Through some data adjustments, we added bitcoin to the base model for gold. The results still suggest gold is undervalued but is less so compared to the base model. The other takeaway from the model is that even with the addition of bitcoin, gold is attractive at current levels. Given the risk of a regulatory crackdown on bitcoin, there is a risk that bitcoin prices could decline, which should be supportive of gold. Past performance is no guarantee of future results.
Information provided in this report is for educational and illustrative purposes only and should not be construed as individualized investment advice or a recommendation. The investment or strategy discussed may not be suitable for all investors. Are there any other lessons we should absorb?
Would a portfolio of just equities and cash make any sense, for example? Gold and bonds paying income of zero and pathetic, respectively. Should we be looking for high-yielding equities, or just invest in global equities passively, and take quasi-income by reducing cash?
The high yielding current accounts available at present pay handsomely more than inflation, but I doubt that this happy state of affairs will long continue. This etf site has some merit. Particularly the part that can show 3 year country performance. However, what it is missing is a valuation metric for the countries, such as PE ratio. With even IGLT, 10 year average duration, yielding about 1. Both with zero risk of capital loss up to the FSCS limits. In Germany they already are. It will also be good in a deflationary environment, especially on a fixed rate.
I will build up a holding of index linked gilts again in a few years though as I start derisking. The research on gilts providing a cushioning effect on equity losses is based on period where the interest on gilts offered a positive real return. We now have a position where the interest on gilts is pretty minimal if you look at RPI. Indeed over the channel there is a about a trillion of government stock changing hands at negative nominal yields.
They still have a role to play in asset allocations, unpalatable a prospect though they seem. As for the converse, the listed stocks in emerging markets are a funny bunch in each market and not necessarily representative of each national economy at all. Neverland — thanks very much for the links. It was actually the bond research you were referring to that I was asking about. Re: overseas exposure and fidelity of local markets. I think this is something of a red herring.
Yes, the capital markets are not faithful mimics of the economy. Vast numbers of private companies and activities are not represented on exchanges. And vice versa. Good luck unravelling all of that. No problem if I recognize and accept that risk but it ought to come with a health warning. I agree there are very few hedged ETFs. I look at liquidity and avoid synthetics but still look for my base currency if it is available. Read this for more:. Re: bonds. Bonds like any other asset class can go down in value as well as up.
However, highly rated domestic government bonds are far less volatile than most: equities, gold, commodities, corporate bonds or emerging market bonds for example. If and when interest rates rise then you can expect bonds to fall in value initially. You can easily be hit by inflation that reduces the real value of your money over time and by interest rate risk i. Cash tends to be very very very safe in the short term but over the long-term decades the risk of earning far less than from other asset classes is high.
As you get closer to your investment goal or your time horizon shortens, it is expected that your risk tolerance should reduce. The focus would be on capital preservation and not growth.
At that point, it is prudent to consciously think about the level of risk your portfolio is exposed to and then take action to reduce it by switching to a more conservative asset mix. Robo-advisors and target date funds will do this automatically, but DIY investors will need to do this on their own when the time comes.
Depending on your desired asset allocation mix, there are several asset allocation ETFs available to Canada investors. Here are some of the best asset allocation ETFs available to Canadian investors, showing the allocation to equities and bonds and the management expense ratio MER.
We have a detailed post on how to start investing quickly for DIY and busy investors using asset allocation ETFs link below.
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