Rolling my Investment Positions

The world is looking increasingly unstable and dangerous, and it would be strange if this doesn't get reflected in the markets.

Gold should be going up relative to other assets. That means that there should be opportunities for those holding gold to roll into other assets. However, we must neither be too quick nor too slow to do so, or we will squander our chances. We need to have a plan as to what to do, and stick to it when the wind blows.

Looking at the Dow to Gold ratio, we see that a ratio of about 7 looks like the neutral level. Ratios above that makes the Dow look expensive. Ratios below it looks cheap. We also see that there's a lot of support at about 5.

The Dow to Gold ratio is currently at about 17, which is roughly where it's been ever since 2017. Those who've been sitting on gold since 2017 have done no better and no worse than those who've been invested in the Dow. However, an imminent drop in the Dow to Gold ratio is likely due to recent developments. A drop to about 5 within a year or two isn't unthinkable. From there, it may fall further to 2.5. It may halve again to 1.25. Even 0.625 may happen. But it's hard to see the Dow fall further from there.

That leaves us with four entry points which I intend to use for myself. I also want to set aside some gold for real-estate, so I don't want to put all my gold into the Dow or similar indexes. A good allocation would be 2/3 in shares and 1/3 in real-estate. If I divide my gold into six equal parts, I can use four of them to buy shares at the above mentioned ratios, and two parts for real-estate.

If things crater completely, I'll end up owning a lot of shares, some real-estate and no gold. Otherwise, I'll remain partially invested in gold, which is fine by me because it's impossible to predict the future with sufficient accuracy to roll positions perfectly. The goal isn't perfection. I'm merely looking to do better than average, and that's only possible if I roll in and out of positions at opportune times.

The idea is to buy shares at ratios of 5 and below, and sell at ratios of 10 and above. I have no shares at the moment, but with a bit of luck, I might have some in the not too distant future. With even more luck, I might have some shares to sell at ratios of 10 and above within a decade or two.

Sovereign

By Heritage Auctions for image, Mary Gillick for coin - Newman Numismatic Portal, Public Domain, Link