BytheNbrs... can't say much about gold... we invested in gold when it was about $800 an ounce back in 1981. Recently we considered selling our Kruggerands but after all these years of keeping them because they are pretty, well hell they are pretty... so we decided to keep them a while longer.
REITs... We were attracted to REITs in 2002 because of the high yield. We often evaluate an investment class based on the yield of the index. The rationale is that the income of an asset class is fairly constant over time and as the price varies yield will go up when the price is low and down when the price is high. Since 1996, the yield on VGSIX (Vanguard REIT Index) has approached 8% a few times and hit a low of about 2.1% in January of last year. The median has been about 5.5%. I would not consider REITs cheap until the yield was at least 5.5%... currently VGSIX has a yield of 4.92%. That indicates they could fall a little more.
A more careful analysis will reveal that the long-term yield of VGSIX typically runs about 1.7 percentage points about the 10-year treasury yield. The current 10-year treasury yield. You can use the yield on FLBIX (Fidelity Spartan Long-Term Treasury Bond Index) is about 4% as a proxy... add another 1.7% and you would not think REITs would be cheap until they yield 5.7%.
Will REITs drop another 10-15% to be offically cheap by my measure? Who knows. I think REITs are not particularly cheap right now but we have bought a few individual companies recently-- VTR (Ventas) and O (Realty Income).
As UH says... now may be early but it is not late. I could see making some bets on REITs now but personally would wait.
We own an energy fund, a commodity fund, an agriculture ETF, and a Health Care fund. These are sectors we think will do well in the future. Health Care has been a laggard this year but we have held it through thick and thin for the better part of a decade. Energy we bought 2.5 years ago, Commodities and agriculture this past January. Been very happy with all four investments on the zig-zag scale.
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