Whether it’s investing in equities or investing across asset classes, the key objective for investors is wealth creation. However, the most basic objective is to generate returns that beat the rate of inflation. This helps in preserving the purchasing power of an individual.
As we live in uncertain times, tactical asset allocation is of paramount importance. With that in mind, here’s a possible portfolio allocation strategy for the coming years.
But before we dive in, let’s look at a few relevant observations.
In the fiscal year 2000, the S&P 500 index was trading at 1,440. By March 2009, the index touched lows of 666. Between March 2009 and now, the index has surged by 419% and currently trades at 3,458.
Between June 2013 and June 2019, gold was trading in a tight range of $1,200 to $1,300 an ounce. Gold has surged in the last 1.5 years and recently traded above $2,000 an ounce.
Adjust for split, Tesla (NASDAQ:TSLA) stock was trading at $48 at the end of FY2015. The stock was trading around sale levels in September 2019. In the last one year, the stock has skyrocketed by 798%.
There are similar observations for different asset classes and stocks. When observed over a time period.
A key conclusion is that timing exposure to a stock or asset class is critical to delivering healthy returns. Considering the current investment environment, let’s examine an ideal portfolio allocation strategy that can create value in the next few years.
Gold In the Long-Term Portfolio