Bigworld, >> gold and silver to 25% <<
That recent calculation included real estate (home), but by normal allocation rules that isn't included in 'investible assets', so in that case the percentages would change to -
Stocks ------ 32%
Bonds ------- 39%
Gold/Silver - 17%
Cash -------- 12%
I did have the gold/silver component up to 24% during the summer, but the miners are often 2x or 3x more volatile than bullion, so after the big rally I scaled it back to 17%. I may re-boost it back up to 20%, but that will probably be the upper limit.
I started to count my condo in the allocation mix since it shares some of the hard asset aspects of gold. I figure if gold + condo equals 40%, that's a pretty good inflation/disaster hedge.
The bonds are high quality corporates and munis purchased years ago when rates were higher. The coupon rates on the corporates range from 4-7% and the munis 3-4%. But the prices on some of these individual bonds are now so high that it's tempting to sell them for the huge capital gains. A few bonds (H. Depot, G. Sachs) are worth almost 50% over what their ultimate maturity value will be.
Among this group of bonds there is only one dog, a Ford bond which suffered several downgrades over the past year. However once the Fed started supporting the corporate bond market, the Ford bond zoomed from being underwater to being priced at a premium. It was a really dramatic move, going from being at a 25% discount to a 15% premium. I have the Fed to thank for that one, but if when/if the Fed decides to pull back its emergency support, I may unload that particular bond.
Combined with high dividend paying stocks, bonds can really crank out income, which comes in handy for retirees. Stock dividends are especially valuable since as qualified dividends they are hardly taxed at all.
Bottom line, I figure it's good to stay diversified since none of us can know exactly what the futures holds. There will be a dollar crisis at some point, but things may hold together longer than we think.
