Precious Metals And Retirement Portfolio Survival Rates

Abstract

Recent gains in the value of gold bullion in the presence of declines in the stock and corporate bond markets suggest that retired investors may benefit from holdings of precious metals.  Because of the comparative liquidity and economy of holding mutual fund shares, we examine the effect of an optimal allocation of precious metals funds shares on portfolio survival rates through payout periods of 15, 20, 25, 30, and 35 years using returns data from September 1988 through December 2008.  Since most of the higher withdrawal rates that are supported by precious metals funds are ill-advised, adding precious metals fund shares to a conventional stocks and bonds portfolio does not appear to benefit most retired investors.  The findings do support greater allocations to bonds rather than stocks.