressive up till 1981, when high inflation began simmering down. Commodities also did very well during this period. Seems both gold and commodities are good hedges for this kind of high inflationary environment.
Equities are good inflation hedge too :)

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by aristotelian » Mon Jun 29, 2020 6:26 pm

Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am

I don’t really want to hold bonds at this time.
What does this mean? Why would you simply ignore a $100 trillion market that is a core component of Modern Portfolio Theory?

Robot Monster
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Robot Monster » Tue Jun 30, 2020 8:39 am

Blue456 wrote:
Mon Jun 29, 2020 6:05 pm
Robot Monster wrote:
Mon Jun 29, 2020 1:37 pm
jason2459 wrote:
Mon Jun 29, 2020 1:18 pm
I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Its performance at the beginning of that chart is very impressive up till 1981, when high inflation began simmering down. Commodities also did very well during this period. Seems both gold and commodities are good hedges for this kind of high inflationary environment.
Equities are good inflation hedge too :)
Stocks appear super reliant on the Fed's ultra loose monetary policy. Might not stocks be in for a world of pain if the Fed had to tighten in the way they'd have to in order to combat inflation?

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Jack FFR1846 » Tue Jun 30, 2020 9:10 am

Be very careful about the starting point you pick to backtest the price of gold. In 71, gold was no longer directly tied to the dollar and it took off. Gold was not legal to own in the US at that point. In 75, gold became legal to own in the US and there was a lot of acquisition. Along with this until the late 80's, inflation was hitting hard. None of this is going on now. So perhaps your starting point should be well away from those single points that won't likely occur anytime soon. Pick your own point. Be prepared to be disappointed in the growth in the price of gold.
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Swivelguy
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Swivelguy » Tue Jun 30, 2020 9:24 am

cos wrote:
Mon Jun 29, 2020 2:20 pm
Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I don’t really want to hold bonds at this time.
So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?
I'll go ahead and disagree. I expect gold to return more (0% real) than bonds (negative 0.5~1% real) over the next decade or two. I hold both.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by firebirdparts » Tue Jun 30, 2020 9:48 am

Robot Monster wrote:
Mon Jun 29, 2020 5:52 pm
If you didn't hold any gold, would you buy at today's prices? Or is it too high of a price as an entry point?
I consider it a random actor, so I might, but I don't think I'd have the nerve for 50%. I am actually selling, but if I decided for instance I wanted to do "the permanent portfolio" then I'd be buying. I know I can't predict the future. Gold is crazy volatile and it seems like nobody thinks of it that way. I guess the volatility is in slow motion or something.
A fool and your money are soon partners

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by rockthisworld » Tue Jun 30, 2020 9:55 am

Right now I’m 100% VTSAX which I love but I have been listening to people saying low bond yields, the dollar is heading for a decline and a mother of all bubbles will burst in us equities. Although I plan on 2% real. I’m just afraid that putting all my eggs in that basket could result in Japan’s -1.5% real on Japan Nikkei 225 since the bubble burst in 1989 to today. If that were to happen here in America it would be catastrophe and there is no way I could have enough to retire one day if I’m losing money after inflation and yes all of that makes me panic however I know I need equities just for a shot at 2% real to hold up over the lifetime of my portfolio.

rockthisworld
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by rockthisworld » Tue Jun 30, 2020 10:05 am

rockthisworld wrote:
Tue Jun 30, 2020 9:55 am
Right now I’m 100% VTSAX which I love but I have been listening to people saying low bond yields, the dollar is heading for a decline and a mother of all bubbles will burst in us equities. Although I plan on 1.5% real. I’m just afraid that putting all my eggs in that basket could result in Japan’s -1.5% real on Japan Nikkei 225 since the bubble burst in 1989 to today. If that were to happen here in America it would be catastrophe and there is no way I could have enough to retire one day if I’m losing money after inflation and yes all of that makes me panic however I know I need equities just for a shot at 1.5% real to hold up over the lifetime of my portfolio.

