Poll: more gold as a person gets older?
RedTiger
Posts: 5,608 ✭
I've been spending some time on the Vanguard discussion boards and they tend to focus on certain keys:
Living under ones means, very high savings rate, age appropriate asset allocation, low cost mutual funds
Gold and certain other investments are basically non existent to those folks unless the lead John Bogle gives his blessing, so there would not be a good place to ask.
The question is about asset allocation. In general terms would you suggest more gold as a percentage as a person gets older? A fixed percentage? Or less gold as a percentage? Or do folks think that it depends on specifics of the situation.
Lets look at two ends of it: A young person with little net worth and high income has little need for gold in the classic sense of insurance. They don't have much net worth to insure. A retired person with high net worth would be wise to have a good chunk as insurance. However, a retired person that needs income may need interest or dividend generating assets for money to live on. Unfortunately, more than half of Americans have not or will not have saved enough for retirement. A retired person with a huge net worth doesn't need that much as insurance either. A smaller percentage would still be insurance against unthinkable scenarios.
I'm on the fence on the issue. Think for a moment before responding, unless you have already thought the issue through. Forget for the moment about the economy, the debt, the dollar, and the news. So forget about timing, because timing is a non-existent issue on the Vanguard boards. It is all about deciding the proper percentages and rebalancing and sticking to the plan. Focus on the question at hand. If you were contributing to a book on the subject and they came to ask your opinion on this chapter what might you say? Hopefully what you say was sound 10 or 20 years ago, and will still be sound 10 or 20 years in the future.
Living under ones means, very high savings rate, age appropriate asset allocation, low cost mutual funds
Gold and certain other investments are basically non existent to those folks unless the lead John Bogle gives his blessing, so there would not be a good place to ask.
The question is about asset allocation. In general terms would you suggest more gold as a percentage as a person gets older? A fixed percentage? Or less gold as a percentage? Or do folks think that it depends on specifics of the situation.
Lets look at two ends of it: A young person with little net worth and high income has little need for gold in the classic sense of insurance. They don't have much net worth to insure. A retired person with high net worth would be wise to have a good chunk as insurance. However, a retired person that needs income may need interest or dividend generating assets for money to live on. Unfortunately, more than half of Americans have not or will not have saved enough for retirement. A retired person with a huge net worth doesn't need that much as insurance either. A smaller percentage would still be insurance against unthinkable scenarios.
I'm on the fence on the issue. Think for a moment before responding, unless you have already thought the issue through. Forget for the moment about the economy, the debt, the dollar, and the news. So forget about timing, because timing is a non-existent issue on the Vanguard boards. It is all about deciding the proper percentages and rebalancing and sticking to the plan. Focus on the question at hand. If you were contributing to a book on the subject and they came to ask your opinion on this chapter what might you say? Hopefully what you say was sound 10 or 20 years ago, and will still be sound 10 or 20 years in the future.
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Comments
I had a customer who cashed out everything when interest rates were in the double digits. He was a happy man in his retirement years
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
A round 10% seems appropriate to me.
If you're just starting out, and your assets are worth little--a couple thousand dollars, maybe--having a few rolls of silver dimes, quarters, or even a couple of 10th eagles makes since. They're liquid, transportable, can be hidden and accessed easily.
As you become more established, you're able to add to your holdings quickly by simply adding more to your stack. Dollar cost average a few half eagles or eagles. Add a few rolls of SAEs.
--Severian the Lame
That is a fatal flaw in their thinking. Things are not static or frozen in time. Even in their world, the analysis changes along with long-term trends. To ignore gold as a component in a diversified portfolio assumes that all else will buffer each other. I guess that depends on the internal correlation coefficients between each component in their portfolios.
If you don't include all asset classes when you rebalance, how can you expect stability over time?
That would be my answer to them.
To you, and other reasonable folks here - I say that the situation isn't 1958 and Ike isn't in the White House anymore. Neither is Reagan. Just because the US is still the most stable large country in the world - doesn't mean that it's as stable as it once was. The "flight to safety" represented by the dollar in days gone by is being methodically and globally abused.
Does that affect the rebalancing question? I think it does, if most of the assets are dollar-denominated. Don't these guys understand that much?
Furthermore, company stock portfolios as a longterm investment are in question, in my opinion. Stock valuations aren't being driven by the same things as they were are recently as 20 years ago. We have a stock price bubble being sustained by printed money, and not by increases in productivity, efficiency or expansion. Costs are as low as they are ever going to get, and quality has also suffered. Anything that happens now will increase costs, except maybe for falling salaries and labor rates.
It's a different equation when the only way to pump up the profitability numbers is by printing money. Call me crazy, but try to prove me wrong.
Oh, in answer to the OP - yes, increasing gold and silver until something else becomes more viable in promoting real economic growth. Everything else is just a bad gamble.
I knew it would happen.
