Legendary Investor Mark Mobius Endorses the 10% Golden Rule

Mark Mobius, the legendary emerging markets investor, says that 10% of investors’ portfolios should be in gold in anticipation of currency devaluation as a result of unprecedented stimulus measures.

Speaking to Bloomberg on Monday, Mobius said that devaluation “is going to be quite significant next year, given the incredible amount of money supply that has been printed.” As such, it’s going to be “very, very good to have physical gold that you can access immediately without the danger of the government confiscating all the gold.”

I would add that even if you’re not too worried about currency devaluation (you should), gold still looks attractive as a diversifier, especially now that the market has ripped to new highs for a record number of days.

The S&P 500 notched its 53rd record close of 2021 on Monday, the most ever in any calendar year through August, even as economic indicators spell weakness due to the pandemic. Stocks also appear overvalued right now with a price-to-earnings ratio of more than 27. This may prompt some investors to wonder if the bull run is overextended and to seek a store of value such as gold or Bitcoin.

Historical Benefits of the 10% Golden Rule

I second Mobius’s call for a 10% allocation in gold, something I’ve recommended for years now. I call it the 10% Golden Rule.

But don’t take my word for it. A recent study by the World Gold Council (WGC) shows that a gold allocation of 10% helped improve risk-adjusted returns over the past 20 years. Between June 2001 and June 2021, a hypothetical portfolio that held 10% in physical gold had higher annualized returns and lower volatility that a portfolio with 5% in gold. It also outperformed a portfolio that was invested in a broad-based commodities index and one that wasn’t invested in commodities or gold.

Gold Improved Absolute and Risk-Adjusted Returns
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