Blue456
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Blue456 » Tue Jun 30, 2020 10:07 am

Robot Monster wrote:
Tue Jun 30, 2020 8:39 am
Blue456 wrote:
Mon Jun 29, 2020 6:05 pm
Robot Monster wrote:
Mon Jun 29, 2020 1:37 pm
jason2459 wrote:
Mon Jun 29, 2020 1:18 pm
I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Its performance at the beginning of that chart is very impressive up till 1981, when high inflation began simmering down. Commodities also did very well during this period. Seems both gold and commodities are good hedges for this kind of high inflationary environment.
Equities are good inflation hedge too :)
Stocks appear super reliant on the Fed's ultra loose monetary policy. Might not stocks be in for a world of pain if the Fed had to tighten in the way they'd have to in order to combat inflation?
Sorry, by equities I meant US and International equities. Hyperinflation in US would be unlikely to occur at the same severity in developed and emerging markets.

rockthisworld
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by rockthisworld » Tue Jun 30, 2020 10:11 am

My only advice to the OP is that I understand it may be a rough next decade but if you are holding that for 40 years and looking for 2% real then just keep buying VTSAX and if there is a dip buy more.

Living Free
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Living Free » Tue Jun 30, 2020 6:57 pm

rockthisworld wrote:
Tue Jun 30, 2020 9:55 am
Right now I’m 100% VTSAX which I love but I have been listening to people saying low bond yields, the dollar is heading for a decline and a mother of all bubbles will burst in us equities. Although I plan on 2% real. I’m just afraid that putting all my eggs in that basket could result in Japan’s -1.5% real on Japan Nikkei 225 since the bubble burst in 1989 to today. If that were to happen here in America it would be catastrophe and there is no way I could have enough to retire one day if I’m losing money after inflation and yes all of that makes me panic however I know I need equities just for a shot at 2% real to hold up over the lifetime of my portfolio.
So why not add some international stocks then?

andrige
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by andrige » Wed Jul 01, 2020 12:19 pm

A bar of gold has no intrinsic return. The price goes up due to inflation and speculation. I would expect 0% real return unless you think there will be speculative return. In this case, how will you know when to sell?

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Dottie57 » Wed Jul 01, 2020 12:22 pm

jason2459 wrote:
Mon Jun 29, 2020 1:18 pm
I think I'd rather hold i-bonds or TIPs vs. Gold to hedge any inflation.

Heck even short term treasuries has done well vs. gold with much less volatility.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
I like to hold gold - in good jewelry. Otherwise I agree on i-bonds or tips for inflation protection.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Swivelguy » Wed Jul 01, 2020 12:23 pm

andrige wrote:
Wed Jul 01, 2020 12:19 pm
A bar of gold has no intrinsic return. The price goes up due to inflation and speculation. I would expect 0% real return unless you think there will be speculative return. In this case, how will you know when to sell?
You sell when you hit your rebalancing bands.

andrige
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by andrige » Wed Jul 01, 2020 4:26 pm

Swivelguy wrote:
Wed Jul 01, 2020 12:23 pm
andrige wrote:
Wed Jul 01, 2020 12:19 pm
A bar of gold has no intrinsic return. The price goes up due to inflation and speculation. I would expect 0% real return unless you think there will be speculative return. In this case, how will you know when to sell?
You sell when you hit your rebalancing bands.
Again, the real expected return of gold should be zero. Re-balancing bands don't necessarily tell you when gold speculation is high (e.g. equity prices could be low). If you people are using gold as an inflation hedge, 50% gold is way too high.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by abuss368 » Wed Jul 01, 2020 4:35 pm

Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I’m trying to diversify but still try to achieve positive real returns on my portfolio. Is still a smart buy and hold?

Please give your pros and cons and whether I should maybe go 60/40 or 70/30? I don’t really want to hold bonds at this time.

I trust the mind pool that is the boglehead community to provide some insight on such a portfolio.

Goal: 2% real over the next 40 years.
Crazy speculation is the short answer! Gold has no intrinsic value or earnings.

