Gyroscopic Investing

I am a firm believer in not tinkering with the HB concept of the PP.  However, I'm wondering if anyone has backtested including a small percentage of silver in the gold segment.  Maybe 85/15 %.

My purpose is not to affect the performance of the PP but to just add silver to my precious metals holdings.  Let's face it, in perilous times a little silver would be much more effective for bartering than a 1oz Gold Eagle.

I know....I could do it in my VP, but for some reason it would fit nicely into my PP if it wouldn't defeat the core fundamentals of the PP.

In earlier variations of the PP, Browne advocated holding silver and gold - the PRPFX fund still does this (20% gold, 5% silver).  Browne ultimately switched to all gold and no silver.  I think the reason is that silver has a dual nature, both as a monetary store of value (like gold) and (unlike gold) as an industrial metal.  The monetary aspect is what we're after for the 25% "gold" portion of the PP.  The industrial aspect of silver is captured within the 25% stock allocation.  So, if you include silver in the 25% "gold" allocation, what you're effectively doing is changing the allocation to be less gold and more stock.

I personally don't think it's a a bad idea to include both silver and gold (at some fixed ratio - rebalancing as necessary), but be aware of what you're doing (overweighting stocks).  If you run the correlations, I think you'll find silver has a strong positive correlation to both gold and stocks - which (perversely) makes it less diversifying than holding your entire 25% gold allocation in gold.

glock19 wrote: My purpose is not to affect the performance of the PP but to just add silver to my precious metals holdings.  Let's face it, in perilous times a little silver would be much more effective for bartering than a 1oz Gold Eagle.

I've done much backtesting with silver and it adds no real advantage, just higher risk.  It is too much of a industrial metal like platinum and palladium to act like gold.

That being sad, I do believe everyone should have one bag of junk silver for emergency purposes carved out of their gold allocation.

I am 90% gold, 10% silver at this time. However, I'm about to dump silver for simplicity reasons. In a way, silver is gold on steroids, with much more volatility than gold, but it has issues too as it has this dual value.

MachineGhost wrote:

glock19 wrote: My purpose is not to affect the performance of the PP but to just add silver to my precious metals holdings.  Let's face it, in perilous times a little silver would be much more effective for bartering than a 1oz Gold Eagle.

I've done much backtesting with silver and it adds no real advantage, just higher risk.  It is too much of a industrial metal like platinum and palladium to act like gold.

That being sad, I do believe everyone should have one bag of junk silver for emergency purposes carved out of their gold allocation.

As I stated in my OP I'm not looking for an advantage as for as returns.  I'm really looking for any backtested data as to whether it will hurt the returns compared to a 25% gold allocation.

Would junk silver be that much better than 1oz Silver Eagles?

Seems I have seen several comments on the fact that holding less than 25% gold, even as low as 15% in the PP really didn't make much difference in CAGR over longer periods.

I added silver to the Simba spreadsheet a while back.  My recollection (I'm on a different computer, or I would check the real numbers) is that a 1:1 gold:silver split didn't change much.

You can get annual silver returns from Kitco et al. and plug those into Simba pretty easily.

glock19 wrote: I am a firm believer in not tinkering with the HB concept of the PP.  However, I'm wondering if anyone has backtested including a small percentage of silver in the gold segment.  Maybe 85/15 %.

My purpose is not to affect the performance of the PP but to just add silver to my precious metals holdings.  Let's face it, in perilous times a little silver would be much more effective for bartering than a 1oz Gold Eagle.

I know....I could do it in my VP, but for some reason it would fit nicely into my PP if it wouldn't defeat the core fundamentals of the PP.

15% of 25% is 3.75% of your portfolio.  I think you should do it if you feel like having the silver could come in handy at some point.  It's small enough that you probably won't notice it much as far as your returns go.

Silver actually doubled my precious metal allocation in 2011, when I sold most of it to buy some more gold. That's how I discovered the joy of rebalancing, which brought me to the PP