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End of Year Portfolio

A helpful place to also put any annual reports etc, of your own portfolios
BT63
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End of Year Portfolio

#468733

Postby BT63 » December 27th, 2021, 10:53 pm

.

As I have been posting more regularly on the forums this year, I thought I ought to list my portfolio for the curiosity of others.

The portfolio is mostly intended to be low maintenance, long-term-buy-and-hold to allow me a good night's sleep; stock markets could close for five years and I wouldn't fret.
In most years it has very low turnover; a quarter of my holdings have been with me for about two decades (!) and half the portfolio has been with me for about a decade (!).
It is a large, mature portfolio, well into six figures. I began building it about three decades ago.

Current holdings:

9% cash
25% gold bullion
8% precious metal mining funds
6% UK All-share index funds
3% FTSE-250 index funds
6 - 7% (approx) in each of: Glaxo, AstraZeneca, National Grid.
5 - 6% (approx) in each of: SSE, Sainsbury, Imperial Brands.
13% in various assorted other large-cap dividend-paying shares.

Whole-portfolio income yield: 2.1%.
Income shares yield: 4.2%.

During 2021, the portfolio gained 15% including dividends, roughly equalling the FTSE All share index total return.
Morrisons were a large holding and were taken over, and the other top three shareholdings all achieved 20% - 30% gains including dividends, making a significant contribution to performance.
The index funds gained around 14%.
The worst performing holding was gold, down around 3%.

I suspect the portfolio's 2021 winners will become 2022's losers and its 2021 losers will become its 2022 winners. I certainly wouldn't expect a second year of 30% total return from National Grid.

The precious metal mining funds were added in the last few months, with the possibility I will use some of the cash to add more soon if there is further weakness.

No major changes are planned for 2022.



.

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Re: End of Year Portfolio

#468744

Postby 1nvest » December 27th, 2021, 11:39 pm

BT63 wrote:I suspect the portfolio's 2021 winners will become 2022's losers and its 2021 losers will become its 2022 winners. I certainly wouldn't expect a second year of 30% total return from National Grid.

Thanks for sharing BT63

This is for end of January years i.e. aligned to MRC's annual reports

Image
Year to date from end of January 2021 and BRK is up 32.5% in £ terms, MRC +18%, gold -0.7%.

I see gold as a commodity currency that hedges fiat currencies. Stocks hedge gold, gold hedges stocks, and a diverse bunch of fiat/commodity currencies hedge each other.

Good stock years, bad gold years negate and leave a positive overall average bias. 1980's and 1990's were pretty bad for gold, but good for stocks and rebalancing saw multiple more ounces of gold being accumulated. In other periods ounces of gold might be deployed to accumulate more stock shares.

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Re: End of Year Portfolio

#468745

Postby Pendrainllwyn » December 27th, 2021, 11:45 pm

Sleeping well at night is an important consideration and only you can judge what works for you. I would sleep a little better if the portfolio wasn't so overweight precious metals and the UK (although the UK is where I have been investing the majority of my new money of late).

Pendrainllwyn

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Re: End of Year Portfolio

#468754

Postby Dod101 » December 28th, 2021, 7:50 am

I do not think we know what the OP's aim's are for his portfolio. Presumably no more than just a place to park some assets so as to hopefully at least maintain purchasing power. Not presumably in any sense to live off, either by drawing income or selling capital gains.

One man's meat and all that. Could he maybe tell us his aims with this portfolio?

Dod

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Re: End of Year Portfolio

#468763

Postby richfool » December 28th, 2021, 9:20 am

BT63 wrote:9% cash
25% gold bullion
8% precious metal mining funds
6% UK All-share index funds
3% FTSE-250 index funds
6 - 7% (approx) in each of: Glaxo, AstraZeneca, National Grid.
5 - 6% (approx) in each of: SSE, Sainsbury, Imperial Brands.
13% in various assorted other large-cap dividend-paying shares.

Thanks for sharing.

Apart from the miners, I didn't see any global investments. Noted many FTSE stocks do have global exposure, but what about USA, European and Asian exposure/holdings (or is this a FTSE focused HYP?).

