Gold Holdings During Lagging Interest Rates

[MediumTex]

Perhaps the information above is a good argument for holding zeroes in place of 30 year coupon bonds.

If long term treasuries have NEVER triggered a rebalancing, moving into a slightly more volatile form of treasuries might be something to consider.

[KevinW]

Perhaps the information above is a good argument for holding zeroes in place of 30 year coupon bonds.

That's what I'm thinking.  I did a very non-scientific study of volatilities and TLT seemed about as volatile as TSM and gold on a day-to-day basis.  But this evidence seems to say that the bonds ought to be even more volatile.

[Tortoise]

Isn't volatility a bit of an imprecise measure, though, when the security prices don't follow a stationary distribution? The famous mathematician Benoit Mandelbrot wrote about the difficulty in his book The (Mis)Behavior of Markets.

Mandelbrot studied financial markets for years and noted that most security prices do not follow normal (Gaussian) probability distributions, nor are their distributions stationary (i.e., constant over time). The distributions tend to be time-varying and have "fat tails," meaning they have very rare but extremely large price swings that drastically affect calculations of the securities' volatilities. You might have a security with small day-to-day volatility but crazy 10-sigma swings once every few years, and likewise you might have a security with high day-to-day volatility but almost no black swan swings. So trying to quantify volatility--whether in absolute terms or relative to other securities--can be tricky and fraught with error and uncertainty, no?

[Greg]

Perhaps the information above is a good argument for holding zeroes in place of 30 year coupon bonds.

If long term treasuries have NEVER triggered a rebalancing, moving into a slightly more volatile form of treasuries might be something to consider.

I know there was a previous thread about adding either EDV or TLT to the PRPFX to help extend the bonds portion of it. Does anyone have any graphs showing adding EDV as a percentage just to 30 year bonds and how this will affect volatility/returns at different % amounts of EDV?