I would consider a simple Two Fund Portfolio as recommended by Jack Bogle and Warren Buffett as discussed here: viewtopic.php?f=10&t=188176
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by willthrill81 » Wed Jul 01, 2020 5:16 pm

aristotelian wrote:
Mon Jun 29, 2020 6:26 pm
Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am

I don’t really want to hold bonds at this time.
What does this mean? Why would you simply ignore a $100 trillion market that is a core component of Modern Portfolio Theory?
Maybe because the expected real return of bonds right now is about zero?

I'm not saying that that alone is sufficient, but that's a very common argument we've heard from many.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by EnjoyIt » Wed Jul 01, 2020 6:03 pm

Swivelguy wrote:
Tue Jun 30, 2020 9:24 am
cos wrote:
Mon Jun 29, 2020 2:20 pm
Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I don’t really want to hold bonds at this time.
So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?
I'll go ahead and disagree. I expect gold to return more (0% real) than bonds (negative 0.5~1% real) over the next decade or two. I hold both.
If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by aristotelian » Wed Jul 01, 2020 9:34 pm

EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm

If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
Not if there is deflation.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by willthrill81 » Wed Jul 01, 2020 10:25 pm

aristotelian wrote:
Wed Jul 01, 2020 9:34 pm
EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm

If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
Not if there is deflation.
I thought that, at the worst, you got a return of the nominal purchase price for TIPS.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Cycle » Wed Jul 01, 2020 10:46 pm

40 years... Better hope fusion power doesn't become a reality bc gold would be very cheap to mine with free energy.
Never look back unless you are planning to go that way

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by aristotelian » Wed Jul 01, 2020 10:52 pm

willthrill81 wrote:
Wed Jul 01, 2020 10:25 pm
aristotelian wrote:
Wed Jul 01, 2020 9:34 pm
EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm

If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
Not if there is deflation.
I thought that, at the worst, you got a return of the nominal purchase price for TIPS.
True if you hold to maturity. In the meantime, the principal goes up and down.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by JamesDean44 » Wed Jul 01, 2020 11:21 pm

Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I’m trying to diversify but still try to achieve positive real returns on my portfolio. Is still a smart buy and hold?

Please give your pros and cons and whether I should maybe go 60/40 or 70/30? I don’t really want to hold bonds at this time.

I trust the mind pool that is the boglehead community to provide some insight on such a portfolio.

Goal: 2% real over the next 40 years.
There are much more diversified portfolios than 50/50 US equities/Gold with an expected return of >2% over the next 40 years. I obviously don't know your thought process, but I have to imagine there are much better options to achieve your goals than your proposed solution.

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Stef
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Stef » Thu Jul 02, 2020 12:59 am

Gold is a terrible investment!

The expected real return is 0%. This combined with a volatility of stocks makes it just bad.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Forester » Thu Jul 02, 2020 7:58 am

EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm
Swivelguy wrote:
Tue Jun 30, 2020 9:24 am
cos wrote:
Mon Jun 29, 2020 2:20 pm
Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I don’t really want to hold bonds at this time.
So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?
I'll go ahead and disagree. I expect gold to return more (0% real) than bonds (negative 0.5~1% real) over the next decade or two. I hold both.
If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
The problem with TIPs is needing to trust the word of a thirdparty. I am sceptical that TIPs would escape a bad bear market in nominal bonds.

Dudley
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Dudley » Thu Jul 02, 2020 8:28 am

Why not try the Permanent Portfolio ? It always gets knocked on Bogleheads for 25% gold but it certainly has a robust track record.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by RomeoMustDie » Thu Jul 02, 2020 8:31 am

Dudley wrote:
Thu Jul 02, 2020 8:28 am
Why not try the Permanent Portfolio ? It always gets knocked on Bogleheads for 25% gold but it certainly has a robust track record.
Golden butterfly is also a gold heavy portfolio which is more diversified than the OP's.

