@Mark
>> When I dig up the can [20y later] to redeem the contents ... the $100 bar of gold will most likely buy me the same suit and loaf of bread it would have when I buried it.
Well, it looks like it depends on the period, as one would suspect. I graphed FSAGX over its lifespan (started end of 1985) and it went from 10k to 43.6k, while inflation that same period went from 10k to just under 23k. But if your start point is 1996 it has just about kept pace with inflation. If your start point is much after then, looks like things are worse most of the time.
Now, I do see that GLD (started end 04) has done better than FSAGX the last 8 years, so again maybe, but GLD has declined since 2012 and mostly flat since the year after that.
So maybe over 20y what you propose is true, and you did say 'most likely', but I am wondering about the basis for what you wrote.
https://www.reuters.com/article/us-gold-inflation/gold-as-an-inflation-hedge-well-sort-of-idUSKCN1GD516

Although I did make something on GLD and SLV in the years after 2008, the total stock market made quite a bit more. I only held them with a few percentage points of my portfolio so not life-changing, but lesson learned.
Does anybody know what percentage of assets withdrawn from equities, during a crisis, go to US Treasurys vs. gold?

I'll never buy a PM or miners fund again. Way to volatile for me. I remember my early days here on the fundalarm site (2006-7 'ish). PM and commodity funds were the rage topic and I took the bait. Group-think funds as Junkster coined the phrase. I learned my lesson on that type of stuff.
I'll play a gold ETF, IAU, but no more PMs, or any commodity fund for that matter.
Thanks for the chart @catch22. Speaks volumes against buy and hold. Add one of the PIMCO commodity funds to the mix. PCRIX for example has negative returns for 15, 10, 5, 3 and 1 years.

For Old_Skeet I have in the past, at times, held some precious metal funds. From my perspective gold is simply a store of value in that in times of uncertainity it usually increases in value as investors seek to reduce risk within their portfolios and buy both gold and silver. However, unless you invest in the miners and producers then there are no earnings to be had from just owning gold or silver by themselves. Thus, for me, this makes them a tradeable play over a long term investment position.
However, I do own a commoditity strategy fund that has offered up some good production for me through the years. There again, I've had to be a shrewd buyer and position into my commodity fund when commodities were out of favor. And, even with this, at times, I've had some dead money.

To avoid random noise, or more likely selective time frames, the government requires funds advertising performance to use standardized periods ending on calendar quarters. 17 CFR 230.482(d)(3)(ii).
So I took a look at the link Ted provided, and clicked on the "quarterly" tab. It seems that PARWX, as of the most recently completed quarter, has outperformed the S&P 500 over the past 3, 5, and 10 years.
The fact that these numbers have shifted in the past two months is reflective of little more than the fund's poor performance over the past handful of weeks. To put it another way, this change isn't so much about long term performance as it is about "what have you done for me lately?"
Over the past three months (through June 13), the fund has underperformed by 7%. In the first quarter of 2019 it outperformed by 4¾%. In the fourth quarter of 2018, it underperformed by 3⅔%. Sure it's volatile. To paraphrase Mark Twain, if you don't like the performance, wait a few months.

@Carefree: Has had difficulty beating it's benchmark the S&P 500 Index over the last ten years, I'd sell.
Regards,
Ted

In what ways has it had difficulty beating the S&P 500? It seems to have beaten it cleanly over the past 3, 5, and 10 year time frames.

Thanks @msf for your (typically) well reasoned and precisely detailed analysis. I’d preface my comments by saying things always look rosier late in a decade-long bull market cycle in equities. I’m confident that if this bull lasts another 3 or 4 years the than prevailing “expert” advice will be to pile 100% into aggressive equity funds because fixed income is tantamount to rubbish.
- Easy to overlook is investor risk tolerance. No matter what one’s rationale may be for “loading up” on equities, there’s nothing like a 40-50% drubbing over a couple miserable years to bring us to our knees and shock us back to our Puritan sensibilities. In too many cases those equities piled into during sunnier days get unloaded by investors at discounted prices late in the bear cycle.
- Also overlooked by the article’s underlying assumption is that although investors might well possess a pension, SS, or annuity assets that would allow some level of subsistence, their portfolio of equities, bonds, etc. is not without some immediate purpose. In many cases (speaking from personal experience) those assets are withdrawn regularly for major expenses like travel, new vehicles and upgrades / maintenance on their principal dwelling. It’s also an emergency fund for unexpected medical costs and provides needed “insurance” against having the carpet pulled out from underneath by a reduction in SS or pension benefits (though the assumption is these benefits will remain intact).
- Further, the invested portfolio provides needed growth to compensate for inflation - arguably better than those (somewhat fixed) pension, annuity, SS benefits can. Point being: Treat those invested assets with the same care & due diligence you would if you had none of those added “insurance” products.
The article seems related to an argument advanced by John Bogle around 2013 when he said investors should treat SS as a “bond” in their allocation decisions. It was part of a wider ranging interview, so I’m posting only one commentary from a secondary source. (But the actual full interview is linked within the commentary). I’m also posting a lengthy mfo discussion from around the same time in which a number of members from various tiers shared their (somewhat divergent) thoughts on the question.
Bogle’s position: https://www.businessinsider.com/how-to-save-for-retirement-vanguard-john-bogle-2017-1
MFO discussion (September 2013) : https://mutualfundobserver.com/discuss/discussion/7814/count-social-security-as-part-of-portfolio

I generally agree with this article (about counting annuities as part of the "safe" portion of your portfolio allocation). It does gloss over a couple of points that merit further thought.
One is how to reduce to present value, i.e. how does one calculate the present value of an income stream in order to know how much one has in "safe" investments? It suggests using the commercial rate for an immediate annuity today that would be comparable to one's pension (if one is lucky enough to have one).
This approach could also be applied to an annuity that one annuitied some time in the past. One might have paid $100K for an immediate annuity in 2014, while that same annuity might cost only $70K today. In part because one has fewer years of life left, but also in part because interest rates have risen slightly. In that sense, an income stream is very much like a bond portfolio - its day to day mark to market value fluctuates.
Notice also that the value of social security isn't discounted to present value. That's because it is inflation adjusted. The value of $20K/year in 2020 is the same as the value of $20K/year in 2030. No need to discount. In the article, it appears that the writer assumed a 22 year life expectancy; $20K x 22 years = $440K shown for Client B.
The other point to think about is why own bonds at all, if your guaranteed income stream (pension, annuities) is large enough to cover essential expenses. The article suggests that the reason is to let people sleep at night ("risk tolerance").
This consideration is real but emotional (since by hypothesis the risk is minimal). If people have trouble addressing this, they will also likely continue ignoring the present value of their income stream for asset allocation. Because all one sees on one's monthly brokerage statements are the assets in the portfolio.
Of course any form of insurance (social security, pensions, annuities) has a cost (overhead). This cost can be reclaimed via the flexibility to be more aggressive with the rest of one's portfolio. Similarly, keeping a cash reserve (see thread on how much cash to keep in retirement) allows one to be more aggressive with the remaining assets.

@Carefree: Has had difficulty beating it's benchmark the S&P 500 Index over the last ten years, I'd sell.
Regards,
Ted

