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Choose · what to own · Decision 01 of 03 · Asset allocation

Stocks, bonds and gold together beat any two of them, on return and on consistency, since 1972

Every 5% mix of the three assets, scored on real return and on its worst decade, then inside four economic regimes.

+0.4pts a yearReal return of 60/30/10 over 60/40: 5.6% against 5.3%.
+1.5pts a yearIts worst decade, real: −2.3% a year against −3.8% for 60/40.
2 of 4Regimes where gold was the best of the three: the two with inflation above trend, where stocks and bonds both lost.
0 of 4Regimes where the blend was the worst asset. Each single asset was worst in at least one.
Scatter of every 5% mix of stocks, bonds and gold, 1972 to 2026: real annualized return against the worst ten-year real return. The stocks-and-bonds-only line runs from 100% stocks (6.9% a year, worst decade −5.9%) through 60/40 (5.3%, −3.8%); the same mixes with 10% gold sit above and to the right of it, 60/30/10 at 5.6% and −2.3%.
Real (CPI-deflated) monthly returns, rebalanced monthly, 1972 to 2026. Stocks: Shiller S&P composite. Bonds: 10-year Treasury built from Shiller's yield. Gold: LBMA PM price. Of the 231 mixes on the chart, 77 contain gold and beat 60/40 on both scores.
Four panels, one per economic regime, each with the real annualized return of stocks, bonds, gold and the 60/30/10 blend, 1972 to 2026. Stocks win the two below-trend-inflation regimes; gold wins the two above-trend regimes, where stocks and bonds both lose; the blend is never the worst of the four in any panel.
Same assets, 1972 to 2026, grouped by the regime known at the start of each month: industrial production up or down over twelve months (FRED INDPRO), CPI inflation above or below its three-year average (FRED CPIAUCSL). Inflation ran above trend in 44% of months.
Verdict

Pick all three before you pick anything else. The exact weights matter less than presence: the best worst-decade on the chart belongs to a mix with 40% gold, and the case for 10% is that it costs no return to be there when stocks and bonds fail together.

A card takes no position on where any of the three goes next. Since 1972 gold lost 10.2% a year in its worst decade: the sleeve is held for the regime, not for the price.

Strategy cards

The 2 cards behind this decision

  1. The 60/40 mixEvidence supports Pick the split before anything else: since 1985 it has swung twenty-year returns by up to three points a year on its own, more than any single strategy or wrapper choice on this site. 3–40 bps a year · mixed · The stock-bond mix alone swings twenty-year returns by up to three points a year
  2. GoldEvidence supports Gold earns its place as the third asset because it paid in the one regime where stocks and bonds both failed; the price is a sleeve that can lose for twenty years and pays nothing while it waits. 10–40 bps a year · mixed · card only, read coming

A card states what a strategy is, its evidence with period and source, when it worked and failed, what access costs, its tax profile, capacity and behavior demand, and a verdict. Open cards carry no evidence yet and are published only when filled.

Which account holds each piece is the next section's job: Account placement, under Implement.

1 short read in this decision, about 5 minutes, below.

Start here1 read · 5 min

The few ideas everything else rests on.

  1. The stock-bond mix alone swings twenty-year returns by up to three points a year

    Since 1985, moving from an all-equity portfolio to 60/40 has changed trailing 20-year annualized returns by as much as 3.1 points a year, before any strategy or wrapper choice.

    5 min
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