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Newtothis92
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Newtothis92 » Thu Jul 02, 2020 8:57 am

Dudley wrote:
Thu Jul 02, 2020 8:28 am
Why not try the Permanent Portfolio ? It always gets knocked on Bogleheads for 25% gold but it certainly has a robust track record.
Honestly after rethinking I think I want to do 20% gold and 80% VTSAX but I’m thinking gold because I do see the dollar getting hit hard, price of gold raised from 2,000 to 3,000. However if I can get in before 2,000 I’m okay if over time gold will just keep up with inflation and then stay mostly in stocks for long term growth but it also worries me that we are at almost half of America out of work and FR buying everything and supporting the market through yield curve manipulation. US debt at these levels and other indicators saying productivity will be hurt. Also how long can we keep up the unemployment benefits which expire July 31st? Once that gravy train stops it will reduce spending therefore seeing downward pressure on stocks. What are your opinions? And what is the permanent portfolio?

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by EnjoyIt » Thu Jul 02, 2020 10:14 am

Forester wrote:
Thu Jul 02, 2020 7:58 am
EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm
Swivelguy wrote:
Tue Jun 30, 2020 9:24 am
cos wrote:
Mon Jun 29, 2020 2:20 pm
Newtothis92 wrote:
Mon Jun 29, 2020 11:11 am
I don’t really want to hold bonds at this time.
So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?
I'll go ahead and disagree. I expect gold to return more (0% real) than bonds (negative 0.5~1% real) over the next decade or two. I hold both.
If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
The problem with TIPs is needing to trust the word of a thirdparty. I am sceptical that TIPs would escape a bad bear market in nominal bonds.
Why are you skeptical? It appears you are from the UK which may be the reason. Not sure if the UK offers TIPS or a variant thereof, but for me, living in America, I suspect if the government can't back its securities, then that would mean the US is collapsing and the economy is the least of my worries as I will have to protect my family and make sure we have food to eat. I just don't see bonds, gold, cash, stocks or anything similar being able to help me with that.
A time to EVALUATE your jitters. | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418

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Forester
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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Forester » Thu Jul 02, 2020 11:38 am

EnjoyIt wrote:
Thu Jul 02, 2020 10:14 am
Forester wrote:
Thu Jul 02, 2020 7:58 am
EnjoyIt wrote:
Wed Jul 01, 2020 6:03 pm
Swivelguy wrote:
Tue Jun 30, 2020 9:24 am
cos wrote:
Mon Jun 29, 2020 2:20 pm


So when do you want to hold bonds? Unlike gold which has a ~0% expected annualized return over the next decade, bonds at least have a ~2.5% expected annualized return over that same period. What are you waiting for?
I'll go ahead and disagree. I expect gold to return more (0% real) than bonds (negative 0.5~1% real) over the next decade or two. I hold both.
If gold will earn 0% real and bonds will be negative, then why not just invest in TIPS? You are guaranteed > 0%
The problem with TIPs is needing to trust the word of a thirdparty. I am sceptical that TIPs would escape a bad bear market in nominal bonds.
Why are you skeptical? It appears you are from the UK which may be the reason. Not sure if the UK offers TIPS or a variant thereof, but for me, living in America, I suspect if the government can't back its securities, then that would mean the US is collapsing and the economy is the least of my worries as I will have to protect my family and make sure we have food to eat. I just don't see bonds, gold, cash, stocks or anything similar being able to help me with that.
The UK has had its version of TIPs for almost forty years; recently there have been news articles speculating that the inflation measure may be adjusted, which would cause the value of UK long dated inflation protected bonds to fall by 30%.

