scotview wrote:My wife kind of summed it up by saying that at one time someone could have loaded up their wagon with flour and provisions with a single silver dollar. Not too sure that our fiat system has the same authenticity.
Originally (around the year 750) a (Saxon) pound weight of silver was £1. That £1 could be exchanged for a lot so it was sub-divisioned into smaller amounts - and 12 divisions were considered convenient for its capacity to be split multiple ways, 1x12, 2x6, 3x4, 4x3, 6x2, 12x1 ... hence the old penny (12 pennies to a shilling, 20 shillings (240 pennies) to a Pound) type currency evolution.
OK, maybe these coins are an investment(?)
As a investment asset, you have to trade silver/gold, perhaps 50/50 with stock and yearly rebalance. The cycles can be very long so its a long term investment, same as for stocks. During the 1980's and 1990's for instance the price of gold declined something like a third, but rebalanced 50/50 yearly with stock and you're safe would have contained around 7 times more ounces of gold. When the cycle does rotate/flip, the accumulation of such stock purchase power as/when stocks do dive/gold soars can more than negate the stock value losses, and as that progresses so you'll see declines in ounces of gold in your safe, increase in share certificates being held (now more electronic than physical certificates/shares)
Some investors like to hold a bond bullet, such as rolling 10 year Gilts (buy a 10 year gilt, hold it for a year so it has 9 years remaining until maturity, and then swap that for another 10 year Gilt ... repeatedly). Others opt for a barbell, equal amounts of 1 year gilts and 20 year gilts - which combined will compare to a 10 year bullet. Another variation is to hold a barbell of stock and gold, two volatile extremes - that similarly broadly reflect a central 'bond' bullet, but in a more volatile fashion.
https://tinyurl.com/ydhfnghoTake a 2x leveraged stock fund, that borrows the same amount again as what you invest in the fund in order to double up the amount of stock exposure, and invest half into that, half into bonds and in effect what the fund is borrowing is countered by the bonds that you buy/hold.
https://tinyurl.com/y8at3bwwIf your bonds reward more than the cost the fund pays to borrow, then so your overall reward will be higher. These all have the same reward expectancy in my book
https://tinyurl.com/y79udxw2 but clearly over that period all of the alternatives beat the straight 100% in stock (Vanguard 500 fund). Primarily because 10 year treasury rewards have been higher than what funds have paid to borrow money. Typically funds pay around the same as shorter dated gilt yields in order to borrow for short amounts of time (leveraged stock funds re-borrow daily in order to roll positions) and intermediate bond gains have exceeded that
https://tinyurl.com/yc7q8gbdFundamentally you can hold whichever of the assets you more prefer. Many like 50% broad stock index, 50% intermediate bonds, others might opt for 75% stock, 25% gold. Whilst both broadly have similar reward expectancy, over sub periods one will tend to better the other, depending upon relative valuations at the start and end dates/sequence of returns ...etc. Compare for instance this (1972 start date)
https://tinyurl.com/ycnozqg6 and this (1980 start date)
https://tinyurl.com/y7jmbsrb A reason why most prefer 50/50 stock/bond over 75/25 stock/gold is indicated in the lower Annual Returns chart, where 50/50 stock/bond tends to have the lower negative side volatility. A smoother ride. For some however lower tax risks, no counter party risk ...etc. factors warrant accepting higher interim volatility (a bumpier ride) for the greater tax savings/counter party risk reduction (or whatever).
Personally I'm not particularly bothered either way, instead I use it as a relative valuation measure. Useless at identifying which stocks are better value I just go with broad index funds. Alone I have no idea whether the price of gold is fair/expensive/cheap. With some regression analysis however I identified 1986 as being a 'neutral' start date and use that to assess relatively valuations
https://tinyurl.com/yaspv52o and use that to rotate into/out/between the assets that have deviated the most. In effect let the market calculate and paint a image of what may be cheap/expensive. Trading those deviations typically adds >1% to annualised rewards IME, which helps to offset the overall portfolio fees/costs etc. (and some).