JohnW wrote:1nvest wrote:The longest dated 'TIP' (inflation bond) is ... gold. Which is like a zero coupon undated inflation bond. Which is my personal preference. 67/33 stock/gold historically worked well.
That mix is a great portfolio, but not as great as one which replaced the gold with US intermediate term government bonds. That's with or without rebalancing, and with or without inflation adjustment. And the gold one had more volatility. And long term treasuries did even better. Someone else might find the UK equivalent portfolio.
https://www.portfoliovisualizer.com/bac ... sisResults But the more important point is that gold is not a bond in any sense. A bond is a contract to return an exact amount of your money; gold is like money that jumps around in value. It's a horse of a different colour.
... unless you count gold as being money. Pre 1972 US and gold/$ were pegged, so it made more sense to hold $ deposited earning interest. When that coupling was broken the $ was no longer backed by anything tangible and masses amounts of $ were printed/spent such that relative to gold the $ currency devalued considerably (price of gold rose substantially).
Similarly during world wars in not knowing the outcome you're better off holding a portable physical asset(s), gold, silver, diamonds, art/painting rolled up into a tube as your currency as you're more assured that post war you'll be able to convert that currency into another prevailing currency that is being used to exchange for goods/services at that time.
But whilst paper currencies/fiat tends to broadly decline over time, its not a consistent motion, sometimes paper currencies can rebound and see its exchange rate into gold currency strengthen (price of gold declines).
Gold has been the most enduring currency. The Pounds done well and dates back to the mid 700's when a Pound was a Saxon pound weight of silver. Other currencies have come and gone.
Harry M. Markowitz back in the 1950's said ... “
I should have computed the historical co-variances of the asset classes and drawn an efficient frontier. Instead, I visualised my grief if the stock market went way up and I wasn’t in it–or if it went way down and I was completely in it. My intention was to minimixe my future regret. So I split my contributions 50/50 between bonds and equities.”. Run the co-variances/correlations ..etc. and 50/50 stock/bonds is a good choice when the 'stocks' are split 50/50 UK and US, small and large caps, and 'bonds are split 50/50 10 year gilt and gold. At least for the UK since 1896, US since 1972, Japan since 1972. In the case of Japan the 'lost decades' vanished (J stocks, US stocks, gold, 10 year treasuries) and pretty much compared to others - around 5% annualised real rewards, but with dot com and 2008/9 financial crisis troughs/peaks (but in being more diversified less extreme than for all-stocks).
For a US investor whose currency is already the primary reserve currency perhaps
this. For UK investors the FT250 mid cap is small cap in US scale and is characteristic of a equal weighted index, so 50/50 FT250, S&P500 for stock, 50/50 gold and 10 year Gilt ladder.for 'bonds'.