This is the whole point, with TIPs you're beholden to a thirdparty not slightly changing the rules of the game. You'll be made good on your TIPs but perhaps not how you might have imagined.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by DaftInvestor » Thu Jul 02, 2020 12:12 pm

50% Gold for 40 years?! :shock:
At least you will get a return on 50% of your money; hopefully the other 50% won't be completely lost but I would run scenarios whereby it will decline by a good 25%.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Swivelguy » Thu Jul 02, 2020 12:51 pm

andrige wrote:
Wed Jul 01, 2020 4:26 pm
Swivelguy wrote:
Wed Jul 01, 2020 12:23 pm
andrige wrote:
Wed Jul 01, 2020 12:19 pm
A bar of gold has no intrinsic return. The price goes up due to inflation and speculation. I would expect 0% real return unless you think there will be speculative return. In this case, how will you know when to sell?
You sell when you hit your rebalancing bands.
Again, the real expected return of gold should be zero. Re-balancing bands don't necessarily tell you when gold speculation is high (e.g. equity prices could be low). If you people are using gold as an inflation hedge, 50% gold is way too high.
I don't need to know when "speculation is high" to manage my portfolio, no matter what asset class we're talking about. Your original post's "how will you know when to sell" seems to come from the angle that a gold investor is looking for a place to get out entirely. That's not the case. A gold-holding boglehead is like any other, but with some gold in the AA. Buy, hold, rebalance, and there is no need to see the future.

I agree, 50% is way too much.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by andrige » Fri Jul 03, 2020 4:24 pm

Swivelguy wrote:
Thu Jul 02, 2020 12:51 pm
andrige wrote:
Wed Jul 01, 2020 4:26 pm
Swivelguy wrote:
Wed Jul 01, 2020 12:23 pm
andrige wrote:
Wed Jul 01, 2020 12:19 pm
A bar of gold has no intrinsic return. The price goes up due to inflation and speculation. I would expect 0% real return unless you think there will be speculative return. In this case, how will you know when to sell?
You sell when you hit your rebalancing bands.
Again, the real expected return of gold should be zero. Re-balancing bands don't necessarily tell you when gold speculation is high (e.g. equity prices could be low). If you people are using gold as an inflation hedge, 50% gold is way too high.
I don't need to know when "speculation is high" to manage my portfolio, no matter what asset class we're talking about. Your original post's "how will you know when to sell" seems to come from the angle that a gold investor is looking for a place to get out entirely. That's not the case. A gold-holding boglehead is like any other, but with some gold in the AA. Buy, hold, rebalance, and there is no need to see the future.

I agree, 50% is way too much.
The reason I mention speculation is that it’s the only possible reason I could see someone holding 50% gold.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by perikleez » Sat Jul 04, 2020 2:17 am

Newtothis92 wrote:
Thu Jul 02, 2020 8:57 am
Dudley wrote:
Thu Jul 02, 2020 8:28 am
Why not try the Permanent Portfolio ? It always gets knocked on Bogleheads for 25% gold but it certainly has a robust track record.
Honestly after rethinking I think I want to do 20% gold and 80% VTSAX but I’m thinking gold because I do see the dollar getting hit hard, price of gold raised from 2,000 to 3,000. However if I can get in before 2,000 I’m okay if over time gold will just keep up with inflation and then stay mostly in stocks for long term growth but it also worries me that we are at almost half of America out of work and FR buying everything and supporting the market through yield curve manipulation. US debt at these levels and other indicators saying productivity will be hurt. Also how long can we keep up the unemployment benefits which expire July 31st? Once that gravy train stops it will reduce spending therefore seeing downward pressure on stocks. What are your opinions? And what is the permanent portfolio?
a few of thoughts:

1. only buy physical gold, such as sovereign coins (American Eagle and Buffalo for example). all other "paper" gold have various investment risks (such as HSBC being custodian of gold reserves for certain ETFs). i had an account with OneGold, it's a nice flashy setup but after a few months I didn't think they had the account guarantees and transparency to satisfy my risk of loss and timely access to funds concerns in dealing with them, not too mention questionable fees. In other words, i thought they were no better than ETFs, just another paper gold investment product. Kitco's Vaultchain Gold is a better option imho. these paper gold options, however, are good places to park your funds until you are ready to buy physical good, but I wouldn't leave my funds there more than 6mos before cashing them and buy physical gold coins. swing trading with gold and gold miner ETFs also can be fun cuz you know that commodity market is headed northwest.

