Here is a simple, visually descriptive portfolio management system for holding 10% of a portfolio in gold.
Over the long term, the best way to make money in gold is to buy it when it falls and sell it when it rallies. But what everyone needs is a set of rules to follow so you know when to buy and sell, and to decide how much.
This is simple money management for a portfolio, but with the graphing tools at TradingView, you can see how many 10% moves there are in the ratio between these two markets. You can change your settings to different levels and get different results, but what I have shown here is that you make adjustments to your portfolio when your 10% position in gold moves up or down by 1%. When gold grows to 11% of your portfolio, you sell off 9% of it and get it back down to 10% of the portfolio and buy the S&P500 (SPY). If your gold falls by 10% relative to the S&P500, you buy 11% more gold with the proceeds of selling off a 1% portfolio position.
The data for XAUUSD and SPY goes back to 1993, so I have started the analysis at the beginning of 1994 for demonstration purposes.
There is a lot of incremental portfolio return with all of the buying and selling of gold, but this is not factoring in any costs for transactions or for taxes.
Best regards,
Tim West
3/18/2015 2:05PM EST
Over the long term, the best way to make money in gold is to buy it when it falls and sell it when it rallies. But what everyone needs is a set of rules to follow so you know when to buy and sell, and to decide how much.
This is simple money management for a portfolio, but with the graphing tools at TradingView, you can see how many 10% moves there are in the ratio between these two markets. You can change your settings to different levels and get different results, but what I have shown here is that you make adjustments to your portfolio when your 10% position in gold moves up or down by 1%. When gold grows to 11% of your portfolio, you sell off 9% of it and get it back down to 10% of the portfolio and buy the S&P500 (SPY). If your gold falls by 10% relative to the S&P500, you buy 11% more gold with the proceeds of selling off a 1% portfolio position.
The data for XAUUSD and SPY goes back to 1993, so I have started the analysis at the beginning of 1994 for demonstration purposes.
There is a lot of incremental portfolio return with all of the buying and selling of gold, but this is not factoring in any costs for transactions or for taxes.
Best regards,
Tim West
3/18/2015 2:05PM EST
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