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Re: End of Year Portfolio

#468779

Postby Wuffle » December 28th, 2021, 10:09 am

Like richfool, I would find it hard not to use the Morrisons cash to get maybe HINT or MYI. Single purchase, dividend paying with cover, international, but you clearly have a very particular view on your portfolio construction.
Also since you have done the precious metals miners recently.
An interesting contribution, ta.

W.

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Re: End of Year Portfolio

#468820

Postby BT63 » December 28th, 2021, 2:22 pm

For those who asked some questions....

The portfolio will be my pension but sometimes my wife and I use dividends or capital gains to pay for large purchases.
Our employment history is unusual but the closest approximation is to say that we used to work long hours but now work part-time (because we value quality of life over maximum earnings or promotions) and we intend to retire in the early 2030s when we will be 60+.

The portfolio's objective is probably best described as delivering reasonable returns with a reasonable yield and a smoother annual progression (e.g. 5 - 10% p.a. instead of +20% one year and -10% the next).
It is my version of a 'Permanent Portfolio' (periodically rebalanced mixture of cash, bonds, gold, shares).

I can't bring myself to lock in the guaranteed negative real yields of cash and bonds so the bond portion is zero and the cash portion is much lower than Permanent Portfolio. The utility shares are somewhat similar to bonds or inflation-linked bonds, with low growth potential but medium yield potential.

I forgot to add that I had a reasonable proportion of index tracking investments in international markets (US, Japan, Europe, Pacific) but forgot to mention that they were all sold a few months ago to add to cash, precious metals/mining and UK investments.
I see much better value in precious metals and UK shares than overseas shares. I think US shares in particular will offer mid-single-digit negative annual average real returns over the next decade or so.

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Re: End of Year Portfolio

#468875

Postby Dod101 » December 28th, 2021, 8:12 pm

BT63 wrote:For those who asked some questions....

The portfolio will be my pension but sometimes my wife and I use dividends or capital gains to pay for large purchases.
Our employment history is unusual but the closest approximation is to say that we used to work long hours but now work part-time (because we value quality of life over maximum earnings or promotions) and we intend to retire in the early 2030s when we will be 60+.

The portfolio's objective is probably best described as delivering reasonable returns with a reasonable yield and a smoother annual progression (e.g. 5 - 10% p.a. instead of +20% one year and -10% the next).
It is my version of a 'Permanent Portfolio' (periodically rebalanced mixture of cash, bonds, gold, shares).

I can't bring myself to lock in the guaranteed negative real yields of cash and bonds so the bond portion is zero and the cash portion is much lower than Permanent Portfolio. The utility shares are somewhat similar to bonds or inflation-linked bonds, with low growth potential but medium yield potential.

I forgot to add that I had a reasonable proportion of index tracking investments in international markets (US, Japan, Europe, Pacific) but forgot to mention that they were all sold a few months ago to add to cash, precious metals/mining and UK investments.
I see much better value in precious metals and UK shares than overseas shares. I think US shares in particular will offer mid-single-digit negative annual average real returns over the next decade or so.


Thanks for answering my questions. At your age and with the timescale you are planning why on earth have you so much in gold bullion and precious metal mining funds? What are you afraid of? You see much better value in precious metals and UK shares than in overseas shares? Logically you should be better in UK shares I agree; they are cheap by most measures but they have been so for many years. Better value in gold bullion? You may be right but I doubt it and of course you cannot live on the income from gold bullion!

Good luck. It is always interesting to see what others feel and apparently do!

Dod

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Re: End of Year Portfolio

#468880

Postby BT63 » December 28th, 2021, 8:44 pm

Dod101 wrote:Why on earth have you so much in gold bullion and precious metal mining funds? What are you afraid of?


I have held a large amount of gold since the early 2000s but was fortunate enough to sell a large amount (but not all) in 2011 just after it double-topped (Sept 2011) and bought undervalued shares which were still recovering from the 2008 crash.
Surprisingly, since Y2K, gold hasn't looked at all bad when compared to the mighty US stock markets, rising from $300 to $1800 now compared to S&P 500 from 1500 to 4800 now (plus token gesture dividends along the way).