2. 10% of net worth or $10K in physical gold assets is a very solid foundation. there are a lot of gold naysayers out there but don't let them talk you out of building your own pot of gold --and holding gold coins in your hands definitely feels different than "holding" any portfolio of the same market value. I would take $10K in gold bullion any day in heartbeat over $10K in VTSAX.

3. most ppl talk about the the price of gold (dollars per ounce) but the reality is that it's the other way around: how many dollars does an ounce of gold "buy"? so if you look at it that way, it doesn't take long to figure out that as the price of gold goes up, the dollar is really "worth less".

3. yes, many see an economic reckoning ahead with either a severe impact on our current currency system, major devaluing of the dollar, or tax rates going up to cover all this fed reserve money printing.
Last edited by perikleez on Sat Jul 04, 2020 2:43 am, edited 1 time in total.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by market timer » Sat Jul 04, 2020 2:28 am

ChrisBenn wrote:
Mon Jun 29, 2020 1:03 pm
You might take a look at this re: gold as an inflation (CPI specifically) hedge:
https://fredblog.stlouisfed.org/2019/03 ... n=fredblog
One would get similar results plotting the price return of 30-year TIPS vs. inflation. Does that mean 30-year TIPS do not hedge against CPI? Very weak analysis to be posted on the Fed's site, IMHO.

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by ChrisBenn » Sat Jul 04, 2020 3:34 pm

market timer wrote:
Sat Jul 04, 2020 2:28 am
ChrisBenn wrote:
Mon Jun 29, 2020 1:03 pm
You might take a look at this re: gold as an inflation (CPI specifically) hedge:
https://fredblog.stlouisfed.org/2019/03 ... n=fredblog
One would get similar results plotting the price return of 30-year TIPS vs. inflation. Does that mean 30-year TIPS do not hedge against CPI? Very weak analysis to be posted on the Fed's site, IMHO.
They only mostly hedge against unexpected CPI jumps though, right? Also I don't believe the plot would look the same, due to the large returns gold has had (which I don't believe were really inflation linked). With those outlier years removed maybe - but I would want to see it first.

Caveat: off the cuff opinion on my part, but I just don't see the assertion as self evident (that 30 year tips would look the same).

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by willthrill81 » Sat Jul 04, 2020 4:25 pm

Stef wrote:
Thu Jul 02, 2020 12:59 am
Gold is a terrible investment!

The expected real return is 0%. This combined with a volatility of stocks makes it just bad.
Modern portfolio theory says that the combination of uncorrelated volatile assets can result in a portfolio with reduced volatility.

For instance, long-term Treasuries, while more volatile than intermediate- or short-term Treasuries, have historically increased returns without increasing volatility. The opposite (i.e. reduce volatility) has often been the case.

And the 'expected real return of gold is zero' is only a theory. The last ~45 years of data that we have on gold (i.e. since the unwinding of Bretton Woods) do not support that theory very well. For instance, gold has significantly outperformed stocks and bonds over the last 20 years. That's not a short-term period in the eyes of many.

Maybe it will be a terrible investment for the next 20 years. But it certainly wasn't for the last 20.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by market timer » Sat Jul 04, 2020 10:36 pm

ChrisBenn wrote:
Sat Jul 04, 2020 3:34 pm
market timer wrote:
Sat Jul 04, 2020 2:28 am
ChrisBenn wrote:
Mon Jun 29, 2020 1:03 pm
You might take a look at this re: gold as an inflation (CPI specifically) hedge:
https://fredblog.stlouisfed.org/2019/03 ... n=fredblog
One would get similar results plotting the price return of 30-year TIPS vs. inflation. Does that mean 30-year TIPS do not hedge against CPI? Very weak analysis to be posted on the Fed's site, IMHO.
They only mostly hedge against unexpected CPI jumps though, right? Also I don't believe the plot would look the same, due to the large returns gold has had (which I don't believe were really inflation linked). With those outlier years removed maybe - but I would want to see it first.

