The Case for Adding Gold to Your Investment Portfolio

While Bitcoin is all the rage, many still believe in the power of gold to diversify a portfolio. The downside to golds is that it doesn't generate cashflow. Yet historical data suggests that it can reduce the volatility of a portfolio and even increase the returns.

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ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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[priayief]

I am fascinated by the analyses that show how inserting gold into a portfolio tends to mitigate volatility while not (proportionally) negatively affecting returns.

[ericaveritt]

I’m new to the channel and I love it. Thank you for being one of the only level headed investment channels that actually take time and teach you on YouTube!

[favjr]

If you want to see another pop in Sharpe and Sortino ratios, get rid of your corporate bonds/total bond funds and only use treasuries (per Bengen and Trinity studies) in addition to adding 10-15% gold.

[DanDavis]

Fantastic video… AGAIN! Well done sir….. Love these videos. I learn a ton!

[Bluponi]

Thank you so much for all the great info... I only knew about Delta and PE ratios before today... You should be charging for these classes. So much good info

[timelston]

I have 15% gold, 20% long term treasuries, 5% short term treasuries, and 60% diversified equities. Each on its own isn't great, but as a recipe it's strong on perpetual withdrawal rate, short drawdown period, low drawdown percentage, and high average return. Equities include 20% small cap value, so that helps the average return.

[jecny]

Gold is one of those topics that tends to get people worked up, either for or against it. My view is more nuanced. Gold is just another asset class that works well in some economic environments and not so much in others. IMHO gold is the financial equivalent to an insurance policy. It is basically just cash in another form. Most people would not want to own a portfolio without a cash reserve. Gold adds a level of diversification to your cash reserves. The advantage that it has over other forms of cash is that unlike the dollar, pound, euro, franc, yen and the other fiat currencies, you can't arbitrarily push a button and print or electronically create more gold. In short, gold is the one form of money that is impervious to the knavery of politicians and central bankers. And with the US Dollar as the world's principle reserve currency since 1973, that means gold is mainly a hedge against the dollar. If the dollar is doing well and people have confidence in it, then gold tends to lag. If people are getting nervous about the dollar (too much debt, too much money printing, inflation etc.) then gold tends to rise as people react to dollar weakness.

[excaliburorz]

Thank you so much for walking through the statistics and all the parameters!

[peterizzo]

Hi Rob,
Cannot thank you enough for your awesome advice it has guided me into my first few months of retirement! I have a refinanced 2.25% mortgage and a SS payment that is about twice that. 20% of investments are in a Roth IRA with individual stocks, well diversified. Other 80% just moved from 401k to Rollover IRA. Doing DCA over 18 months into these Index ETFs.
VTI-40%
VXUS-25%
BND-25%
VBR-10%
I am anticipating ~ 2% withdrawals.
I have ~ 5% of my savings in physical gold. Besides the diversity and hoping for upside, I do think of it as another source of emergency funds if needed. I'd like to increase gold to more like 10% of portfolio. Lastly, I have < 5% of savings in Crypto "just for the heck of it."
Thank you again and Best Regards!

[noveltyrobot]

The biggest takeaway from this is that you cannot ignore the sexy metals. How much value do you assign to the feeling of owning beautiful gold coins, in vacuum sealed cases?

[joshraces]

Will you be adding this to your podcast so we can listen to it while driving?

[martinXY]

From an investment POV as described here, is "gold" physical or ETF?

[jimstarnes]

I’ve been called crazy only until this past year. Gold is hands down the direction investors need to go this next decade as equities are oversold and commodities have basically been left in limbo. I hold far more gold than most “traditional” investors hold but I sleep well at night. The US dollar is in a transitory period. Gold has always and will always be money. Don’t believe me. Hold an ounce of gold then hold a Bitcoin. The comparison is very clear.

[chaneque]

Saludos desde Ensenada, Baja California, México

[alexkou]

the only explanation is that gov print more money as they declared, maybe more than 10%, that is why annual return for gold is 8% during inflation period

[terryadams]

Assuming you can stomach the ride, a high SD is good when contributing level $ on a fixed schedule (if you are a long way from retirement) because the high SD drives the average cost per share bought down. A high SD is bad when drawing down your investments (retirement) on a fixed basis because the high SD drives the average price per share sold down.

[alleneverhart]

Bishop to f6. I have M1, I prefer to own stocks inside of my pies instead of ETF's except where the ETF represents an asset that I couldn't put in a pie. Example: Nasdaq top 10 stocks, TIP, GLD, GSG. I re-evaluate/balance the Nq10 pie once a quarter. Also, I vary the allocation depending on the season. Oct-May I weight stocks more heavily than other assets, Jun-Sep, I weight other assets more heavily.

[chaneque]

How about balance buying cripto and invest the same quantity in gold

[frederickamartinez]

instead of using bonds I was thinking about using non correlating assets ie
vym, gsg, iemg, vwo, vnq, to add to vti, vxus

[pommemoi]

When Rob talks about adding gold, does he mean physical gold or gold mining stocks/funds? If the former, the Portfolio Visualizer analysis omits carrying-costs and risks, which are not inconsequential.