It is my belief that since the Y2K bubble, both gold and the S&P 500 have floated higher only because of a tide of easy money.
The financial system is now totally addicted to funny money which is a dangerous situation. The S&P and many other major stock market indices would not be anywhere near where they are today had it not been for unprecedented monetary stimulus.

The S&P has had a great last decade and now looks very over stretched. Bull markets don't last forever, especially not after a 13-year long uptrend which increased the value 7-fold. That's as large and long an uptrend as the late-1980s to Y2K bull run.
Gold has been out of favour for most of the last decade and has some substantial catching up to do. Gold's miners are likely to offer significant leverage to the gold price, as they did in the early 2000s stock market bear or the 1970s inflation.

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Re: End of Year Portfolio

#468908

Postby 1nvest » December 29th, 2021, 12:06 am

Dod101 wrote:why on earth have you so much in gold bullion and precious metal mining funds? What are you afraid of? You see much better value in precious metals and UK shares than in overseas shares? Logically you should be better in UK shares I agree; they are cheap by most measures but they have been so for many years. Better value in gold bullion? You may be right but I doubt it and of course you cannot live on the income from gold bullion!

Most don't have the longer term temperament for including gold within their asset allocation, can endure decades of declines whilst stocks do well such as across the 1980/1990's. A consolation was the expansion in number of ounces being held, 6 to 12 fold type increase. Sooner or later fiat currencies falter, are destined to decline relative to gold and many countries even target 2% fiat currency devaluation (inflation), where investors have to invest surplus capital to offset such decline, incurring cost/fees and taxes on 'gains'. With a commodity currency such as gold it doesn't have to be invested, broadly maintains its purchase power albeit in a very volatile manner. A good addition to holding gold is stocks, significantly reduced the historic volatility.

Currencies of £ invested in land (home) price only, hard US$ primary reserve fiat currency, commodity currency gold, has imputed rent benefit on top. Invest the US$ into US stocks (total return) and the reward progression line was considerably smoothed ...

Image

If the US stock were BRK-B shares that pay no dividends (not advocating such), then a portfolio with zero regular income production and hence zero income tax declaration. Primary home and legal tender gold coins are also exempt from Capital Gains Tax.

You can live off the income from gold and/or BRK stocks, you just pay your own dividends at times and to the amounts you opine appropriate. Better that than others paying dividends that might be too much or too little or not at the times you'd prefer.

Pre 1930's, when money was convertible to gold at a constant fixed rate, it made more sense to hold money deposited into treasury bonds. Broadly inflation averaged zero such that the interest paid was like a real rate of return. Akin to having the state paying you for it to securely store your gold, That situation that had existed for centuries came to a end in 1931 in the UK, when there was a gold-rush, too many asking for money to be converted to gold at the same time. The US followed that lead in 1933 and the US$ replaced gold as the primary reserve currency on the promise that the US would respect that agreement (not print/spend irresponsibly). A promise that was broken by P. Nixon in the late 1960's/early 1970's as a means to pay down the cost of the Vietnam war.

Image

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Re: End of Year Portfolio

#468918

Postby Dod101 » December 29th, 2021, 1:08 am

It obviously depends on where you are in your investing life and I would argue how much you have by way of assets. My investment in gold has never got past a few gold coins and certainly will not now at my stage of life.

To have 25% of one's assets in gold seems to me to be far too much as it is totally non productive, and is probably more volatile than some wealth preservers. I would rather take my chances with equities.

Dod

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Re: End of Year Portfolio

#468928

Postby 1nvest » December 29th, 2021, 8:25 am

Gold is a hangover from when money was something tangible. When the Great Depression hit England in 1931 the people panicked and started trading in their paper money for gold. That gold-rush got to the point where the Bank of England was in danger of running out of gold. This was a terrifying thought, particularly for Montagu Norman, the head of the Bank of England. who faced an impossible dilemma, it was becoming increasingly difficult for England to remain on the gold standard but abandoning it was unthinkable for Norman and his contemporaries, who came of age at a time when the gold standard was the unquestioned anchor of the global monetary system. Norman's response to this dilemma - a nervous breakdown, the pressures of the job got to him and he collapsed one day and he basically couldn't function. Norman's doctor told him to leave the country and get some rest and whilst he was gone his colleagues at the Bank of England realised they had no choice, they were about to run out of gold so they abandoned the gold standard.

