Balancing a portfolio

shokadelika

jem16 wrote: »

No it's becaue they are not authorised to deal in shares, nothing to do with commission.

Gold and silver bullion is not "a share"?.

I'd personally steer clear of commodities.

Gold performs a dual function in that it is classified both as a commodity and a currency.

dunstonh

Of course gold and silver pay no renewal or trail commission to financial planners and advisers maybe that is why most of them do not seem to understand or recommend them as an investment.

I would love to see the complaints come in if an IFA was to recommend bullion. Anyway its a non issue as its outside the scope of advice for authorisation for IFAs.

jem16

shokadelika wrote: »

Gold and silver bullion is not "a share"?.

Perhaps I should rephrase that to direct investments such as shares.

Aegis

dunstonh wrote: »

I would love to see the complaints come in if an IFA was to recommend bullion. Anyway its a non issue as its outside the scope of advice for authorisation for IFAs.

Would a commodity ETF be within scope?

dunstonh

Aegis wrote: »

Would a commodity ETF be within scope?

ETFs are outside the scope of permission for most IFAs. Some firms may employ stockbrokers or have special permissions to allow them to use direct/quoted investments.

There is a list here of IFA's who deal with investing in Gold Bullion in a SIPP

SIPPS are within the authorisation of IFAs but Gold bullion within the SIPP would be outside the authorisation. The tax wrapper is one thing. The investment is another. Quite a basic error from someone getting involved in advanced investment options.

jon3001

Aegis wrote: »

For a larger portfolio, I'd absolutely agree that a little investment in gold and other metals is a good diversifier, but as the 4th fund for the small portfolio stated in the OP, and for the low risk part at that, I'd personally steer clear of commodities.

FWIW Roger Gibson's asset allocation examines portfolios consisting of:
25% domestic stocks
25% international stocks
25% REITs
25% commodities (based on GSCI or AIGC)

The fundamental basis is that these are uncorrelated assets and, if annually rebalanced, should provide higher returns and lower volatility than the individual asset classes.

Bullion has a different role to commodity futures though. Commodity futures do generate long-term returns above inflation whereas I think bullion will broadly only track inflation. Bullion is more for portfolio insurance/store of value when other asset classes are under pressure.

Jim Rogers states that you're not truly diversified unless you have exposure to commodity futures. He suggest a 10% level although his exposure is obviously much more - but that's his field. Maybe that because it's hard to get acceptance above that level.

Gibson suggests 20% (of non bonds) for investors wanting maximum diversification and portfolio efficiency. And down to about 8% providing more limited diversification for someone wanting a more conventional, less-efficient, portfolio which broadly tracks domestic stock-market performance.