I recently ran across a chart pointing out that gold -- represented, in this case, by the streetTRACKS Gold Shares
In case you're one of those folks, here is some food for thought: Even though gold has spiked sharply in value recently, it hasn't been a long-term winner for most investors. According to University of Pennsylvania finance professor Jeremy Siegel in his seminal book Stocks for the Long Run, here's what a dollar invested in various things would have grown to, from 1802 to 2001. (Amounts have been adjusted for inflation.)
- Stocks: $599,605
- Bonds: $952
- Bills: $304
- Gold: $0.98
Did you catch that? Over 200 years, you would have lost two cents of your dollar if you had invested in gold.
OK, so if your personal investing timeline is less than 200 years, here are some compound average annual returns to consider:
|
Period |
Gold |
S&P 500 |
|---|---|---|
|
1982-2007 (25 years) |
3% |
11% |
|
1987-2007 (20 years) |
2% |
8% |
|
1992-2007 (15 years) |
5% |
9% |
|
1997-2007 (10 years) |
8% |
5% |
|
2002-2007 (5 years) |
18% |
13% |
Gold may indeed be trading high right now, and it has certainly rewarded investors who bought at the right time. But "the right time" is clearest only in retrospect. Over most long periods, gold hasn't been the most spectacular investment, while stocks have generally done rather well.
If you still want to invest in gold, a smarter way is through mutual funds. The Vanguard Precious Metals and Mining (VGPMX) fund, for example, sports an average annual return of about 33% over the past five years, and it's invested in companies such as Barrick Gold
You may also want to check out these articles:
