A plaque remaining from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem.

Above, a 1934 plaque from the Big Apple Night Club at West 135th Street and Seventh Avenue in Harlem. Discarded as trash in 2006.

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Entry from November 19, 2008
“Put 10% of your portfolio in gold and hope it doesn’t work” (investment adage)

Entry in progress—B.P.

14 April 1989, The Gleaner (Kingston, Jamaica), “The thing with the bad rep is gold” by Robert Heier (Copley News Service), pg. 23, cols. 1-2:
Byron R. Wien of Morgan Stanley and Co. echoes the prevailing sentiment about gold’s volatility. He recommends that investors keep only “5 per cent to 10 per cent” of their holdings in gold.

Scarcely affected
If you look closely, however, you’ll see that if your objective is lots of profit, it really doesn’t pay to follow the above advice and invest only 10 per cent of your portfolio in gold. The reason is simple. Let’s say gold doubles in price, i.e., appreciates 100 per cent in value. By having only 10 per cent of your money in gold, your portfolio would scarcely be affected. To be precise, while gold doubled, the value of your entire portfolio would have gone up only 10 per cent (a 100 per cent increase of 10 per cent of your portfolio).

So to have participated substantially in what would have been a spectacular price increase, you’d have needed to risk far more than 10 per cent of your portfolio. But taking that step would have exposed you too heavily to all that volatility. Either way, gold for profit is a real headache.

Gold as a safety net is another story. If you happen to have a large portfolio, or other wealth, the 10 per cent rule-of-thumb may make good sense. That’s because, for you, gold is not an investment. It’s actually a form of crisis insurance. First, it can be very expensive. Second, your hope you’ll never have to use it.

International Herald Tribune
The Other Side Of The Gold Coin
Published: SATURDAY, SEPTEMBER 14, 1991
(...)
The classic adage is that gold should make up 10 percent of a balanced portfolio. That may be a little too bullish, but the new lows and the absence of new downside factors in gold suggest that a 5 percent investment in the interest of balance would not hurt.

13 July 1998, Syracuse (NY) Herald-Journal, “Gold: It’s like an insurance policy for your portfolio” (Wall Street Jorunal), pg. D11:
“If you think about the sort of thing that drives gold higher—inflation, economic chaos, social unrest, war—then people should put 5 percent of their portfolio in gold and hope the price goes down,” says Gerald Perritt, editor of Mutual Fund Letter, a Largo, Fla., newsletter.

The Idler Forum
Frizzers
2006-11-11 02:13:18
(...)
The safest way to play this is to have 5 or 10% of your portfolio owning physical metal. Isn’t there a Wall Street saying, ‘Hold 10% of your portfolio in gold and hope it doesn’t go up’ or similar?

Kitco Forums
Eurodragon
04-28-2008, 11:03 PM
I most often read this as being presented by gold people and companies as a “wall street saying” that goes “Put 10% in gold and hope it doesn’t work”.

It sounds as a nice bit of lore and 10% would lay a good foundation as an insurance. The current bull market however changes the role of PMs from an insurance to something actually expected to do well.

GoldSeek.com
Gold Investments Market Update - Astute Contrarians Buy Physical Bullion at Firesale Prices
-- Posted Thursday, 23 October 2008
(...)
Many of our clients do not care what happens to the gold price in the short term as they see it as financial insurance and not as a speculation or money making exercise. The old Wall Street adage to hold 10% of your portfolio in gold and hope it does not work remains more than valid.

The Market Oracle
Gold Rallies as Goldman Sachs Share Price Crash
Commodities / Gold & Silver
Nov 11, 2008 - 06:15 AM
By: Mark O’Byrne
(...)
However, anything is possible in the short term and leveraged trading is for the foolhardy. Risk aversion should remain paramount today and in the coming weeks and investors should shun speculative short term get rich schemes for passive long term investing. Value investors should continue to remain properly diversified and maintain a minimum of 10% to 20% of their portfolio in gold bullion. The old Wall street adage of keeping 10% of your portfolio in gold and hoping it doesn’t work has never been more appropriate. 

Posted by Barry Popik
New York CityBanking/Finance/Insurance • (0) Comments • Wednesday, November 19, 2008 • Permalink