Why gold is a bad investment.
The other day, my mother called me with a message that my grandmother wants to “secure the future of her great-grandchildren” with an “investment” in gold. I called my mom back and told her that was a terrible investment. Here’s why: since 1833, gold has had the incredible interest rate of 1.97% per year while the consumer price index, aka, “inflation” increased at a rate of 3.29% per year, since 1913. But that’s not such fair comparison, so how about comparing gold and CPI since 1975. That comes out to be 4.35% and 4.35% for inflation and gold, respectively. Good investment? I think not! Gold’s barely kept up with inflation. Something that I consider an investment performs better than inflation *after* taxes.
You put your money in the stock market instead? See www.coininfo.com
Sure thing! But only in good growth-stock mutual funds with at least a good 10 year track record. Time is the reason you invest, if you’re not willing to wait on it, it’s not worth investing. The stock market has averaged 12% growth per year for the last 70+ years and 97% of mutual funds make money over a 5 year period. That’s not to say that it grows 12% each year, but that it might be down one year, up another, and up even more the next and since you’re investing for the long haul you end up winning.
Here’s something else that’s interesting:
“In the book, Stocks for the Long Run, Jeremy Segall has a graph that shows what would have happened to a single dollar invested in gold, bonds and stocks since 1801.
One dollar invested in bonds in 1801 would yield $13,975 today.
One dollar invested in stocks in 1801 would be worth $8.8 million today.
One dollar invested in gold in 1801 would be worth $14 today.”
How many companies from 1801 are still in business though? That’s the problem I have with stocks…. The companies, or their stock, could disappear overnight. Gold, or other commodities, are tangible and will still exist in 10 or 100 years.
Yes, this is true. This is why I don’t invest in stocks. I invest in mutual funds. With a mutual fund, I’m paying someone to buy and sell stocks for me so I don’t have to lose any sleep if one company sinks. Since a mutual fund has several stocks within it, it is unlikely that there would be a significant change since the risk is distributed among different stocks. Honestly, gold is not really an investment, it is more in line with speculation, and that’s not something I’d do with the stock market. I’ll stick with my mutual funds.