Can Gold Help Diversify a Portfolio? -Barrons
"Gold has had a great run this year. But it's always had a questionable reputation among many money managers because of its volatility and difficulty in valuing. Now, InvestmentNews cites a study showing that a 5% allocation to the yellow metal improves the risk-adjusted performance of a standard portfolio of 60% stocks and 40% bonds.
For optimal risk-adjusted performance, as measured by the Sharpe ratio, the standard 60-40 portfolio should be set at 60% stocks, 5% bonds and 35% gold, according to GraniteShares' research. 'Adding gold to a portfolio improves the Sharpe ratio, and a 35% allocation is optimal,' said Will Rhind, founder and chief executive of GraniteShares, an ETF provider whose funds include the GraniteShares Gold Trust ETF (BAR). Rhind adds: 'Gold has more value in a portfolio than most people think.' When the analysis was pushed back to the beginning of 2000, it showed that adding an allocation of just 5% gold provided superior or equal risk-adjusted returns to a 60-40 portfolio 79% of the time."