Author: Nicholas

This author has written 39 articles
Read more about the article Insights – Has gold lost its status as an inflation hedge?

Insights – Has gold lost its status as an inflation hedge?

In 2022, inflation made its presence clear and undeniable. While it can be argued whether we experienced an inflation "surprise", investors were reminded of the importance of inflation hedges in their portfolios as stocks and bonds suffered.

Gold is one such inflation hedge, but he narrative in financial media has bashed its capabilities of protecting against inflation in 2022, as the gold price ($) was barely flat for the year.

In today's article, we will be reviewing whether gold has lost its appeal as an inflation hedge, or if it rather needs to be viewed from a different angle.

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Read more about the article Insights – Optimal Time to Rebalance a Portfolio and Rebalancing Timing Luck

Insights – Optimal Time to Rebalance a Portfolio and Rebalancing Timing Luck

The theory behind investing in a multi-asset portfolio is pretty straight forward when simplifying it. You select a diverse set of uncorrelated assets, assign target weights and then you're done. Not that tricky.

It is mostly the managing part of the investment process that is more challenging. First, you have to work on your conviction to stick to the strategy and remembering why you chose the strategy in the first place. Secondly, you have to deal with rebalancing the portfolio, as uncorrelated assets are guaranteed to develop in different directions with some assets zigging when others are zagging.

The topic of rebalancing is one which I find is underserved in the literature and one that I get most questions about. Usually, it is the theory behind a portfolio that is the most exciting to write about and which is the key topic that sells and attracts more clients. The science of rebalancing, however, is just something that is covered briefly, at most.

While I have been writing about portfolio rebalancing in the past, I have recently found renewed inspiration for this topic. That inspiration turned into this post, where we are looking more closely at rebalancing luck, and if there is an optimal time in a month to rebalance a portfolio.

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Read more about the article eToro Post – Prediction versus Preparation and Why Diversification Matters

eToro Post – Prediction versus Preparation and Why Diversification Matters

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  • Reading time:5 mins read

The legendary credit investor Howard Marks (founder of Oaktree Capital Management) wrote an investor memo titled "You Can't Predict. You Can Prepare." in 2001.

Although more than 20 years have passed since these words were written, the message is almost eternal for investors.

The probability of consistently succeeding as an investor in this endeavor and regularly making money over decades is vanishingly small. This is why, as a capital manager, I constantly come back to the title of Howard Marks' memo, even though the memo was written from the perspective of a credit investors. Still, the words ring at least as true for a diversified macro-oriented portfolio, such as the All Seasons Portfolio.

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Read more about the article Insights – The Case for Gold in a Diversified Portfolio

Insights – The Case for Gold in a Diversified Portfolio

Gold is a popular investment due to its ability to hedge against inflation, low correlation with the stock market, and its relationship with real interest rates. Using modern portfolio theory and the efficient frontier, investors can find the optimal allocation to gold in their portfolios that balances expected returns and risk. However, the optimal level of gold allocation will depend on an investor's specific investment objectives, risk tolerance, and financial situation. Therefore, adding gold to a well-diversified portfolio can improve its risk-return characteristics, particularly during periods of market stress.

In this article, we explore gold as an investment and inflation hedge, and briefly touch on how it fared in the inflationary year of 2022. We further look at the current case for gold in terms of real interest rates, the M2 money supply, and discuss how the gold price performs relative to also other currencies than just the US dollar.

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Read more about the article eToro Post – Outlook for Commodities from Q3 2022

eToro Post – Outlook for Commodities from Q3 2022

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  • Reading time:6 mins read

A recent interview with Goldman Sachs global head of Commodities Research, Jeff Curie, on Meb Faber’s podcast (episode 445: https://mebfaber.com/2022/09/26/e445-jeff-currie/, available on most podcast apps) caught my interest with a summary of the commodities outlook and where we are in a commodity supercycle with current underinvestment in the supply side

The main take out from this interview is that this last year’s increase in commodity prices is not caused by Russia, but the underlying structural issues were caused by policy and underinvestment in the sector in the last decade, which Russia has taken advantage of.

In this brief article, we summarize the key message of the interview and what lies ahead for the energy sector and broad commodities for the next years. We are most likely set up for a new commodity supercycle, so prepare your portfolio accordingly.

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Read more about the article eToro Post – Adding US Dollar Index (DXY) Exposure to an All Seasons Portfolio

eToro Post – Adding US Dollar Index (DXY) Exposure to an All Seasons Portfolio

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  • Reading time:10 mins read

Interest rate risk and sentiment risk (periods of risk off behaviour) are two risks that are typically difficult to hedge. These risks have characterized the first nine months of 2022, so if we could find some asset that could help offset losses in stocks and bonds during these periods, that would be great.

Therefore, with this post, we look at an alternative investment that could provide at least some protection against rising rates, and one of them could be to go long the United States Dollar. In this article, we will be looking at an index giving broad exposure to the dollar, what benefits it adds to a diversified portfolio, and how a retail investor can add this exposure to a portfolio.

We review the UUP ETF (Invesco DB US Dollar Index Bullish Fund) and its underlying exposure to the US Dollar Index ("DXY"), what it is, and why it might be a good diversifier.

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