GRP wrote: ↑Sun Jan 15, 2023 3:44 pm
Interesting tidbit about Exter's pyramid:
Exter is known for creating Exter's Pyramid (also known as Exter's Golden Pyramid and Exter's Inverted Pyramid) for visualizing the organization of asset classes in terms of risk and size. In Exter's scheme, gold forms the small base of most reliable value, and asset classes on progressively higher levels are more risky. The larger size of asset classes at higher levels is representative of the higher total worldwide notional value of those assets. While Exter's original pyramid placed Third World debt at the top, today derivatives hold this dubious honor.
So do we allocate 1 to gold, 2 to cash, 3 to bonds, 4 to stocks, 5 to REIT ... and forget about leverage/derivatives, which has REIT at 33% weight, which is perhaps the value of some investors home relative to their total wealth, so discounting home value that's 40% stock, 30% bonds, 20% cash, 10% gold? Or do we reverse that, 40% gold, 30% cash, 20% bonds, 10% stock? Or average those two, 25% each in stocks, bonds, cash, gold?
for data since 1972 and each/any of those were in the same ballpark! (Around 4% real).
Seems like respective choices of somewhat ...
Fat Tail minimization
4x25 Permanent Portfolio
Similar'ish rewards, drawdowns, worst year declines, volatility.