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Ibbotson asset allocation study - high allocation to commodities

>I'm a big fan of gold and own a little but the volatility makes 25% way more than I would ever own.<

I've been designing model portfolios for institutional clients, and I shared your bias until several years ago, when I saw the Ibbotson study for PIMCO:
tinyurl.com/n55xo3
tinyurl.com/nlsm5p

If my reading is correct, the optimal allocation for a typical moderate growth/medium risk 60/40 investor is 22-29% Commodities. True, Commodities isn't just gold, but DBC would be a reasonable proxy for that 25% of the portfolio.

fwiw, the PIMCO product manager admitted it was highly unlikely most clients would ever allocate this 'aggressively,' but if Ibbotson's methodology is sound then advisors should likewise model much higher commodity allocations to offset equity risk in their clients' portfolios. For a moderate risk investor, a 10% allocation might be the weakest choice next to IGNORING the asset class altogether - how foolish is that?!

Lesson learned? Always double-check your own professional biases & presumptions.
Jun 08 08:14 PM