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04 May 2020
CEO & Founding Partner at Endowus
Thank you for your question @CN.
You raise a very good point on gold, which has historically been an asset class with low correlation to the traditional asset classes of stocks and bonds. That being said, gold has historically had a lower expected return than stocks, and with higher volatility. Gold, an asset class that incurs real cost in terms of storage, and produces no cash flows, has also had changing importance in our global economic system, and we do not know how this will play out in the long-term.
If we were running a strategy to maximise our Sharpe ratio, for example, we would consider using gold as part of our asset allocation.
As we employ a strategic passive asset allocation strategy focused on the probability of maximising long-term investment success, we do not optimise for low volatility but instead, long-term asset class risk and returns. We also do not market time, so gold is not something we will move in and out of tactically, even in the short-term uncertainty we are living through during COVID.
I would be happy to chat about this more in detail.
This is also a good article I found with some more explanation:
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