Again, I'm not going to argue for or against any specific percentage number. Some say 5%, some say 10%, some 25%, some even higher. The actual percentage is a separate question. What I am asking is whether it is logical to increase the percentage as a person gets older. I'd say a slight increase in allocation percentage makes sense.
A fixed allocation percentage disciplines a person into steady accumulation, which for average folks works way better than trying their hand at market timing. A fixed percentage is also good in that folks find out where to buy (and sell) in small quantities, before they have big money to allocate.
Rebalancing at fixed allocation percentages can be a self-regulating equilibrium that hopefully moves money into markets where valuations are better than the current hot market(s).
As a rule of thumb I think a person should keep about 10% of his wealth in gold. When younger
and there are almost no wealth and in times of low inflation or high gold prices this might be as
low as 1 or 2%. In times of enterring inflationary periods or when more wealth has been accum-
ulated this might be as high as 20% and for speculators it could even be slightly higher.
Near the end of life if one has enough wealth that there's no longer a real danger of running out
then it might be wise to reduce this and speculate a little on promising technology and enterprises.
This might be a form of altruism and might even allow one to continue to make a difference after
he dies.
"Gold" doesn't always have to be exactly in the form of the yellow metal in one's possession. For
most investors it probably should be but if you are able to monitor your own investments and to
move in the event of changing conditions then you can use "equivalencies" for part or all of your
gold holdings from time to time. For instance silver performs soe of the same functions as gold so
some might want to invest some of their gold in perhaps silver and shorting bonds or going long
in currencies. Perhaps a gold mining stock or strips from gold producers can take the place of ac-
tual physical gold sometimes. Vast real estate holdings in places with worked out gold mines could
become extremely valuable if gold prices soared.
Most people should try to adjust their gold holdings at least slightly to take profits and buy cheap
but 10% is a rule of thumb.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Cladking, with all due respect, 10% went out the window along with the dollar. Gold is less an investment these days as it is more a wealth (savings) preserver. >>
I do tend to agree.
In normal times there are plenty of places to park money but with the economy
the way it is it can be difficult to keep under 10% as the price keeps increasing.
It's a good time to buy gold but there are other opportunities starting to arise
and it's never a good idea to keep all yor eggs in one basket.
These are unusual times; one might say interesting times.
<< <i>Cladking, with all due respect, 10% went out the window along with the dollar. Gold is less an investment these days as it is more a wealth (savings) preserver. >>
I asked about "all weather" advice. Like I said, advice that can stay in print, that would have been good ten years ago, 20 years ago, or 30 years ago, and also into the future, 10 years ahead, 20 years ahead, 30 years ahead. That's what responsible fiduciaries do, think very long term. They don't tilt the sail towards the wind or against it, they make a decision after much study, and stay the course, no matter which way the wind blows.
What you seem to be talking about is too much of a reaction to the current news events, which is par for the course on this forum, but in the long term is often a dangerous course to chart. Keep in mind that one of the very best times in recent memory to buy gold was when the U. S. government last had a budget surplus in 2000/2001, and many states also had a surplus. It is a big stretch to think the opposite, that all time record deficits means it is a good time to sell gold, but it is a thought worth thinking.
Again, I'm not going to argue for or against any particular percentage. There are too many personal variables to make much sense of it.
I knew it would happen.
<<< If you are looking strictly from an insurance and capital preservation perspective, then gold & silver is the way to go. >>>
Wow, unbelievable.
of gold. 67, means 67 ounces. That's how it works. Then when you croak your kids can
throw one heck of a wake and bury you too!
bob
So forget about timing, because timing is a non-existent issue on the Vanguard boards.
There was a time when they could not see their own market timing.
<< <i>You should match your age in ounces of gold. If you are 35 you should own 35 ounces
of gold. 67, means 67 ounces. That's how it works. Then when you croak your kids can
throw one heck of a wake and bury you too!
bob
Dad burn
Many seldom or never sell, they just "keep on stackin!" for the future they imagine, and then someday they die
Their heirs sell to a different midas and the cycle continues
Liberty: Parent of Science & Industry
<< <i>You should match your age in ounces of gold. If you are 35 you should own 35 ounces
of gold. 67, means 67 ounces. That's how it works. Then when you croak your kids can
throw one heck of a wake and bury you too!
bob
I'm not sure if that is tongue in cheek or a serious reply, but it is one of the more insightful replies and I may start repeating it, or a modified version. There is wisdom in that idea even if it was meant as a joke. However, for a young person at their first real job, it is a going to be a long haul to get to their first allocation, unless he is a trust fund baby. Say 23 years old fresh out of school, one of the very lucky ones to get a half-decent job. 23 ounces is going to be a full year's post tax salary or more for 80% of kids. How to get to that point from a negative net worth and a pile of student loans and still live at all? That's a difficult course to chart or recommend.