The concern that allocating to gold or Bitcoin requires giving up productive, income-generating assets like equities or bonds is both intuitive and legitimate. Neither gold nor Bitcoin produces dividends, interest, or cash flows, which may make these bearer assets appear less compelling. However, this view overlooks the distinctive economic roles they play and why, despite their lack of income, they may still merit a place in a well-constructed portfolio.

Gold, in particular, is often thought of as a hedge. Traditionally, hedges come with a cost: like insurance, they tend to deliver negative expected returns in exchange for protection during crises. Gold, historically, is a rare exception. Since the end of the Bretton Woods system in 1971, gold has exhibited both crisis-hedging properties and a positive real return: compounding at 7.35% annually through 2024. This paradox is resolved by recognizing that gold no longer functions as a passive store of value but now absorbs inflation, currency, and policy risk. Investors holding gold are taking on these macro risks and, as with equities or bonds, expect to be compensated for bearing them. In this way, gold behaves not as insurance, but as a risk-bearing store of value with asymmetric upside in specific economic regimes.

In addition to a risk premium, gold may also benefit from what’s known as a convenience yield: a non-cash benefit associated with holding a highly liquid, universally trusted reserve asset. During periods of market stress, currency instability, or institutional distrust, the demand for physical gold can surge, leading investors to pay a premium for ownership. Central banks, for example, have consistently accumulated gold reserves for macro-prudential reasons, reinforcing structural demand. This sovereign support – sometimes described as an “official-sector put” – can act as a source of price stability and long-run support even outside of traditional return drivers.

Bitcoin, while still in a more speculative and volatile phase of adoption, is increasingly viewed through a similar lens. Though it lacks the centuries-long track record of gold, its hard-capped supply, decentralized governance, and non-sovereign nature make it attractive as a digital analog to gold. Investors do not expect cash flows from Bitcoin, but instead value its scarcity and independence as a hedge against fiat dilution and systemic risk. Like gold, Bitcoin may command a premium for the unique role it plays, particularly among younger investors and institutions seeking uncorrelated, censorship-resistant assets in an increasingly digital economy.

While these assets may not generate income, their value arises from scarcity, liquidity, and their function as macroeconomic hedges. In that sense, gold and Bitcoin are not inferior substitutes for cash-flowing assets, but potential complements: tools that absorb different risks and provide different benefits within a diversified portfolio.

The idea that “they don’t produce cash flow” is not a disqualifier: it’s a feature. Cash-flowing assets like stocks and bonds tend to be priced off interest rates, risk premiums, and economic growth expectations. Gold and Bitcoin, in contrast, respond to different drivers: inflation, currency debasement, monetary expansion, geopolitical instability, and long-term sovereign credibility. This is precisely why return stacking – as we’ll explore in the next section – becomes so valuable: it allows investors to layer these non-cash flowing diversifiers without giving up exposure to traditional, productive assets.

Viewed this way, the overlay becomes a re-denomination mechanism. It’s not about betting that gold or Bitcoin will outperform, but rather recognizing that diversification also extends to currency regimes. By adding exposure to bearer assets that are not tied to the fiscal or monetary credibility of any single government, investors can construct portfolios that are more resilient across a broader set of macroeconomic environments.

In a world where currency debasement and financial repression are more than theoretical risks, the ability to partially denominate a portfolio in hard assets like gold and Bitcoin – without sacrificing core holdings – offers a compelling evolution in portfolio design. Overlaying these exposures acknowledges their potential role not only as tactical diversifiers, but as structural components in the architecture of long-term wealth preservation.

Gold and Bitcoin are no longer fringe curiosities: they are increasingly being embraced by central banks, institutional investors, and a new generation of asset allocators for their unique role in navigating an evolving macroeconomic landscape. While neither asset generates cash flow, both offer scarce, non-sovereign stores of value that can hedge against currency debasement, inflation shocks, and systemic risk.

Importantly, investors no longer need to choose between owning these assets and maintaining exposure to traditional equities and bonds. By shifting from substitution to overlay, gold and Bitcoin can serve as complements rather than replacements—effectively re-denominating a portion of the portfolio in alternative monetary assets without sacrificing core return drivers.

In doing so, investors may achieve deeper diversification—not just across asset classes, but across monetary regimes—positioning portfolios to better withstand a range of future economic outcomes.