Investing, economics, finance and random thoughts.
Posts tagged historical returns
The Home Stretch…
Nov 23rd
In January of last year I asked what people thought would perform the best of the four Permanent Portfolio Assets (Stocks, Bonds, Cash or Gold). While I tossed my hat into the stocks camp (which have recovered sharply since last year), the gold bulls seem to be winning. Here’s the breakdown according to Morningstar using a standard ETF version of the Permanent Portfolio for ease of performance tracking:
SPDR Gold Shares (Ticker: GLD): +30.54
Vanguard Total Stock Market (Ticker: VTI): +25.44%
iShares Short Treasury Bond Fund (Ticker: SHV): +0.20%
iShares Barclays 20+ Year Long Term Treasury Bond Fund (Ticker: TLT): -17.76%
YTD Morningstar Total Returns (capital gains, interest and dividends): +13.21%
Gold has been able to beat stocks so far this year. I was pretty sure that stocks would rebound strongly but didn’t expect gold to still do so well. We still have a month to go, but looks like the gold bulls may be buying the champagne come New Year’s Eve.
Long term bonds took a beating so far, but usually it is the case that one or more assets in the portfolio may be doing poorly while one or more may be doing well. Normally what happens are the gains from the winners can offset the losses from the loser. Not always, but mostly. So even though LT bonds are down almost 20%, the stocks and gold have provided more than enough power to grow the portfolio in total. And of course that’s what really matters. Don’t look at assets in isolation, look at how they work together in the total portfolio value.
Right now is also a good time to remind taxable investors to start planning for end of year rebalancing sales to capture losses (such as the Long Term Bonds), to take gains to offset against losses, etc. If this is confusing to you, talk to an accountant for some advice as smart tax loss harvesting can significantly reduce your tax bill.
Happy Thanksgiving…
Permanent Portfolio Historical Returns
Dec 22nd
Let’s get to the meat of any investment strategy: How well does it actually work?
In a prior post we talked about the Permanent Portfolio allocation which is:
25% – Stocks (in a broad based stock index fund like the S&P 500)
25% – Long Term Treasury Bonds
25% – Gold Bullion
25% – Cash (in a Treasury Money Market Fund)
This allocation will provide protection when the economy shifts through the cycles of prosperity, inflation, deflation and recession.
Now, some may be thinking that this allocation sounds very different than what they’ve seen elsewhere. For instance, the idea of owning gold is scoffed at by some investment advisors because it has no dividends or interest. Long Term Bonds? Many will tell you that they’re too risky due to rising interest rates. How about Cash? Isn’t holding a bunch of cash missing out on the hot stock market action? And, only 25% in stocks? Well everyone knows that stocks always beat every other investment so surely you want more than 25%, right? Right!?
Not exactly.