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Is 35/55/3/3/4 the Ultimate Portfolio Today?

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By Jared Dillian via Iris.xyz

Lot of strong feelings on gold.

Some people think it has no utility. Other people have pretty reasoned arguments about how gold maintains purchasing power across the centuries.

It was in a bubble eight years ago that sucked a lot of people in. There were some sketchball commercials for gold on Fox News. The people who missed the bubble spent the next eight years mocking the people who got sucked into it.

(I got sucked into it.)

Also, a lot of people think gold is obsolete in a digital world, with bitcoin and all. But crypto (as much as I am warming up to it) is an unreliable store of value, at least for now.

Now, most people are kind of neutral on gold and are off arguing about other things. I am thankful we are done yelling about gold. Because now we can talk about the real reason you should own gold.

The Real Reason

I have been talking a lot about portfolio construction lately.

Most idiots have an 80/20 portfolio (80% stocks/20% bonds) or a 90/10 portfolio or even a portfolio that is 100% stocks.

Recently, I’ve made the case for a portfolio that is 35% stocks and 65% bonds. Over the last 20 years, that portfolio has been giving you a little less return, with a lot less risk.

In hedge fund terms, you would say that it has a better “Sharpe Ratio.”

I have been also experimenting with variations on the 35/65 portfolio, with some incredible results. For example, a 35/55/10 portfolio (35% stocks, 55% bonds, 10% commodities) has even better risk/return characteristics. And if your view is that commodities are underpriced, terrific.

But wait, there’s more.

How about a 35/55/3/3/4 portfolio? That’s 35% stocks, 55% bonds, 3% broad commodities, 3% gold, and 4% REITs.

Click here to read more on Iris.

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