Marc Faber’s Ideal Asset Allocation

By on March 6, 2012

Marc Faber - Gloom Doom and Boom ReportMarc Faber, editor of the Gloom, Boom and Doom Report, was interviewed yesterday on CNBC (before today’s ugly market action).   When asked what an investor should do if the missed the huge rally of the last four months, Faber replied missing the rebound was a fatal error.  But he added the market is now overbought and we have seen a technical deceleration.

Faber said there has been heavy insider selling and he believed a correction was coming.

Faber stated, “investors misunderstand what is risk.” He added it is highly risky to have all your money in cash. If he didn’t have any investments today he would put a little bit into equities, properties and gold; and accumulate every month.

According to Faber, the ideal asset allocation right now for a prudent investor “is something like 25% in gold, 25% in real estate or real estate related equities, 25% in equities and 25% in cash.”

Faber doesn’t believe investors should be “shooting for huge gains, but rather preservation of capital in our environment.”

Faber said if you look at history where there are big events including wars, hyperinflation, depressions and so forth, equities in general have been a better vehicle to survive than sovereign bonds. Sovereign bonds have defaulted again and again and were wiped out through inflation. He stated cash frequently becomes worthless.

Faber stated gold is not the best investment because over the long run equities provide a higher return. However, he said investors need to re-balance the equity portfolio from time to time. Faber provided the examples of Cisco, Dell and Google, and soon to be Facebook, as examples of new industries coming up. He said you can’t stand there and have your investment in U. S. Steel.

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