Skip past the menu Skip to accessibility controls

Why Financial Planners Shriek at My Portfolio: Here’s MY 60/40 Allocation

Jeff Clark, Senior Analyst, 
DEC 9, 2020

Editor’s note: Jeff Clark provides some insightful comments to consider in this article, but his personal portfolio should NOT be viewed as a recommendation from Like Mike Maloney always says, we don’t give personal advice. Everyone has to decide for themselves what the most appropriate mix is for their portfolio. Read on for Jeff’s…

The look on the broker’s face was priceless. He tried to remain stoic, but I saw the fleeting look of shock in his expression. Along with a bemused look that signaled his educational pedigree was insulted.

He was reviewing my investment portfolio. He was indeed surprised—but what he said next didn’t surprise me.

“You’re taking way too much risk. Physical gold? What good is that going to do you?”

A dozen rebuttals ran through my mind, most of which our readers can recite, but I didn’t say anything. With his lack of understanding, what would be the point?

It was 2005, and I had been buying gold and silver bullion coins, along with inheriting a little more, so it was a sizable portion of my portfolio at the time. I also owned some common stocks, but like some investors I was getting uneasy with the real estate bubble, the vulnerability of the stock market, and the growing levels of both government and consumer debt. It seemed time to play defense, especially with how giddy many investors were, so I’d lightened up on those considerably.

The broker naturally disagreed, I’m sure partly due to the fact that he earned little to no commissions on gold. His income came from selling stock and bond investments, so we shouldn’t be too surprised that that’s what he recommended. (And yes I work for a bullion dealer, but this all occurred long before I joined Mike and GoldSilver).

So here’s what has happened since that meeting in December 2005, to his stock and bond recommendations vs. the gold and silver I decided to focus on.

Asset class gains

My personal stash of gold and silver bullion has outperformed any combination of the S&P 500 and 10-year Treasury (including its dividend) over the past 15 years. With less risk. And no dividends. (I think this is where I say, “that’s what gold can do for you.”)

His client’s portfolios blew up a couple years later. Yes, gold and silver prices temporarily suffered in the 2008 meltdown too, but that was largely a liquidity event… because so many investors were long stocks, they were forced to liquidate some gold holdings to cover their positions. Gold reversed literally the month after the market meltdown as investors rushed to safe havens. Stocks took a lot longer, and many bonds stopped paying dividends along with the crash in their prices.

The bottom line is that gold has outperformed stocks and bonds over the past 15 years. Actually longer than that, as empirical research demonstrates.

But what about going forward? Is gold and silver still a large portion of my portfolio?

Gold & Silver Today: Defense AND Offense

Our readers know well that on top of gold being real money, it is an excellent hedge.

But those are reasons to always hold some gold. The reason to be overweight gold today—well, that’s the result of where we are at this point in history, particularly the massive, unpayable fiscal and monetary imbalances.

Mike Maloney has spent a lot of years and a lot of cash on analyzing these monetary imbalances, and how their inevitable correction will lead to soaring gold and silver prices. If you haven’t seen it start with his Hidden Secrets of Money series, with episode 7 probably the most relevant now.

For me, it comes down to this:

Besides, stocks are likely to return next to nothing, especially on a real basis, for the next 12 years, as successful hedge fund manager John Hussman points out.

Estimated 12 annual nominal total return on conventional 60/30/10 mix of s&p 500, Treasury bonds, and T-bills

There could be a melt-up in stocks before there’s a meltdown, but I’m looking beyond the next bend in the road ahead. Besides, a growing number of funds are recognizing they need gold in their portfolios. I wonder if my old broker from 2005 has recognized that need yet.

So what does my portfolio look like today?

The Monetary Shift Portfolio

I don’t call it the monetary “crisis” portfolio, because while there will be some type of crisis, gold is likely to be more than just a defensive asset for those properly positioned.

The types of crises ahead are likely to present a huge profit opportunity as well, with gold and silver almost certainly one of the biggest beneficiaries. No guarantees, but here’s a good example of what I think is likely coming.

As such, my investments are in the following five categories, from largest to smallest (the percentage of each fluctuates). Cue the gasps from financial planners.

  1. Physical gold and physical silver, held in multiple locations but the bulk in professional storage.
  2. Mining stocks, focused on gold and silver projects (and some uranium). Keep in mind that I’ve worked as a mining analyst so feel comfortable buying them, though history shows mining stocks tend to follow gold.
  3. Treasuries, since they’re safer than corporate bonds and in case the US dollar rises over the next couple years.
  4. Cash, both for liquidity purposes and buying opportunities.
  5. Cryptos, including some bitcoin.

That’s it. No common stocks, no bonds (except Treasuries), no real estate investments (yet). That’s why financial planners shriek at my portfolio.

This is how I think I should position my investments at this point in history. Based on my research, this portfolio is the best combination of defense and offense for the foreseeable future. Someday it’ll change, but that’s for another day.

You can disagree, and most investors probably shouldn’t do what I’m doing anyway. Like we always say, we don’t, and shouldn’t, give personal advice. But I share it to show that my “money” is where my mouth is.

There’s no guarantee my portfolio will outperform a traditional stock/bond portfolio. But there wasn’t in 2005 either, and the positive case for gold and the negative case for stocks is much greater now.

  • Show me that monetary, fiscal, market, and geopolitical risks (among many others) are low or nonexistent, and I’ll reconsider.

Until then, I’m buying the next dip in gold and silver.

(Follow Jeff on Twitter @TheGoldAdvisor)