On My Radar: Three-Way Asset Strategy (Stocks, Bonds and Gold)
The concept here is simple and often simple is best. The red line shows the performance from 1968 to present when holding the asset classes (S&P 500, long-term bonds and gold) when the 3-month moving average is above its 10-month moving average. It shows how a simple three-way model can do well against the stock market as represented by the Standard and Poor’s 500 Total Return Index.
Here is how it works:
- The concept is to stay fully invested in any of the three assets provided each asset’s 3-month MA is above its 10-month MA.
- If, for example, gold is the only asset with its 3-month above its 10-month, then the model will be 100% long gold. If stocks and bonds, than 50% is positioned in each. If all three are in a positive up trend, than 1/3rd is allocated to each.
- It’s that simple. The model’s returns are better and much less volatile than the S&P itself.