Performance Review of 2010, Where to Invest in 2011

Includes: GLD, IEI, IWO, QQQ, RWR, TLT
by: Maheep Hayer

In my last article, I mentioned the reasons why I believed the S&P 500 would outperform gold for 2010. With 2010 over I can humbly say I was wrong, since gold finished up 29.3% for 2010 while the S&P was up 16.1%. But for all the fanfare gold received last year my 2010 portfolio kept pace with it very well, though gold was a large portion of the portfolio.

While people laughed at my 25% portfolio exposure to commercial real estate, the index finished up 28% for the year. My stock mix of value indexes finished up 22.25%, and even my intermediate treasury bonds finished up 6%. Overall my portfolio was up 23.3% for 2010 with only one trade made, which I mentioned on my last blog. With my portfolio so diverse, I easily withstood the day to day gyrations and volatility in the stock and gold markets.

On the last day of 2010 I trimmed my stock market and real estate exposures. Although next year is a pre-election year, historically the best year for stocks, I am not too bullish because stocks have now been up 2 years in a row. Also, using Robert Shiller's method to calculate PE ratios we come up with a 23 PE for the market. On top of that, gold is outperforming the stock market. Therefore my 2011 portfolio is 47% gold, 12.5% commercial real estate (NYSEARCA:RWR), 10% small cap growth (NYSEARCA:IWO), 5.5% Nasdaq 100 (QQQQ), 12.5% 5 year treasury bonds (NYSEARCA:IEI), and 12.5% 30 year treasury bonds (NYSEARCA:TLT). Just like in 2010, I will not be trimming or adding to my stocks or commercial real estate. My gold composition may fall based on price action, the funds would be used to buy more short term treasury bonds. I will keep you updated.

If you don't have the stomach for a big bet either way, I would advise one to put 25% in gold, 25% in commercial real estate, 25% in stocks, and 25% in long term bonds.

Disclosure: I am long GLD, RWR, TLT, IEI, QQQQ, IWO.