Not saying these are the best global dividend payers; but, it is what I own in my global equity and global hybrid sleeves found in the growth & income area of my portfolio. In my global equity sleeve I own DWGAX which has a dividend yield of 2.04%, CWGIX which has a dividend yield of 2.16%, DEQAX which has a dividend yield of 2.36% and EADIX which has a dividend yield of 3.67%. In my global hybrid sleeve I own CAIBX whcih as a dividend yield of 3.15%, TEQIX which has a dividend yield of 3.71% and TIBAX which has a dividend yield of 4.35%. All these funds pay quarterly except TEQIX which pays annually and EADIX which pays monthly.
My three highest dividend paying funds within my portfolio are PCLAX with a dividend yield of 17.23%, PMAIX with a dividend yield of 5.77% and FKINX with a dividend yield of 5.33%. PCLAX pays quarterly while PMAIX and FKINX pays monthly.
My portfolio contains four areas of investment which includes a cash area, an income area, a growth & income area and a growth area and overall has a dividend yield of better than 3.2%. When I include capital gain distributions it tops out at better than a 5% distribution yield. My current asset allocation is 20% cash, 40% income and 40% equity. This portfolio generates more than enough income to meet my needs plus I have some residual left over for new investment opportunities. Going forward, should I not be able to make enough interest in my cash area to offset inflation then I'll reduce cash by 5% and raise my income area by 5%.
My investment focus since I retired five years ago has been to invest for income generation over growth of principal. However, since I retired I have also been able to grow my principal.

I agree with @Crash; I have let Grandeur Peak go and used some of the dough in WAGOX. As it stands now, from my quick review of their international and global funds, there's only one (Emerging Markets Select) that seems to invest in anything but small and micro caps. Maybe the two new offerings will also venture into larger cap holdings. The high ERs kept me away, but my reluctance may have been penny foolish. My final sale of GP funds was GPGOX, which I bought almost at inception. As others here have pointed out, GP lost its momentum a couple of years ago. WAGOX caught GPGOX in late 2017 and hasn't looked back since.

FYI: Quick — what’s the best performing sector in the S&P 500 so far in June? No, it isn’t the highflying information technology sector — that’s second best.
The materials sector is by far having the best month of any of the 11 sectors in S&P 500 groups, up 9.5% in the June to date, according to FactSet data, as of Wednesday afternoon trade (see charted attached).
Regards,
Ted
https://www.marketwatch.com/story/this-sp-500-sector-is-having-its-best-month-in-about-4-years-trouncing-tech-stocks-2019-06-12/print
M* Snapshot XLB:
https://www.morningstar.com/etfs/ARCX/XLB/quote.html

M* seems infatuated with value funds. They have given a fair amount of coverage to the LSV family of funds, more coverage than the results warrant IMO. LSVEX (large), HIMVX (mid) and LSVQX (small) are all run my the same group of academic value quants located not too far from M*'s Chicago offices. I just don't see awarding these three funds "silver" ratings. M* has slobbered over Oakmark, also a "homey," for years while astute MF investors on this board have fled the funds.

Wasatch has earned its keep through the years, I suppose. I never threw them any money. High E.R.s.

"Just because the banks are safer doesn’t necessarily mean the financial system is"
Here's a few selected excerpts from davfor's Bloomberg link, just above. The entire article is well worth a read.

Leveraged lending has raised eyebrows partly because of how lightly it’s regulated. Fueled in large part by demand from collateralized loan obligations that offer interest rates that approach 9% on some riskier portions of the debt, the market for leveraged loans has more than doubled since 2012.
One of the ironies of the boom is that much of the risk-taking decried by central banks and regulators is largely of their own making.
Years of ultra-low rates have made it easier than ever for less-creditworthy companies to borrow large sums of money, all while pushing investors toward riskier investments. At the same time, post-crisis bank regulations have fueled the rise of shadow lenders, which helped facilitate the growth of leveraged lending. Then, financial watchdogs appointed by the Trump administration started encouraging Wall Street to dial-up more risk last year by easing guidelines to limit lending to deeply indebted companies, which freed banks to compete more directly with non-bank firms to underwrite the riskiest loans.
• “Whenever you give children toys, you know they’re going to keep playing with them until they break them,” said Phil Milburn, a fund manager at Liontrust Asset Management in Edinburgh, Scotland. “Someone has to come into the room and say put your toys down.”
• Wells Fargo research suggests buyers of CLOs include U.S. banks, insurers and hedge funds, as well as a large number of non-U.S. financial firms.
• Pimco, the world’s largest bond investor, said last month the credit market is “probably the riskiest ever.”
• When the credit cycle finally does turn, UBS estimates investors in junk bonds and leveraged loans could lose almost a half-trillion dollars, more than any downturn since at least 1987.
• Just because the banks are safer doesn’t necessarily mean the financial system is, says Karen Petrou, managing partner at Federal Financial Analytics, a regulatory-analysis firm.

Comment: Well, it certainly won't be this administration that tells anyone to put their toys down.

- “My issue is related to ... RISK TOLERANCE ... Investing is so emotional for many of us. Its hard to sit by and watch your Account Balance go down the tubes.”
- “I've (incorrectly) gone to cash more often than I want to admit over the years. Though I am shy of my 50s, I am personally still all about preservation of capital.”
- “Combine this president, with his "Tariff policies", alongside a very, very long bull market...... and I am once again (cautious).” I am mostly in CASH. “

Hi @JoeD, You raise a lot of interesting points. Nothing much I can say, but some vague thoughts might help ...
Re risk tolerance - Everybody’s different based on their own life experiences and personality. You remind me of one time in the ‘80s when I had secured a good paying job and wished to do something nice for my aging parents. Knowing they weren’t very astute in money matters, I opened an account in their name in a reputable money market fund that was yielding something like a crazy 15-20% in those days. Gifted them $1,000 which was the minimum to open an account. I hoped they would let it grow into their retirement years, perhaps add to it, and that it might benefit them years later. While grateful, they were suspicious of this new-fangled type of account in a big city somewhere and almost immediately cashed-out and moved the money to their passbook account at a local bank yielding something like 3%. So for them (both products of the Depression), even a money market fund was way beyond their risk tolerance!
Going to cash can be risky from an investment standpoint. Sure, if you will need the money within a few years, it’s a smart move. But if you are doing it with the intent of reinvesting later on, it’s tough to pull-off. I’d rather invest in something like TRRIX (a lame 40/60 fund) if I was really worried about the markets. If your guess is right and the market tanks you will lose something - maybe 20% of your money. But over the very long-term the fund should allow you to sleep better and keep you at least ahead of inflation. FWIW - My gut tells me equities are overpriced. But I’m not going to bet the ranch on that gut feeling.
Missing is reference to the purpose for which you are investing. I’d assume it’s for retirement in another 10-15 years. With retirement that near, I’d be reluctant to go overboard with aggressive equity funds myself. However, I wouldn’t exclude equities completely. I started moving out of the really aggressive stuff at about age 50 (but retired in my early 50s). Again, there are many great conservative funds that will keep you out of deep trouble during a big sell off and still help you accumulate more for retirement than cash would. Furthermore; most of us dollar cost average into our equity positions during our working years. I’d think that during those years the temptation (or need) to “sell all” and move to cash would be lessened.
re: “Bizarro” politics. I may share your foreboding. But I think we do a disservice to @Junkster who devoted considerable time and thought into creating a pretty valuable thread if we move it into the political arena. So I won’t go there and hope others don’t. What I tell myself every day is that regardless of who is President or what type of government we become, great companies like Amazon, Boeing, Apple, Microsoft aren’t going to go away - at least any time soon. So we may be appalled by some of the politics taking place, but that shouldn’t deter us from investing in great capitalist companies and sharing in the wealth they create.
There’s no right answer to any of this. And nothing I said should be construed as investment advice.
Regards

Great thread.
I’m tempted all the time to move to 100% cash - but don’t. Admittedly, my exposure to equities is probably only in the 40% area anyway. Throw in lower rated bonds (held thru funds) plus international & EM bonds (also thru funds) and there’s probably another 20% at some degree of risk. Why don’t I jump ship? Because I can’t think of any 10 year period in my lifetime when I’d have been better off having 100% in cash. (Yes - that may have been the case for a few years under Paul Volcker in the 80s.) The cost of living continues to rise yearly whether they call it inflation or not. Pickup trucks stickering in the $70,000 - $80,000 range at your local dealer ought to convince you that inflation isn’t dead.
Besides believing that a moderate degree of risk is better at any age, I get some satisfaction knowing that the folks at T. Rowe Price and Dodge & Cox are much smarter and better informed than myself, most media pundits, and many here. Sure - there’s always the possibility of a big loss - as in 2008. So my advice is: Don’t get greedy. Have a plan. Diversify. Know what you own. And keep a longer term focus.

If I had traded based on my opinions or personal biases over the years I would be looking at a very bleak retirement now. More often than not the market has run counter to my expectations. But I learned long ago not to trade based on my opinions and expectations but based on the action of the market itself. A good example was this past December. I was as bearish as anyone and expecting the long awaited corporate credit crisis to hit full force in 2019. I was ready to sit out the year drawing 2.50% in one of Fidelity’s money market market funds. But then out of the blue came a couple of huge and rare momentum days. So as bearish aa I was at the time, I had no choice but to get back into the grind. Trading is a hard game because a good trader has to admit they are often wrong. I think the above would also apply to investors unless one is a strict buy and holder.

- “Steven’s freak-out is that he’s worried about breaking the benchmark.”
- “I’m terrified that if we have a bear market I’ll be way behind again.”
- “Right now, every time the market loses a few points, I’m more nervous than I’ve been in years,” he said.
- “... the market’s recent volatility has bounced him around. Sometimes he checks his portfolio and it has been below his benchmark, other times it has him smiling.”
Sounds to me like this fella has a serious problem. But it’s not the market. He’s way too fixated on money. It’s obviously impacting his ability to enjoy life. Maybe Dr. Phil could help?
(Thanks @Ted for the 2 excellent links at the bottom of your article relating to the 737 MAX story. I’ve added them to the ongoing 737 Max thread in the interest of continuity.)

I think the decision about the amount of cash or low volatility investments to hold is not much about a "right" answer but is highly individual. The average length of a bear market can be misleading. During the Depression and the beginning of this century there were 2 bad bear markets very close together. If an individual was disciplined and replenished their cash when the market reached its all-time highs again they were a lot better off than if they allowed their equity to run in hopes of recovering a bit for lost time. In the 1970s inflation was a killer and it took around 13 years before the purchasing power of an S&P 500 portfolio was back to equal. In most cases I'm aware of the "average" recovery time for bear markets doesn't include dividends, which helps, or inflation, which hurts.
I use a slightly more dynamic approach to my cash/low volatility investments:
- When I retired I made an estimate of the CAGR I'd need to achieve to cover basic living costs (non-discretionary) and "desired" living costs if I lived to various ages, including "forever", including a static 3% inflation rate. I settled on a goal that I thought was conservative, largely due to the inherent uncertainty.
- As long as the S&P 500 is above its 200 day SMA I hold a minimum of 2 years of non-discretionary living costs in cash or effective equivalents.
- If the S&P falls below its 200 day moving average (at the end of a month) my minimum cash & equivalents increases to the larger of 25% or 5 years of "desired" living cost PLUS "potential" costs like the out of pocket maximum on my health insurance plan or a new car if I'm getting close to needing that- things which my estimates of living costs didn't fully include but could have a fairly significant impact if they occurred.
- Additionally, to the extent that I'm ahead of the CAGR I decided I'd like to target, the excess is invested more conservatively. That doesn't mean cash or equivalents, but lower correlations to the stock market.
- Finally, I keep track of my expenses at a very high level just to make sure my original estimates and/or inflation assumptions aren't way out of line and I would make adjustments if needed but I was pretty conservative so hopefully that won't happen.