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This FIRE experiment has been quite a ride. Through the ups and downs, I’ve documented our investing journey on this blog so that anyone can see how a portfolio like the one we taught in the Investment Workshop actually works in retirement.
Transparency has helped people gain confidence that this approach actually works, which is great. But transparency has also helped us out as well. By forcing us to explain our investment decisions, it forces us to be better investors.
Right now, our portfolio is configured as a 75%/25% portfolio like so.
Notably, the 25% fixed income portion has been swapped for a preferred share index back in 2023. I wrote about that change back then, and so far that tweak has worked out beautifully, with dividend increases being delivered right on schedule, followed by the price of the asset going up as well.
So today, in the interest of complete transparency, I’m making another change to our investment portfolio by adding a small gold component.
Gold: What Is it Good For?
Don’t worry, I’m not stockpiling gold bars in my basement or anything. Instead, I’ll be using the SPDR Gold Trust (GLD), which holds gold in huge vaults in London, New York, and Zurich. Each share of GLD represents 1/10 of an ounce, so this allows me to own gold while not having to physically store or protect it myself. Plus, I can buy and sell it just like any other ETF on the stock market.
I don’t recommend gold as a long term investment since it doesn’t pay a dividend or interest, and therefore can’t help you retire. In order to make money from gold, you have to sell it. This makes gold a speculative investment.
So why am I getting this? In short, I think several Trump administration policies are going to combine to create a wave of inflation in the next year or so, and I think those will create upwards pressure on gold prices.
What policies am I referring to?
Deportations
One of President Trump’s most visible domestic policies has been extremely aggressive enforcement and deportation of illegal immigrants.
I’m not here to debate the morality of this policy. I’m Canadian, so I have no dog in this race. If the US wants to brutalize their undocumented workers, then that’s their decision for their government to make, and for their voters to either approve or reject.
However, the USDA estimates that 42% of US farming operations depends on undocumented workers. With ICE raids driving the undocumented community underground, that’s 42% of farm workers gone. There’s no way that’s going to be painless.
Farmers basically have two options: The first is to hire local domestic workers and pay them domestic wages. This raises the cost of operations, since you can’t get away with paying a domestic worker the wages that an undocumented worker would accept. This will raise food prices.
And the other is just to let those crops rot on the field, which also raises food prices. Anecdotally, food prices are already shooting higher in many cities in the US, and this will likely get worse over time.
Trade War
The other major policy of the Trump administration is the trade war.
Imports from every country have been hit with tariffs ranging from 15% at the low end up to 50% for Brazil and India, plus a smattering of other sector-specific tariffs including a new 100% tariff on imported pharmaceuticals.
The fact such eye-popping tariffs haven’t already caused inflation to spike have been the biggest mystery puzzling economists all summer. It looks like there was a period of time where importers were partially eating these tariffs to knock out their competitors, or relying on pre-tariff inventory, but we all know that can’t last forever. Now, it looks like those tariffs are gradually being passed onto the consumer. Inflation data in August came out hotter than expected, rising at 2.9% on an annualized basis, well above the 2% target, and will likely get worse over time as well.
Crashing Interest Rates
And finally, the Trump administration’s policy towards the Federal Reserve is the biggest factor that threatens to spike inflation.
The US central bank has a dual mandate: Keep inflation under control and reduce unemployment. When the two mandates point in the same direction, their job is easy: Do the thing that helps both. It’s much harder when that dual mandate points in two directions.
Fighting inflation requires interest rates to go up. Stimulating the economy requires interest rates to go down. So what’s a central banker to do?
Well, the president has made his preference extremely clear. He wants interest rates to go down.
Just out: No Inflation!!! “Too Late” must lower the RATE, BIG, right now. Powell is a total disaster, who doesn’t have a clue!!!
Trump says Fed chair Powell should make big rate cut now, Reuters
He wants interest rates to go down so badly that he’s (unsuccessfully) tried to fire both Federal Reserve central bank governor, Jerome Powell, and another federal chair member, Lisa Cook.
