Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold - Investor Safety Blanket or Quilting Essential?

Commodities / Gold and Silver 2013 Feb 14, 2013 - 09:06 AM GMT

By: Adrian_Ash

Commodities

The patchwork quilt of diversification looks awful smart. It's more than pretty with gold in it, too...

Investment experts keep telling us two things.

One, you must diversify your savings. Nothing works for ever. Two, your annual returns are set to be miserable, because there's no return to the out-sized gains of the 1980s and '90s. The last 10 years prove that.


Now, we don't doubt Point 1. Not even people buying gold in 2001 could in fact see the future (though we might tell you different tomorrow). That second claim needs a closer look, however.

US Assets, US Dollars: Total Annual Returns (before expenses & tax)

Source: BullionVault via CRB, LBMA, NAREIT, NYU Stern, St.Louis Fed

REITS = FTSE Real Estate Investment Trusts S&P = S&P 500 equity index CCI = CRB Continuous Commodity Index Corp = Barclays Aggregate US Bond Index Trsy = 10-year US Treasury bonds Cash = 3-month Treasury bills

The idea is simple enough. Our patchwork quilt above looks a lot like the more famous Callan Periodic Table (well, famous to finance nerds and investing professionals). It compares the annual returns on a selection of assets. In the case of the Callan Table, those assets are mostly stock-market indices, split into emerging markets vs. Europe vs. a range of thinly sliced US segments (Russell 2000 Growth anybody?).

But while that's useful, perhaps, for equity-fund investing, there are lots of other things which both private savers and the professional investors supposed to be working for them also buy. What about commodities, real estate, gold, cash or T-bonds?

Now, as you can, and just like the people Callan say - as well as more finely-sliced examples, such as Frank Holmes at US Funds ranking the different tradable commodities - "The Table highlights the uncertainty inherent in all capital markets.

"Rankings change every year."

There are broad patterns over time, however. No asset class makes #1 for more than two years running, for instance, not in the 35 years of data we've crunched. (More on the full table next week.) Most recently, and with the calls for a gold bear market in 2013 growing louder each day, it's also notable that:

  • Gold has been the #1 asset only once. It placed in the top 3 performers in eight out of the last 10 years;

  • Real Estate Investment Trusts, if averaged, were the #1 asset class in 3 of the last 10 years. They made the top 3 seven times, but slumped to worst position twice;

  • Cash has now lagged inflation 4 years running for US savers.

The upshot? Going forwards, no idea. But looking at that "poor returns ahead" warning, it only gains credence from the past decade if you ignore gold. Which is of course what most packaged-finance promoters do. They might well ignore real estate and commodities as well.

Investing money evenly split however between US equities, investment-grade corporate bonds, Treasuries, cash, gold, commodities and real estate would have returned 6.5% per year on average, over and above inflation, since the start of 2003. Even if you'd avoided miserable gold all through the 1980s and '90s, you would still have made only 5.4% per year during those go-go decades.

Including an even allocation to gold investment, in fact, the last decade's returns stand very nearly two full percentage points better than the average real return since 1977 (again, pre-tax but post-inflation, and excluding trading costs). At 4.6% per annum, that 35-year average also sneaks ahead of the average return if you had avoided gold too, at 4.4%.

"Gold is the equivalent of a financial teddy bear," as one UK fund manager never tires of saying. And saying - and again. People cling to it, in short, for emotional support instead of rational reasons. Yet the patchwork quilt of a diversified portfolio is no mere safety blanket. And it's warmer still if you add gold to your color scheme.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules