Wanted to get the board's opinion on the role of contrarian or negatively correlated assets in the context of managing a large investment portfolio. Current investment allocations are equities, bonds and a smattering of real estate investments. Additionally, there has always been a smallish brokerage account which held mining stocks and some swiss franc currency trust shares. In previous market downturns/volatilty, this particular portfolio has risen and mitigated broader portfolio losses. I am mulling over the longer term necessity, investment objectives and the potential composition of such a contrarian portfolio in today's investment climate. Seems like this type of thinking is from my parents/ grandparents time but may not be as relevant today.

Black Swans will occur. Look at 9/11. Your grandparents will be right, given enough time.

That being said, I don't personally invest in low earning stable assets because I can ride out the wave, and I don't like the opportunity cost.

If disciplined rebalancing is part of your investment strategy, it almost certainly makes sense to include low/negatively correlated assets.

If you are trying to time the market and/or have strong opinioned theses, they can make sense to express a view or act as a store of value.

For the buy and hold crowd, they will likely degrade return over long periods.

I'm only parroting what Nassim Taleb said during an interview I watched a few months ago... During times of crisis, non-correlated assets all begin to correlate. Cross asset diversification may not be enough to protect yourself.

moses1084ever said:

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I'm only parroting what Nassim Taleb said during an interview I watched a few months ago... During times of crisis, non-correlated assets all begin to correlate. Cross asset diversification may not be enough to protect yourself.

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I agree with this, liquid assets help with correlated panic selloffs (expected liquidity dries up during flash crashes, since market makers aren't obligated to buy). Didier Sornette also has interesting views on risk in complex systems, with his research on earthquake forecasting.