With a 5% allocation to gold, a traditional 60/40 portfolio of stocks and bonds would have a higher risk-adjusted return. Rawson suggests reducing the traditional allocations to 58% stocks and 37% bonds to make room for gold.
Rawson suggests the iShares Gold Trust (NYSEArca: IAU) for long-term investors as it has a cheap 0.25% expense ratio. However, large hedge funds and institutional investors would prefer the tighter spreads in the SPDR Gold Shares (NYSEArca: GLD). Additionally, for those who feel safer with gold stored in Zurich, the ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) provides another alternative.
iShares Gold Trust
For more information on gold, visit our gold category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.