Caveat: off the cuff opinion on my part, but I just don't see the assertion as self evident (that 30 year tips would look the same).
Below is the price of gold vs. 10-year real yields (inverted by multiplying by -1). Clearly, gold shares strong similarities with long term inflation adjusted securities. It is helpful to think of gold as buying a long term inflation adjusted security. Most of the day-to-day price variance will be determined by changes in real yields, not short run inflation. This is not a new finding--many famous economists have written about this in the past. Here is Tyler Cowen summarizing a Paul Krugman post in 2011 and a paper from Larry Summers in 1988: https://marginalrevolution.com/marginal ... radox.html. If one understands that gold behaves like a long term inflation adjusted bond, one would expect the low correlation in the Fed blog post. It's such a major oversight that the analysis feels like something written by an anti-gold marketing department. It reflects poorly on the Fed.

Image

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Re: 50% VTSAX (VANGUARD) & 50% Gold (One Gold)

Post by Ralph Furley » Sun Jul 05, 2020 8:37 am

perikleez wrote:
Sat Jul 04, 2020 2:17 am
Newtothis92 wrote:
Thu Jul 02, 2020 8:57 am
Dudley wrote:
Thu Jul 02, 2020 8:28 am
Why not try the Permanent Portfolio ? It always gets knocked on Bogleheads for 25% gold but it certainly has a robust track record.
Honestly after rethinking I think I want to do 20% gold and 80% VTSAX but I’m thinking gold because I do see the dollar getting hit hard, price of gold raised from 2,000 to 3,000. However if I can get in before 2,000 I’m okay if over time gold will just keep up with inflation and then stay mostly in stocks for long term growth but it also worries me that we are at almost half of America out of work and FR buying everything and supporting the market through yield curve manipulation. US debt at these levels and other indicators saying productivity will be hurt. Also how long can we keep up the unemployment benefits which expire July 31st? Once that gravy train stops it will reduce spending therefore seeing downward pressure on stocks. What are your opinions? And what is the permanent portfolio?
a few of thoughts:

1. only buy physical gold, such as sovereign coins (American Eagle and Buffalo for example). all other "paper" gold have various investment risks (such as HSBC being custodian of gold reserves for certain ETFs). i had an account with OneGold, it's a nice flashy setup but after a few months I didn't think they had the account guarantees and transparency to satisfy my risk of loss and timely access to funds concerns in dealing with them, not too mention questionable fees. In other words, i thought they were no better than ETFs, just another paper gold investment product. Kitco's Vaultchain Gold is a better option imho. these paper gold options, however, are good places to park your funds until you are ready to buy physical good, but I wouldn't leave my funds there more than 6mos before cashing them and buy physical gold coins. swing trading with gold and gold miner ETFs also can be fun cuz you know that commodity market is headed northwest.

2. 10% of net worth or $10K in physical gold assets is a very solid foundation. there are a lot of gold naysayers out there but don't let them talk you out of building your own pot of gold --and holding gold coins in your hands definitely feels different than "holding" any portfolio of the same market value. I would take $10K in gold bullion any day in heartbeat over $10K in VTSAX.

3. most ppl talk about the the price of gold (dollars per ounce) but the reality is that it's the other way around: how many dollars does an ounce of gold "buy"? so if you look at it that way, it doesn't take long to figure out that as the price of gold goes up, the dollar is really "worth less".

3. yes, many see an economic reckoning ahead with either a severe impact on our current currency system, major devaluing of the dollar, or tax rates going up to cover all this fed reserve money printing.
I'm with perikleez. As a small fraction of my net worth, I do own some gold. Physical only. I prefer coins. They are gathering dust in a safe place right now.

In my opnion, the gold ETFs are for trading. If you're going to invest in gold, it has to be physical gold. Those ETFs do not possess enough gold to equal their NAV - so you're really just buying paper and a promise that tracks the spot price of gold.

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