The diversified trust portfolio of our friend Lars gained $66,500 during 2012, on its initial investment of $500,000. He is expecting 2013 to be a flat year. The precious metals mix of rich uncle Nils advanced less, to $538,250 but he feels his gold, half his holdings, will be up 15% in the coming year. They meet for dinner at Guy.
Well, not so good for the old man so far. Gold is down almost 5%, and silver nearly 7%. Platinum and especially palladium are up, but the weighted average is minus 2% for the first quarter. Nils suspects he won't be choosing the drink this time.
Lars as trustee has done better. REITs and US stocks are up in the 8%-11% range, and bonds and international stocks just a little. Lars also has a bit of Nils's mix. So overall the trust is up 4%, better frankly than his predicted return for the year as a whole. Of course things can fall back any time.
And that is still what Lars expects, although as trustee he feels obliged to stick with his spread of holdings. With his own money, though, he has gone even further into short-term fixed income, now approaching an unprecedented 40% of his self-directed retirement plan. He feels he has learned something from the recent years of volatility, and his gut tells him things have gone too well lately, with stocks and REITs and even more so with bonds. He is sacrificing a little yield but keeping his powder dry.
Lars is pretty happy in the moment, in this dual role of good trustee and private contrarian. Gracious toward his uncle's likes, he orders up a Buffalo Trace for each of them.