Nowadays money is just a figure. Money you deposit into a bank becomes the banks money along with a IOU, free for them to speculate with however they see fit within regulations that often are lacking. New money can be created out of thin air, benefits the printer who can spend that money at the cost of devaluing all other notes in circulation, inflation is a form of micro-taxation and where to offset that you have to invest money and incur costs and taxes against the 'gains'.

Harry Browne who devised the Permanent Portfolio was a gold-bug and in the 1970's after great gains from gold sought to diversify its volatility risk by blending it with other assets such as stocks and bonds.

Used to be that in being backed by or equivalent to gold, there was broad 0% inflation (but periodic spikes of inflation/deflation). Lending to the state, buying treasury (Gilt) bonds, was like the state paying you a real rate of return (interest rate) for it to securely store your gold. Stocks were for speculators, sharing the risk/reward from high risk ventures such as sending ships eastward to maybe never return, maybe return with a great bounty. A setup/arrangement that lasted centuries. The last 80 odd years have been totally different, a fractional banking system rather than banks being custodial (secure places to store your wealth), a somewhat grand casino based system where one country (US) can print/spend and export inflation onto others to its advantage. There are indications that the world is tiring of that setup and broken US promises and who knows where the next century might lead.

On a micro-economy basis, prisoners might use money fiat currency alongside cigarettes commodity currency, putting aside perishing, a packet of 20 cigarettes from 20 years ago might purchase the same today as it did back then, didn't have to be invested to offset declines in purchase power.

Berkshire Hathaway Chairman letter 1979 ...

One friendly but sharp-eyed commentator on Berkshire has pointed out that our book value at the end of 1964 would have bought about one-half ounce of gold and, fifteen years later, after we have plowed back all earnings along with much blood, sweat and tears, the book value produced will buy about the same half ounce. A similar comparison could be drawn with Middle Eastern oil. The rub has been that government has been exceptionally able in printing money and creating promises, but is unable to print gold or create oil.

Yes both fiat and commodity currencies can be very volatile, a blend of both can be better than either alone.

Owning a home is somewhat like a combination of the two, stocks are more fiat based, gold is more commodity based, those three in around equal measure broadly work well, especially if £ based home value, US$ based stock value ... £/$/global currencies, land/stock/commodity assets.

Yes rebalancing home value is impractical, other than perhaps adding/selling some woodlands (that after a couple of years can be considered as being outside of your Estate for inheritance tax purposes) or suchlike in addition to owning a home to scale up/down exposure. You don't however have to rebalance other than directing new money added towards the lower ongoing valued, or drawing income from the ongoing higher valued. For newly retired 50/50 stock/gold will likely see one or the other do well over the first 15 years, offsetting any declines in the other, and Kitces notes that the first 15 year outcome is a significant predictor of success/failure for 30 year 4% SWR outcome.

Why is gold the preferred choice of commodity currency? Because its one of the most uninteresting elements in the periodic table, doesn't rust, doesn't kill you, is solid rather than liquid ...etc. which has been widely (globally) recognised as being a appropriate choice of commodity currency across millennia. Old-money, generational wealth, favours land, art, gold. Valued paintings by dead artists (so finite/relatively rare). Lending to the state (buying Treasury bonds) is more seen as lending to someone who can print more money to induce inflation, change the interest rate, change the taxation rate, or otherwise change the rules, and where you're reliant upon the net of costs/taxes 'gains' to offset the loss of purchase power of money. And/or to speculate in public listed stocks, where great stocks are more inclined to be totally bought-out (taken private), and again gains that might just offset inflation may be taxed and incur costs such as stamp duty, brokers fees, platform fees, market makers spreads, dividend withholding taxes, FX fees ...etc. that all help line other peoples pockets with some of your money, that all helps fund the worlds largest sector (financials) to own expensive real estate offices and pay high wages/lifestyles, and who are experts at filtering off other peoples money.

