Bloomberg/John Stepek/1-30-2023

“(Very) broadly speaking, I like to think of asset allocation in terms of just four asset classes. Equities are for growth; bonds are for ballast (making the overall ride less of a rollercoaster); cash is for optionality (ie the option to buy stuff when it’s cheap and everyone else is panicking); and finally, there’s gold.”

USAGOLD note: Though addressed to UK-based investors, Stepek’s tenets and rationale apply to investors everywhere. “You can think of gold in various ways,” he says, “but the simplest way is to think of it as portfolio insurance. It diversifies your portfolio in a different way to either equities or bonds. It’s the sort of asset that does well when everything else is doing badly.”