While the court drama surrounding Lisa Cook’s attempted firing will continue to play out in the media, that’s mostly a side show. Jerome Powell’s term ends in May 2026, and Trump can appoint whoever he wants to the role. Whoever he hand-picks for that role will drop interest rates as much as he wants, and he’s previously indicated that he thinks interest rates should be three full percentage points lower than today, so going from 4.25% all the way down to 1.25%.
We know what such a drastic drop in interest rates means: Higher inflation.
And that’s not economic theory telling us this. It literally just happened a few years ago. During the pandemic, central banks all over the world dropped interest rates down to 0% in order to save the economy, and while this did save the stock market, we all remember the painful aftermath. People took low interest rates as a sign to borrow like crazy, they went nuts buying houses, and cars, and it made the cost of those things shoot up. Inflation topped 10%, and everyone was super pissed off.
So that’s what we’re heading back to. I don’t know when, because timing these things is always guesswork, but inflation is coming back one way or another.
Portfolio Changes
Gold isn’t a long-term holding for us, since it doesn’t pay interest or dividends. As a general rule, speculative investments like gold or bitcoin should be capped at 5% of your overall portfolio, so that’s what we’re going to do. After this change, our portfolio allocation will look like this:
I’m planning on holding this investment for a period of 6 months to a year, with my exit point corresponding to whenever the interest cycle flips from stimulating the economy to fighting inflation. Basically, when the central bank panics at the out-of-control inflation and starts raising interest rates instead of lowering them, that’s when I’ll get out of this position and return back to my normal 75%/25% portfolio.
This is the first time I’ve ever done a speculative investment, so it’s entirely possible that I’m going to screw this up. With a long-term buy-and-hold strategy involving index funds, all I have to do buy the thing and sit on it forever. But with a speculative investment like gold, I have to guess correctly that something will happen to make my investment go up, and I have to guess when to get out at the right time as well. That’s two places I could screw up.
I’ve made some good investing calls in the past, but I’m also acutely aware that it’s easy to mistaken luck for skill. That’s why I’m making sure to limit my exposure to make sure I don’t blow myself up. In this case, I’m making this bet with new money I’m adding to the portfolio, and limiting total exposure to 5%, so I feel like this decision has guardrails around it.
Plus…it’s gold. Gold ain’t hitting zero anytime soon.
What do you think? Do you think owning gold is a good idea right now? Or am I mistaking past investment success as skill rather than luck?
Let’s hear it in the comments below!
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A bit risky but Gold has outperformed the markets for a while now. 5% is a good allocation as well. Good luck with this. Hope it works out.
2.5% gold and 2.5% silver
Interested to know why not Bitcoin instead or as well?
GDL traded at 150$ at the end of 2022 and now it’s over 360$. It’s not exactly a buy low, sell high strategy. And you already have a gold exposure with the TSX. I don’t really understand your decision.
That is a great point about the TSX
In 2022 with the rising interest rates, the US market was down 20%, my bonds were down 12%, but the TSX was only down 5.5%.
Frank Vazquez at Risk Parity Radio does a good job explaining why he includes some gold. We added some to our portfolio based on his analysis. He also mentioned that gold as an investment is pretty well accepted in most countries, but folks in the US (and perhaps Canada) aren’t used to it so it sounds more like a scam to us. At this point, we’re planning to keep a little as a long term investment since we (hopefully) have a long retirement horizon.
The time to buy Gold was when it was $2000 USD /oz not, when it has gone up 50% since the low. That’s not to say it won’t go up more, it will. But the easy money has already been made. Moreover, the Gold Miners (GDX) and Silver are still cheap relative to Gold, so may want to look at those. Finally, from a pure technical perspective, we are due for a pullback after this great run-up recently, so you may be wise to wait until we get the pullback and then buy in, instead of buying close to a local top.
As for the GLD ETF, you may want to do some research on if it actually has any of the gold that claims it does. There are a lot of well-respected investors who are skeptical. That being said, for a pure speculate instrument, it will probably do the job.
