August 22, 2011

Gold versus Stocks

A lot of noise around gold these days, it seems we are bombarded with ads reminding us to buy gold.

Here is the truth about gold.  Gold is a commodity and as such is susceptible only to perceived supply and demand.

If you thought stocks are volatile, watch commodities for a while!

The chart compares the total real returns over the period, 1925 to 2010. Gold has climbed a great deal in the last year, not on this chart so I imagine the yellow line to be well above the red but still not above the blue which is stocks.

Sure, we'd all like to have sold all our stocks in 2000 before the bubble burst and bought gold but timing the different asset classes is just too difficult and commodities are dangerous.  The average investor and yes, that means you, is better off staying the course with your mix of stocks, bonds, CD's and cash.

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