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Re: End of Year Portfolio

#468931

Postby Dod101 » December 29th, 2021, 8:36 am

Thanks for the reminder of all that 1nvest. I agree with most of what you say. A good resume for the end of the year.

Dod

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Re: End of Year Portfolio

#468958

Postby flyer61 » December 29th, 2021, 10:09 am

Thanks 1nvest,

and a good resume as we go into the new year. Inflation is very much on my mind. Hoping to keep a good spread of real assets.

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Re: End of Year Portfolio

#468993

Postby SalvorHardin » December 29th, 2021, 12:29 pm

1nvest wrote:Why is gold the preferred choice of commodity currency? Because its one of the most uninteresting elements in the periodic table, doesn't rust, doesn't kill you, is solid rather than liquid ...etc. which has been widely (globally) recognised as being a appropriate choice of commodity currency across millennia. Old-money, generational wealth, favours land, art, gold. Valued paintings by dead artists (so finite/relatively rare). Lending to the state (buying Treasury bonds) is more seen as lending to someone who can print more money to induce inflation, change the interest rate, change the taxation rate, or otherwise change the rules, and where you're reliant upon the net of costs/taxes 'gains' to offset the loss of purchase power of money. And/or to speculate in public listed stocks, where great stocks are more inclined to be totally bought-out (taken private), and again gains that might just offset inflation may be taxed and incur costs such as stamp duty, brokers fees, platform fees, market makers spreads, dividend withholding taxes, FX fees ...etc. that all help line other peoples pockets with some of your money, that all helps fund the worlds largest sector (financials) to own expensive real estate offices and pay high wages/lifestyles, and who are experts at filtering off other peoples money.

Shares aren't singled out for capital gains tax (CGT). Paintings and other art / antiques / collectables are also also subject to CGT, as is gold (with the exception of British gold coins), at the same tax rates. The real monetary value of artworks and gold are reduced by inflation in exactly the same manner as gains on shares, cash, real property and every other asset.

Dealing in shares is cheap. I bought roughly £70,000 of shares in a large (S&P500 constituent) in American company a few days ago, using money that was converted to US dollars over 20 years ago so I've only paid foreign exchange fees once. The total commission was £10, there is no stamp duty on American shares and the bid-offer spread was roughly 0.1%. American dividend withholding taxes can be offset against my UK tax liability (quite a saving there) whilst the annual platform fee on the account is trivial (much less than 0.1%).

Had I spent the same £70,000 on a painting and/or antiques in an auction, I'd be looking at a typical commission for the auction house of 20% (£14,000 + VAT) on the purchase and a similar percentage when selling it (I dread to think what the bid-offer spread would be). Private sales and purchases of artwork can involve quite a bit of legwork (and fees) and I have no idea as to what a painting is worth (need to ask a professional, which costs). Storage and insurance costs for art and antiques would almost certainly be higher than the platform fees on a stockbroker account for a similar amount.

Art and antiques can be horribly illiquid assets, whereas you can nearly always find a buyer for shares in large quoted companies.

A lot of the recent move towards taking companies private is because owners and managers are fed up with reporting requirements and/or the availability of cheap debt. But if you think that the private equity companies are taking advantage of investors in the wider stockmarket, then why not join then by buying shares in the quoted specialists such as Blackstone, Brookfield, Carlyle Group and KKR.

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Re: End of Year Portfolio

#468997

Postby 1nvest » December 29th, 2021, 12:51 pm

I just casually mentioned woodland in my earlier post. Reading deeper however and I note that you can fell around 210 modest sized trees/year (4m tall, 15cm diameter) without requiring a licence and some reasonable sized woodlands are available for around £50K. More than enough to fuel quite a number of 5KW log stoves i.e. potentially replace a number of otherwise £2K/year and rising average home heating costs. Potential 20%+/year type dividend(wild guess), but involving some effort/time, maybe 4 weekends/year. Perhaps not surprising upon looking around at availability to see many woodlands having been sold.