I agree. This may be a buy high moment. I wish them well on their gold gamble. On the other hand, I’ve made about 15% so far this year. Why would I add more risk to the mix?
This feels like a perfect example from the book, The Psychology of Money”.
Thanks for this, I’ve been considering the same. However, I’ve been leaning towards MNT,
Backed by the Canadian mint in Ottawa. Also curious if you are considering a small amount of bitcoin for speculation? Thanks!
My only comment is, wwjdcd?
What would JD Collins do?
This is definitely speculation, which is the opposite of indexing and vtsax & chill.
I think the question I’d ask myself if I were you is, do I need the small additional return that this might give me if I’m right? Will I be upset if I’m wrong?
Maybe you mean wwjlcd, lol
I am a moron. 🙂
Re: “I am a moron.”
LOL
Re: “do I need the small additional return that this might give me if I’m right? Will I be upset if I’m wrong?”
EXACTLY
Why add more stress to your life? Why then also beat yourself up if you guess wrong when to buy AND when to sell? That’s double the chance to mess up. LOL
Wouldn’t higher interest rates hurt your preferred share etfs?
I don’t agree with the thesis that tariffs are inflationary. Tariffs are a fundamentally a tax, and taxes are generally deflationary because they lower demand. So even if CPI prices go up, that will is counteracted by reduced demand.
I’m with Tricia, Frank Vazquez at Risk Parity Radio convinced me to buy into gold, mainly because it’s not correlated or negatively correlated with other asset classes such as stocks. I’m up over $296,000 so far this year. It’s luck, I know, but the standard advice goes something like “Gold has a great run about once every 10 years. The rest of the time it just sits there, barely matching inflation. However, when the stock market takes a 40%+ dive, the golden blob you own may just prevent Sequence of Return Risk crashing your retirement.”
I added gold in January of this year for similar reasons. Mine more for diversification than chasing the return. I’ve also added some other metals/miners.
I wouldn’t call gold a speculative asset. Just because something doesn’t produce income, doesn’t make it speculative. Especially if you consider that “income” is in Fiat money, which can lose value fast (as seen between 2021-2024).
If you reframe your thinking to Gold is a hard currency, and other prices move in terms of gold, not Gold in terms of dollars (a soft, infinite supply currency). Gold has been valued for thousands of years, nearly the opposite of speculative.
It doesn’t always match or beat inflation over shorter periods, so you shouldn’t have too much in a portfolio, but it could definitely be considered a staple.
Considering Ray Dalio’s views on this being the end innings of a Long Term debt cycle, which usually play out with currency devaluation, stocks and bonds tend to perform poorly in these periods and Hard assets (Gold, Bitcoin) tend to do well
I bought CI galaxy bitcoin etf. Killer returns but very speculative. I’d go with that over gold.
A fourth factor is the very real possibility of World War III. With the US regime re-purposing its military for use against its own civilians and to instigate Venezuela into war, Russia now sees a rare opportunity to push further into Europe, and China to take Taiwan and possibly other Asian countries:
https://www.mind-war.com/p/the-carving-up-the-post-wwii-world
I think having a gold allocation makes perfect sense. Its price goes up long-term, and its volatility is uncorrelated to stocks and bonds making drawdowns more bearable, especially with large retirement portfolios.
If there is world war III, it wouldn’t matter what you invest in neither gold, silver or equity will be spared.
Andrew: What you describe might not have the effect you think. In 1950, Russia extended half way through Germany. And the USA lost all of China except Taiwan. And the 1950s had plenty of USA induced regime changes. The outcome of all this was a USA ascending to even greater strength than that of WW2. The events you and the link describe create insecurity everywhere which creates flight to the USA, capital and people. Europe and non China Asia become strategically closer to the USA with a consequent loss of autonomy. The history of the last 100+ years screams that for non USA people, some position in USD is the first anchor (ahead of gold and bitcoin) and that some significant portion of financial assets need to be in a safe country other than your home country.
Thank you for your transparency over the years as you said it had inspired cinfidennce in many people like me around. I also believe this may also explain why public companies tend to be more stable on unaverage than private ones dues to governance and reporting requirements which fosters more discretion and accountability.
