One big lesson from America's 'tin decade'
In this issue:
» SEBI twists fund houses' ears once again
» Jim Rogers bearish and bullish on US dollar
» Pimco's El-Erian is a worried man these days
» US Parliament passes financial reforms bill, but then...
» ...and more!!
------- FREE Newsletter -------
Dont't get tempted to gamble your savings on some 'hot tips'
Get The Honest Truth, the e-letter by Ajit Dayal, directly in your mailbox.
It's FREE. Sign Up Today.
---------------------------------------
00:00 |
Chart of the day |
Data Source: Yahoo Finance
Nevertheless, this last 'tin decade' for US investors offers a great deal of learning for investors around the world.
The foremost lesson is that asset allocation works. Not the asset allocation that divides money between large-caps, mid-caps, small-caps, penny stocks, dot com stocks, or realty stocks (as US investors thought).
But an asset allocation that divides money between cash, stocks, bonds, gold, real estate, commodities, and international markets.
There is an important lesson for you in this. A proper allocation between these asset classes - cash, stocks, bonds, gold, and real estate - will go a long way in safeguarding your portfolio when any one of these asset classes crash.
While a single allocation does not work well for all kinds of investors, those with a 10-year horizon can have around 40-50% allocation to stocks. Another 5-10% can be put into gold, 5-10% in cash/liquid funds (for emergency needs), and 30-40% into property.
But always remember, periodically rebalance such an allocation. For instance, if your 40-50% stock allocation rises to 60-70% (possibly as the markets rise), then sell some stocks and add to other asset classes to bring your portfolio in line with your original allocation.
01:21 |
||
The market regulator, in a circular to all mutual funds and asset management companies (AMCs), has instructed, "You are advised to ensure compliance with the instruction of the investor informing his desire to change his distributor and or invest directly, without compelling that investor to obtain an NOC from the existing distributor."
Let's call it another way towards investor independence and empowerment. But there will be a lot of hearts (distributors') that will burn!
02:05 |
||
From a long-term perspective, Rogers is bearish on the US dollar. However, he believes that the dollar will rally in the short term. What is more, he has increased his holdings in the currency. The reason for it is simple. While the dollar has its share of serious problems, other currencies are not exactly endorsed by strong economies either. And in the medium term at least, it seems unlikely that the dollar's status as the world's reserve currency will be challenged. However, we believe in the longer term, the case for a weaker dollar holds given the gargantuan debt that the US has amassed over the years.
02:49 |
||
But the sad part is that these are not permanent sources of growth. Sustainable growth in the US can come only from the private sector - consumers and companies. However, these sources are unlikely to pitch in with their share of consumption anytime soon due to the tremendous headwinds of unemployment they are currently facing. Indeed these tough times do not look they are about to end in a hurry.
03:34 |
||
These reforms are likely to not only restrict Wall Street profits but also ensure good governance. But then, as with all other reforms, the key will be implementation!
04:05 |
||
Note: Countries are representative of their benchmark indices
Talking about gold prices, and that of silver (which declined 7% during the week), we do not see this correction as changing their long-term trend, which is of rising prices. This decline in fact can be used by you to buy into these metals in small lots to build up an allocation of 5-10% of your total investment portfolio. Of course, these prices can fall more but you can then just average out your costs.
So, are you buying gold and/or silver at the current levels? Share your views
04:43 |
||
04:59 |
Weekend investing mantra |
Today's Premium Edition.
Recent Articles
- All Good Things Come to an End... April 8, 2020
- Why your favourite e-letter won't reach you every week day.
- A Safe Stock to Lockdown Now April 2, 2020
- The market crashc has made strong, established brands attractive. Here's a stock to make the most of this opportunity...
- Sorry Warren Buffett, I'm Following This Man Instead of You in 2020 March 30, 2020
- This man warned of an impending market correction while everyone else was celebrating the renewed optimism in early 2020...
- China Had Its Brawn. It's Time for India's Brain March 23, 2020
- The post coronavirus economic boom won't be led by China.
Equitymaster requests your view! Post a comment on "One big lesson from America's 'tin decade'". Click here!
29 Responses to "One big lesson from America's 'tin decade'"
sharad gupta
Dec 14, 2009what are the gold ETF how one can buy them can ETF be traded in the market as shares, what are the good companies of gold ETFs, what should be the level of entry for gold ETF
Please suggest
Thanks
Ram
Dec 14, 2009My comment refers to the statement: "Not the asset allocation that divides money between large-caps, mid-caps, small-caps, penny stocks, dot com stocks, or realty stocks (as US investors thought)." I think this statement is unwarranted and could have been avoided. There have been umpteen instance when your column has recommended asset allocation across different market-size caps and industry class.
sankar
Dec 13, 2009One can buy gold using Gold ETF.. there are a score of them around, but how does only buy silver without getting in to commodity trading?
JOSHI JANAKKUMAR
Dec 13, 2009GOLD IS BOUGHT WHEN A)THERE IS A FEAR IN THE MARKET B) HEDGE
AGAINST CURRENCY. IF IT FALLS BELLOW 20% THEN IT WILL ENTER IN TO BARRISH ZONE. IF IT IS A BUBBLE BURSTING IT MAY NOT RECOVER TO THIS LEVEL FOR LONG PERIOD OF TIME. ALSO IF INDIAN CURRENCY RECOVERS GOLD WILLBE AVAILABLE CHEAPER TO AN INDIAN.
manoj sikka
Dec 13, 2009i want to buy gold & silver at the current levels so plz tell me the way when should i entire in which level and what was the target in the year of 2010 thanks
Vijay Sam
Dec 18, 2009Now is a good time to accumulate Gold via ETF