Asset classes can sometimes get beaten down at or near the end of a cycle. No asset class has been as universally unloved in the last three years as much as commodities, but does the sell off mean that the asset class is cheap? William Bernstein, a noted author on efficient frontier investing, is adding precious metal equities to his strategic asset allocation to further diversify his portfolio and take advantage of a cheap asset class.
Bernstein: You can look at it from two perspectives. One is the simple mean-variance perspective, which is that when you add in 1% to 5% of precious-metals equity to a normal portfolio–in normal times at least–you get a bit of a bump in return and you get a bit of a reduction in risk. What are you protecting against? You are obviously in a more heuristic sense protecting against inflation.
