Portfolio Breakdown : Managing your Precious Metals Allocation
For serious investors it’s important to have a good understanding of your current Nett Worth and know how much of each asset class you own, along with an idea of what sort of Percentage Allocation you want to have for each asset class. That last part is particularly valuable. Most people would agree that it’s good to be diversified across multiple asset classes as the individual assets often move up and down a lot in price, however it is your Percentage Allocation that tells you when you need to re-balance the assets in your portfolio.
I’ll use an example to explain. Recently "Stacker Sam" reviewed his assets and calculated that Real Estate makes up 46% of his Nett Worth which is a bit higher than he’d like it to be. His Precious Metals investments are another 31% because the price of Gold and Silver is way up over the last couple of years, but at 31% it is also a bit high. Even the hardest Gold and Silver shills recommend that Target Allocation for Precious Metals should be more like 10% but he's a stacker so he's cool with 20%. His other asset classes are currently below his Target Allocation levels which look like this next to his Actual Allocations :-
| Asset Class | Target Allocation | Actual Allocation |
|---|---|---|
| Real Estate | 40% | 46% |
| Precious Metals | 20% | 31% |
| Cryptocurrencies | 20% | 16% |
| Blue Chip Shares | 15% | 5% |
| Cash | 5% | 2% |
To re-balance his Portfolio he’d ideally be reducing his Real Estate and his Precious Metals assets while shoring up the other asset classes. However, it’s not that easy to reduce the Real Estate asset class without taking on more debt against his house. Houses aren’t really fungible or divisible or liquid, unfortunately. He doesn't really want to sell his Precious Metals but it makes a lot of sense for him to do so in this situation.
There are a lot of smart people in SGS with a decent stack like "Stacker Sam". Do you have a Target Allocation for your Precious Metals holdings? If so, what is it and have you ever sold some of your metals just to re-balance your portfolio or do you take the view that you’ll never sell unless you have to?