Unhedged (all-stock) or hedged (67/33 stock/gold). Whatever might drive 67 stock value to halve might see 33 gold value double. No loss, just a transition from 67/33 -> 33/67 that rebalancing fixes.I'll answer your question with a question. What is your goal?
To reduce portfolio volatility or to have the highest balance at the end of the game (hopefully)?
Monte Carlo simulations, applying a 4% SWR
Unhedged https://www.portfoliovisualizer.com/mon ... 5g0TseHOpN
Median (50th percentile) case ended with 2.9 times (real); 10% percentile $0, 90th percentile 13.2 times (real)
Hedged https://www.portfoliovisualizer.com/mon ... WYj9vHtje6
Median (50th percentile) 3 times real; 10th percentile 0.5 times real, 90th percentile 9 times real.
On the basis that most will fall into the median case unhedged ended up with less than hedged. Towards the lower end/bad case outcomes unhedged beat hedged. Only towards the right tail/good case outcome did unhedge 'win', at the more extreme cases ended with around 1.5 times more (13.2 instead of 9).
The right tail/good cases are inclined to be 30 year periods that started from extreme lows, ended at highs, such as starting at the lows of the Wall Street Crash ..etc. Infrequent/rarer cases. From a withdrawal/retired perspective hedged generally rewarded more with less variance/volatility, a better Sharpe Ratio (risk adjusted reward).
All stock may accumulate more in younger years, especially when averaged into over many years. There is even sound reason to apply leverage - buy a house using a mortgage in your 20's for instance, then accumulate stocks once the mortgage burden lightens. Maybe downside the house and transition into a more wealth preservation hedged style asset allocation after the kids have flown the nest and you're looking to retire.
Statistics: Posted by seajay — Sat Sep 14, 2024 12:23 am — Replies 96 — Views 4711