A Barbell Approach to Investing
To bullet proof your portfolio and achieve positive returns in a crash, you need to hold almost zero equities, a lot of cash, gold / silver, hedge funds and private equity. Just sharing my thoughts. The traditional barbell approach is to hold 50% cash / AAA rated bonds, maybe silver and gold. Things that should make money when stock markets crash (defined as > 20% drop). The other 50% is equities. If stocks were to crash by 50%, at least the “safe” portfolio will rise by 5%. Cash will not give you anything. AAA bonds maybe 5%. Silver and gold maybe 10 – 20%. Mind you the portfolio will still fall by 22.5%. 50% correction of a 50% allocation = 25%. 50% of a 5% increase for the safe portion is only 2.5% increase. The other option is to go for 30% cash, gold / silver, 50% hedge funds / PE, 20% equities. In a crash, 50% of 20% for equities = 10% drop. Gold and silver up 15%, cash flat. So 7.5% (half of 30% into gold and silver) of 30% = 2.25% up. The hedge fund / PE portion...