Other choices of 'land' might be buying/selling ground rents, or garages/storage spaces.

Just a case of preferred lifestyle. I'm a pure townie whose closeness to nature is picking apples out of supermarket trays. My grandfather on my mothers side was much more self sufficient, grew vegetables, went shooting for game, salmon and mackerel fishing, mushroom picking, even kept chickens and a turkey ... etc. Fond memories of when I was a young lad of spending some time during summer holidays with him. Both he and my mother lived into their 90's (mum turned 90 this year). Me, I suspect will be more like my father and be lucky to get to mid 70's.

Similarly art wise my ability is limited to drawing match-stick-men and what others prize I would be inclined to throw-away in absence of knowing the value placed upon such. I suspect much of ownership of such art may be via 'tax/cost efficient' private title transfers. Just going by films and even some open auction purchases seem to be by 'anonymous'.

Fundamentally just stores of value against surplus capital, only being sold when liquid cash is necessitated. I've heard some say that the rich don't ever sell, just use assets to cover taking out debts that are used to fund cash spending - such that when they pass they were in debt, whilst ownership of assets may have been redirected to others in the background. Some even say inheritance tax is a optional tax/donation.

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Re: End of Year Portfolio

#469069

Postby Newroad » December 29th, 2021, 9:36 pm

Hi SalvorHardin.

Your point about listed Private Equity is well made.

I had a quick look at what UK (or de-facto UK) listed ETF's existed to cover the sector, and found IPRV - there may well be others. Might be an interesting "small holding" diversifier if it can be held in a SIPP or ISA (which it probably can).

Regards, Newroad

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Re: End of Year Portfolio

#469076

Postby tjh290633 » December 29th, 2021, 10:43 pm

Newroad wrote:Hi SalvorHardin.

Your point about listed Private Equity is well made.

I had a quick look at what UK (or de-facto UK) listed ETF's existed to cover the sector, and found IPRV - there may well be others. Might be an interesting "small holding" diversifier if it can be held in a SIPP or ISA (which it probably can).

Regards, Newroad

You might like to look at the holdings that F&C IT (FCIT) has in private equity. A link from https://www.bmogam.com/fandc-investment-trust/ will get you to their Annual Report. Page 80 is the one with the list of investments.

TJH

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Re: End of Year Portfolio

#469143

Postby Newroad » December 30th, 2021, 11:08 am

Thanks, TJH.

Also a well made point.

It's not easy to quickly ascertain what proportion of FCIT's overall holdings the Private Equity (or anything else) is - as it's often mixed together - but my back of a postage camp calculation suggests around 6.6%. That's suitable for my kids, where FCIT is the key active equity holding in their JISA's* (at about 40% thereof - so FCIT's PE represents a little over 2.6% of their overall portfolio**). When time permits, I'll have a look at ATST (our SIPPs) and MWY (our ISAs) to see if they have any material listed Private Equity holdings.

Regards, Newroad

* roughly 40% FCIT, 40% VWRL, 10% BIPS, 10% VAGP
** ex MNP, which I account for separately

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Re: End of Year Portfolio

#480541

Postby 1nvest » February 14th, 2022, 2:34 pm

Thought I'd post this here whilst to hand. US investors weren't permitted to hold investment gold within the US between 1933 and 1975. As a alternative holding physical gold outside of the US they might have substituted in silver held domestically. Values are in US$ and relative to US inflation but broadly a third each of small cap value stock, T-Bills and silver (gold from 1976) yielded 5% after inflation rewards relatively consistently across 1933 to 2020 inclusive years

Image

Diversity of stocks, bonds (counting T-Bills as a 'bond'), commodity assets, and a mixture of fiat and non-fiat/commodity currencies.

In recent times with T-Bills yielding such low amounts you might as well have just stuffed hard currency notes under a bed alongside physical silver (gold) coins/bars, also has counter party risk reduced to just a third.


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