British investor in 50/50 US stock/gold since 1932

[Bratnia]

Data sourced from https://www.measuringworth.com/ (inflation, gold prices, £/$ rate), US stock total return from Simba's backtest spreadsheet https://www.bogleheads.org/forum/viewtopic.php?p=7135971#p7135971

Chart shows yearly total returns, left hand Y-axis scale, and total return accumulation (assuming stock dividends reinvested) in nominal (red) and real (after inflation, orange) right hand Y-axis that is log scaled. Assuming the portfolio was rebalanced to equal capital value weightings of stock and gold values at the end of each calendar year.

A 10.5% annualised nominal, 5.3% real (after inflation) in a relatively consistent manner, and where the worst individual years weren't too bad. -17 loss in 1937 being the worst, and where typically losses in one year where offset by gains in a adjacent year.

Why from 1932? Well that's when depositors who deposited their money, gold Sovereign one Pound coins, instead got paper money back when they withdrew their money, and where the state could simply print/spend money, unlike when it borrowed gold (Sovereigns) that cannot be created out of thin air. Prior to 1932 many investors/savers were content to just deposit their money (gold/sovereigns) in return for safe keeping and some interest, as most didn't pay any taxes and inflation broadly averaged 0%, such that interest rates were more like a real rate of return. Since 1931 however combined inflation (printing/spending new notes that devalues all other notes in circulation) had savers barely seeing interest after taxation offsetting inflation (in effect the crown/state transitioned from having to pay to borrow to where it cost nothing to borrow, and indeed it didn't even need to borrow when it could simply just print and spend new money, at the expense to all other notes in circulation that were devalued by such printing/spending.

[Bratnia]

This chart is just price only values, no Dow stock dividends included, and converted to Pounds. Also adjusted for RPI inflation.

Since 1968 there's been a degree of inverse correlation between Dow and gold. As stocks have performed poorly gold did well and vice versa. Only to be expected as Dow normally priced in US$ when converted to Pounds - and if the Pound is strengthening so gold priced in Pounds will tend to decline and vice-versa. Add in UK average house price data and that yielded a smoother progressive line, as did if you averaged all three. Equal measures of land (house), commerce (stocks) and in-hand (gold) asset allocation is one that dates back millennia. In modern times a UK house, US stock, gold is three different currencies additional diversity. A lifestyle choice of buy your own home, that avoids having to find/pay rent to others, and thereafter save into US stock/gold ... and that might generally be good enough for most peoples needs/objectives.

[Bratnia]

A pleasing feature with 50/50 stock/gold is that it might be considered as being two portfolios, one a 67/33 stock/gold, the other a 33/67 stock/gold. For oldies like me in drawdown/retirement the general guidance of of using a SWR (safe withdrawal rate) applied to that ... is how that might be considered as drawing a 6% SWR from either of those halves alone (rather than a 3% SWR applied to the whole), leaving the other half as-is (untouched). One or the other is inclined to sustain that withdrawal rate, whilst the other poorer forming portfolio is left as-is. When stocks are doing well that's like drawing from the 67/33 stock/gold portfolio and leaving the 33/67 side as-is, when gold is doing well you're drawing from the 33/67 stock/gold portfolio and leaving the 67/33 as-is. Historically that tended to work out OK/well. Combining both of those halves into the 50/50 whole ... and things still work out much the same. Just a mental gymnastics thing really, but comforting.