The Golden Rule of Investing

18 Pages Posted: 4 Apr 2023 Last revised: 24 Jun 2023

See all articles by Pim van Vliet

Pim van Vliet

Robeco Quantitative Investments

Harald Lohre

Robeco Quantitative Investments; Lancaster University Management School

Date Written: June 23, 2023


While gold is a volatile asset, it is often considered a safe haven that offers protection during bear markets. We study this safe haven hypothesis by analyzing a strategic allocation to gold for a loss averse investor with a 1-year evaluation horizon. A modest allocation to gold indeed helps to reduce downside risk of traditional stock-bond allocations, yet such risk reduction comes at the cost of return. Conversely, low-volatility stocks are more effective in reducing losses without giving up returns. As a result, a stock-bond-gold allocation considerably benefits from embracing low-volatility stocks, and allows for increasing the equity allocation at the expense of bonds. Notably, the effectiveness of this defensive multi-asset portfolio increases with the investment horizon.

Keywords: Strategic asset allocation, gold, defensive equities, low-volatility investing, loss aversion, downside risk

JEL Classification: G11, G12, G14

Suggested Citation

van Vliet, Pim and Lohre, Harald, The Golden Rule of Investing (June 23, 2023). Available at SSRN: or

Pim Van Vliet (Contact Author)

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG

Harald Lohre

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG

Lancaster University Management School

Lancaster LA1 4YX
United Kingdom


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