- Joined
- 24 February 2013
- Posts
- 643
- Reactions
- 911
Stocks do well over time if the stock market is not too overvalued and the economy performs okay. Look at Japan. The Nikkei 225 only surpassed its 1989 high recently. A Japanese investor in 1989 would have done better buying gold. There is argument for owning both stocks and gold. Gold will still do okay if the world economy goes to hell but stocks will under-perform. So yhes you want a greater allocation top stocks but its reasonable to own some gold as a risk management/hedge. Not too mention gold is a physical asset if the internet or electricity goes down or the stock market shuts down for a while due to a major world war/crises, etc. the physical gold will come in handy.Consider this short story that will describe the difference between holding gold and holding other assets.
Imagine a Genie came to you an offered to give vast amounts of 10 Trillion dollars of assets, the catch was these assets were the only assets you family could ever own for future generations, they could sell them as needed, but couldn't buy anything else, She gave you 2 options.
Option 1 - All the gold the has ever been mined worth about $10 Trillion, it is a large cube that would fit between the legs underneath the Effiel Tower.
Option 2 - The Entire City of New York + All the farmland in the USA + The entire sharemarket of Australian share market + Apple, Google and Berkshire Hathaway, and still have about $1 Trillion left in cash to spend or deploy as you wish.
Obviously being felt that hand would be amazing and if you chose option 1 your family would live a very rich life for a long time, but over time your cube of gold would shrink, and your future generation would eventually run out of gold having sold it all to fund their life style.
But, if you selected option 2, your family would never run out of funds, because the rental checks from New York and every farm in the USA, dividends from the entire Aussie sharemarket and APPLE and Google, and share sales from Berkshire would never run out.
If you can understand that, you should be able to see why storying your retirement funds in gold might not be great if you plan to live off them in the future.
But yes in general if you are holding for 50 years generally stocks will outperform gold. But returns are only one aspect of investing. Risk management is the other aspect.