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What mixing two holdings actually did
Highest return
+150.3%
Least variable
28.1%
Shallowest fall
-17.7%
S&P 500 alone
+73.4%
Gold alone
+150.3%
Rebalanced
Monthly
Two holdings, one mix
Choose the pair, the weight and the intervalThe remaining 40% sits in Nasdaq Composite.
Rebalance back to those weights
Rebalancing sells whatever rose and buys whatever fell, to restore the weights. It costs nothing here; in reality it incurs dealing costs and may realise tax.
The blend returned
+76.0%
Variability
39.8%
Worst fall along the way
-28.7%
Return per unit of variability
1.91
- The blend
- S&P 500 alone
- Nasdaq Composite alone
Both holdings are measured over the trading days they share, so the comparison is like for like. A blend usually varies less than the more volatile of its two parts, and sometimes less than either — that is the one thing in investing that comes close to free, and it depends entirely on the two not falling together. Whether this particular mix beat holding one on its own is a fact about the window shown, not a property of the mix. Change the dates and the answer changes. Charges, dealing costs and tax are excluded.
Every mix of S&P 500 and Gold
Five years, rebalanced monthly| Mix | Return | Variability | Worst fall |
|---|---|---|---|
| 100 / 0 | +73.4% | 35.8% | -24.8% |
| 80 / 20 | +89.6% | 30.7% | -21.9% |
| 60 / 40 | +105.6% | 28.1% | -19.0% |
| 40 / 60 | +121.2% | 28.6% | -18.0% |
| 20 / 80 | +136.2% | 31.9% | -17.7% |
| 0 / 100 | +150.3% | 37.0% | -23.3% |
The mix with the highest return and the mix with the shallowest fall are rarely the same, and the one that looks best here is the one that suited the past five years. A different window gives a different answer, which is the honest limit of this exercise. How these markets moved relative to each other
Why a mix can vary less than its parts
If two holdings do not fall at the same time, the mix is steadier than either. When one drops and the other holds, the combined value moves less than the falling one did.
This is the one effect in investing that comes close to free. It depends entirely on the two behaving differently, and things that normally behave differently have a habit of falling together in a crisis.
What rebalancing does
Left alone, a mix drifts: whatever rises comes to dominate, and the blend slowly turns into the thing that went up. Rebalancing restores the weights by selling some of the winner.
That helps when holdings take turns and hurts when one trends strongly throughout. Set the interval to Never to see which happened here.
Reading the risk columns
Variability is the annualised standard deviation of daily moves. Worst fall is the deepest peak-to-trough decline inside the window, which is closer to what an investor actually experiences.
Return per unit of variability divides one by the other. It is crude — it treats upside and downside movement as equally bad — but it is the standard comparison.
What is excluded
Charges, dealing costs, spreads and tax are not modelled, and rebalancing incurs all of them in reality. Index figures are price levels rather than total return, so dividends are missing.
This is a record of what these prices did. It is not a recommendation, and it is not evidence about what any mix will do next.