That said, I am a little unsure about your decision on Gold while I see your point on inflation spike and taking protective measures. Buying Gold which is purely a speculative holding does not cut it for me especially when you are putting. only 5% and still have 95% exposure. If you truly believe your projected US economic outlook, you will transfer your entire US Holdings. I thnk the approach you have chosen are a bit like timing the market which you and the godfather thought us not to do. I am just wondering not judging. By the way, you may need to do a deep introspection to be sure that beyond the analysis this decision is not.inspired by FOMO as a result of the recent gains in Gold which I believe might have started to reach its hieght in this cycle. Moreover, in your scenario of aggressive rate cut, the US stock market will first spike further before 2022-type slowdown. and you will miss out on the.opportunity.
In my opinion, I will rather rotate out more proportion of my portfolio into EAFE which was the point of diversification in the first place. This way you remains in global stocks, keep your pure-breed investmentment portfolio and reinforce the core principles of FIRE.
Please forgive all my typo errors
You are forgiven. 😉
The human brain is such an amazing thing it can overcome many typos and grammatical errors. Have you ever seen the sample paragraph that on first glance looks like complete gibberish, but then is completely understandable once you start reading it?
This is exactly why I can never proofread my own writing – my brain knows what is intended! LOL
Hmmm … I stand corrected???
https://www.sciencealert.com/word-jumble-meme-first-last-letters-cambridge-typoglycaemia
Indeed, thank you😊
From my AI: “…The inflation rate for the Consumer Price Index (CPI) excluding housing (also known as “All Items Less Shelter”) for the 12 months ending August 2025 was 2.5\% (not seasonally adjusted).
For context, this figure compares to the overall CPI for all items, which rose by 2.9\% over the same period…”
Most people are somewhat insulated from near term housing costs and related price changes via rental agreements or home purchases.
Inflation is actually dropping in the USA and likely to continue because interest rates are coming down. And the consumer durable and other merchandise indicies are falling and likely will continue for a host of reasons.
You should be careful how you use an index and wether you want to use the 12 month cum or a current month annualized.
(My comments are from a USA perspective which could be different in Canada.)
PS: I’d be very careful with preferred equities in a falling rate environment. If you look at SPPREF as an example, preferred equities tend to peak as interest rates fall and sell off during the late period fall as owners take profits. These equities might be “interesting” about this time next year. And not in a good way.
Re Gold: I’ve held a small amount of physical gold coins since the 80’s, but the ones I have and recommend are at least MS 69 or better yet MS 70 because their value is increased by being collectibles as well as the increasing price of gold. Also, in the past private ownership of gold was made illegal here in the States. But ownership of collectible gold coins was still permitted, making coins a safer investment.
Which Canadian account type is best to hold precious metals?
Jack B comment is spot on. If you have dollars on your brain they are fiat dollars. If you understand that you’ll understand why you buy physical gold.
In a war torn country or simply a struggling country economically you don’t go to the bank or here’s this stock oh, it’s a gold stock, yah, right.
Look at Lebanon they sell gold to eat/live. (unfortunately they purchased fiat USD,but there’s nothing else of any value)
China has bought 21 tons this year, it has 2300 official tons but counting private ownership it’s estimated to be 29,000 tons. Russian citizens have bought 75.6 tons in 2024 more than some countries. Gold is not a dividend producer right it’s a life line it’s insurance it’s peace of mind. I’ll say with assurance although I’m invested “I can predict the future thank you very much”
textbook FOMO?
Your approach here is a real-world example of market timing, and while it is intellectually interesting and may work for some short timeframes, it lacks robust evidence for long-term success and carries risks and challenges that most investors should be cautious about or just avoid completely.
