I've been lax on my Grow Your Dough updates this year because I've been falling in the rankings since almost the beginning. A big reason? I'm investing in gold.
We've been running Grow Your Dough 2.0 this year, and I'm doing awful. At this time last year, I was in the top five. By the end of the competition (after making some ill-advised trades), I was comfortably in the middle of the pack. This year, I'm already near the bottom. Not?at the bottom. But I'm pretty close.
And why is that you say? Because I'm investing in gold. Gold has been taking a beating this year, and it's dragging on my portfolio.
Investing in Gold is Killing Me
Using Motif, I built a portfolio that makes some tweaks to the so-called “permanent portfolio.”?One of the components of this portfolio is gold. I'm mimicking gold by investing in a gold ETF (which means I don't actually own any gold).
Right now, gold is below $1,200 an ounce. Remember the heady days of a few years ago when it seemed as though the sky was the limit for gold? Those days are long gone.
And, as you can see in my portfolio, right now gold is the only thing holding me back from having a portfolio that is at least in the black. It's a good thing I'm not actually using my own money.
I do have some hopes that I'll start seeing some help from the high yield dividend ETF as well as the high yield corporate bond ETF. And, of course, the REIT should also pay out dividends. I'm hoping that, even though gold doesn't look like it's going to have a lot of success this year, maybe the dividends will be enough to keep me in the black. I'm reluctant to trade because last year, when I unloaded something I was frustrated with, my portfolio took a turn for the worse.
I'm trying hard to stay the course, but it's difficult in a program like this, where we see a leaderboard and I know that I am falling further behind by the day. It's also difficult because we are doing this over the course of a year. It's short-term, rather than long-term. I expect that the permanent portfolio with the tweaks I made would do just fine over the long haul since it's completely diversified in terms of asset class and has low volatility.
But it's still hard to see that I can't even beat the S&P 500 — and I at least managed that bit last year.
On the other hand, the fact that investing in gold is bringing my portfolio down, it's worth remembering that there may come a time when investing in gold will actually help the portfolio. Right now other asset classes are performing ok. At some point, these other asset classes might struggle more, while gold performs at a higher level. This is the sort of thought process that is required when you are investing for the long term.
As disappointing as this whole thing is, it's still providing valuable lessons to me. Hopefully I'll be able to apply them. And keep it together for the rest of the year. After all, this is more of an experiment. My long term retirement portfolio is still intact, and providing me with the growth needed for future wealth.