# Adding a gold stock to the portfolio



## newfoundlander61 (Feb 6, 2011)

I have never owned a gold stock but with interest rates on the way up likely next week here in Canada and the pending invasion by Russia would a holding of 5% in a gold stock be reasonable addition to a portfolio. There are several articles regarding commodities and what could have if this invasion occurs. Any opinions are welcome. My choice if it is a good idea would be a larger producer IE: ABX or K.


----------



## Beaver101 (Nov 14, 2011)

^ Neither have I so can't comment on ABX/K. What about an ETF instead?


----------



## Ponderling (Mar 1, 2013)

I currently am 10% down on my current gold holding of K.

But it is less than 1% of overall holdings. I use it more a thermometer of sorts to track how fear is flowing in equity markets. 

I have made a good return though the pandemic stock gyrations with own and sell and own and sell KL. 6k in and 15k out in less than 15 months


----------



## james4beach (Nov 15, 2012)

newfoundlander61 said:


> I have never owned a gold stock but with interest rates on the way up likely next week here in Canada and the pending invasion by Russia would a holding of 5% in a gold stock be reasonable addition to a portfolio. There are several articles regarding commodities and what could have if this invasion occurs. Any opinions are welcome. My choice if it is a good idea would be a larger producer IE: ABX or K.


You're better off holding gold bullion than gold or mining stocks. These two things act very differently, where the mining stocks tend to have extremely volatile moves but have NOT shown price appreciation over time. Meanwhile gold bullion has been more stable and has gained value over time.

This difference can be illustrated numerically too, take a look at this link. The question is whether you're better off holding XGD (the miners) or something like MNT or CGL.C (gold bullion).

Look at the 'Portfolio Returns' comparison table, where I entered two different portfolios that diversify into gold:

Portfolio of 70% XIC and 30% XGD: this had a maximum drawdown of -20.68% and a Sharpe ratio of 0.49
Portfolio of 70% XIC and *30% MNT*: maximum drawdown was reduced to -12.89% and a Sharpe ratio of 0.82

That second portfolio is far superior.

So holding gold bullion (MNT or CGL.C) actually improves the portfolio by reducing volatility. Holding gold miners doesn't achieve the same thing, in fact it results in a portfolio that's worse than just holding XIC.

Tagging @hfp75 @librahall @MarcoE


----------

