The “Optimal Portfolio” by Nick Maggiulli

In his analysis of diversification, Nick Maggiulli on Of Dollars And Data mentions an interesting portfolio he built using asset class data from Bullion Vault spanning 1972-2022. The portfolio consists of:

38%

U.S. Housing

24%

U.S. Stocks

18%

U.S. Bonds (10-Year Treasury)

16%

Gold

4%

U.S. REIT

This asset mix would have produced the highest return per unit of risk over this period for the asset classes in the Bullion Vault data. This mathematically optimal mix of assets experiences significantly less volatility than the S&P 500, yet it still loses money approximately one out of every five years.