Quantifying

Sources: LBMA, Nasdaq OMX Group Many investors hold a portfolio containing only equities. Some 'balanced' portfolios will be a mixture of equities and bonds (often only conventional though with no index-linked bonds). But what is the effect of holding gold in your portfolio? The legendary investor Warren Buffet has famously disdained gold because of its lack of usefulness. But you don't have to go far on the  Bank of England  website to find a profusion of information on the subject. They boast of the 400,000 bars of gold in their vault. I make that around $240 billion at a current price of $1500/troy ounce. That's a lot of money just sitting there looking at you. The chart above uses data taken from the US Federal Reserve database FRED. I've chosen to use the Nasdaq Composite because of the availability of data going back to the 1970s. This was a period of high inflation in which gold performed well but in subsequent decades it lagged. Still the chart cle...

Short Guide to Inflation-indexed Bonds Summary In this post I introduce you to inflation linked bonds and how they can be used by investors in an investment portfolio. Introduction Most private investors focus their attention on the equity market. It's exciting and offers the possibility of big gains, albeit at the risk of big losses or worse every now and then. Others are nervous of the equity market and prefer government or corporate bonds with their predictable (mostly) flow of coupons and pay-out (hopefully) on the maturity date. If your nervousness has developed into paranoia you may invest in gold as an insurance against war and pestilence. And if all of these options and choosing between them seems like too much then, of course, cash is a respectable investment although in some countries you may now be 'rewarded' with a negative interest rate. But there's a good alternative to all of these options and that's inflation-linked bonds. What are I...