Asset Allocation for a Balanced Portfolio

There is no safe investment. A company can go bankrupt, an economy can crash, and a government can destroy money. But that doesn’t mean you should pile all your cash into risky assets.

I keep cash, gold, and stocks in our portfolio. Each has its purpose: gold to store value, cash to transact and invest, and stocks to make money.

I try to keep our investment assets divided into three buckets:

  • 20 percent cash
  • 30 percent gold (and other precious metals)
  • 50 percent stocks

Keeping our assets takes some focus and patience. We may dip down to 10 percent cash until we sell some stocks. And we may hold extra cash for awhile while we hunt for bargins. But no matter where we are, we are always trying to keep balanced.

Asset 1: Cash

When the price of gold drops or we find another great stock, we want to be able to buy it. The only way to take advantage of those moments is to have cash ready to go. The last thing I want is to have to sell something, or wait days to transfer money to the right account.

We try to keep about 20 percent cash. This is cash that is sitting in our Interactive Brokers or Hard Asset Alliance account ready for use, not cash in savings or emergency accounts.

Asset 2: Gold

Governments around the globe are printing as much money as they can get away with. Printing money destroys its value (ask people in Zimbabwe or just about anywhere in South America). When currencies are being destroyed, you have to hold real assets.

The dollar may not crash tomorrow, but I ‘m convinced it will lose value. That’s why I want a good amount of our assets in gold (and other precious metals like silver and palladium). Gold may go up and down, but it will never go to zero. It’s more likely to skyrocket (in which case it will be wise to sell some), but we’re holding gold for long-term security, not for speculation.

I try to keep one-third of our investment assets in:

  1. Bullion. We want most of our gold in physical bullion (coins and bars). How you split it up depends on your situation, but you’ll probably want some or all of it in a secure vault. We buy gold and silver bullion through Hard Asset Alliance and store it in various vaults around the world (see: How to Buy and Store Gold Securely).
  2. Stock. We also buy some safe precious metal trusts. Central Fund of Canada (CEF), Sprott Physical Gold Trust (PHYS), Sprott Physical Silver Trust (PSLV), and Sprott Platinum and Palladium Trust (SPPP) are my favorites.

Asset 3: Stocks

Without the time to properly research investments, we rely on Casey Research for investment guidance. They produce exceptional monthly investment newsletters that track various investment sectors, each with a tailored investment portfolio (when to buy, hold, sell). They share our outlook on the world and have some of the best minds in the business trying to stay ahead of the curve.

Quality investment newsletters aren’t cheap, but they are worth their weight in gold once you have a decent amount to invest. If you’re just getting started, I recommend their best value publication, the Energy Dividends newsletter, where we get our recommendations for solid energy companies (the backbone of our portfolio).

I keep no more than half of our investment assets in stocks:

  1. Strong Energy Companies. As mentioned above, I keep about a third of our stock portfolio in solid companies such as those covered in the The Colder War Letter newsletter.
  2. Junior Energy Companies. My favorite sector to invest in is the junior energy sector covered in the Casey Energy Report. Junior energy companies are the “start ups” of the energy sector. Most of these companies never make a dime. But the ones that do either become the next big energy company, or get acquired by an existing one. Either way, you’re in for a huge gain. The Casey team, led by senior energy investment strategist, Marin Katusa, has an incredible track record in this sector.
  3. Junior Mining Companies. Similar to junior energy companies, junior miners are literally looking for gold. This is the most volatile sector in the world, but the good companies in this mix are huge levers on the price of gold; when gold goes up, these companies typically go up 10, 20, even 50 times more than gold. With gold finding its bottom and destined to go higher, this is a place where fortunes can be made. Casey’s Louis James travels the world visiting mining sites to find the best out there for the International Speculator publication.

What is your idea of a balanced portfolio?