Have you read Ray Dalios recent book How Countries Go Broke? Another reason to buy gold is because of the deficit. We are spending 7 trillion annually while only pulling in 5 trillion and this shows no signs of changing. As US debt gets further downgraded and there are fewer buyers at bond auctions, this will lead to money printing and rapid devaluation of the currency in a viscous cycle. It’s estimated this will hit a tipping point in 2-3 years. It’s a viscous cycle where you want to raise rates but that increases debt servicing costs which leads to more printing ie more inflation. And if you lower rates, there’s more inflation. It’s not looking good and I don’t think this is speculative. I think you should “math shit up” and look at the interest now, plus what it will be in a few years and keep an eye on bond auctions.
My only concern with your strategy is that you say you will exit. I will be gradually adding at pullbacks shooting for a 15% allocation in silver and gold. Let me know your thoughts!
I own a copper miner stock that pays a dividend. 5 % of my portfolio. I have held this stock for over 3 years. Copper price should go up with inflation.
May I ask which copper stock? I was looking into copper and platinum stocks paying dividends. Thank you
Amerigo Resources LTD
TSE: ARG
Div yield 4.27%
Thank you Dave, appreciate it!
Buy KGLD or IAUI and get the appreciation of Gold with a nice yield to boot. Best of both worlds.
Bitcoin fever, gold fever. Most of us are captivated by tendencies. In my case I keep 5% crypto which has almost doubled to represent close to 9% now. However I follow the Permanent Portfolio strategy: 25% cash, 25% gold, 25% stocks and 25% bonds. I only had around 10% in gold, as I was building up my portfolio. The current situation actually helps and now my gold portion is 18% of my portfolio. But one never knows. Having an investment strategy can be very helpful. The most important thing for me personally is to invest with peace of mind. Thanks for sharing your ideas and portfolio with us guys!
I have thought bout adding gold but it just seems to never stop climbing. It almost seems like it is caught up in an “everything” rally lately.
It is a weird market. Almost a total barbell. All in on AI on the of the barbell and then all in on the end of the supposedly conservative Gold trade.
Scares me into do nothing which of course is wrong also
“Gold ain’t hitting zero anytime soon.”
Gold dropped 83% in real terms from 1980 to 2001. While not technically going to zero, that’s a pretty dramatic meltdown that took forty-five years to recover from.
Gold seems like an asset to hold for the long run, if you’re going to hold it. Trying to jump in and out of a gold allocation via political justification seems like the antithesis of good investing behavior. The historical data can be compelling to add a 10% or so allocation, but you have to be willing to suffer multidecade drawdowns to benefit from the diversification during once in a lifetime crashes.
As a retiree, I think of gold as a hedge to maintain and maximize my Safe Withdrawal Rate (SWR). In my Accumulation phase (prior to retirement), I viewed gold as a non-starter for the reasons noted above (no dividends, no intrinsic growth). However, backtesting over a 40+ year horizon (PortfolioCharts.com) convinced me to add gold when I retired four years ago to maximize SWR. I now have ~15% of my portfolio in gold. I’m positive it will go down at some point but I’m managing a portfolio, not a single investment.
Australian investor here. Yep, I added a small gold ETF in my portfolio around 18 months ago purely as an alternative to help offset my equity heavy weighting at the time. I’ll leave it for another 12 months before I rebalance as the portfolio weighting is starting to creep up.
Gotta say, I don’t agree with your idea that low interest rates caused inflation post Covid. There’s an old book on economic theorey called “Economics in One Lesson” that explained it very clearly. They explain how printing money (same effect caused by the CERB in Canada and other runaway spending especially outside your own country) causes inflation and even explained the approximately 1 year lag between circulation and start of inflation. This does conflict with Keneysian theories subscribed to by Liberals (and Democrats) but I would suggest those have now been proven false by the inflation we saw post Covid.
Interesting. Ray Dalio would give you a thumbs up. I did own a gold ETF in my FIRE portfolio sold when it peaked Oct 2024 then it kept getting to new all time peaks. I decided on keeping things simple given that I am still in accumulation. I did learn that it had a role in the portfolio if you look at Modern Portfolio Theory. We learn by doing, will look forward to seeing how your experiment goes. Gold has been rallying in the last year, have you bought at a peak only time will tell.
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