INVESTING STRATEGY
The Great Gold Debate
Hey everyone For background, I used to be with Stockspot when I first got started in ETFs. I've recently moved out of Stockspot's platform and onto Pearler, and have shifted my asset allocation to better suit my risk profile. I was actually wondering about everyone's thoughts on Gold as a defensive asset, or one that is not correlated to shares? Stockspot has had quite a large allocation to GOLD (approx 15%). There seems to be quite a debate around GOLD as an asset class, and I was wondering what people's thoughts were? Having been invested in gold for a short time period (approx 7 years) - I definitely noticed that in a diversified portfolio it did help smooth out returns, and tends to be oppositely correlated to stocks. Chris Brycki from Stockspot seems to like gold (i.e. good diversifier, hedge, insurance policy) (https://blog.stockspot.com.au/buy-gold/), whereas Ben Felix from PWL capital has a lot less of a rosy outlook - https://www.pwlcapital.com/will-gold-save-the-day/, (I.e. not an income-producing asset, highly volatile etc.) I'm sitting on the fence, and not too sure if I want to keep a small allocation to gold in my portfolio (say 5-7%)?
4 Comments
about 2 years ago
I’m not personally a fan of gold at all. Over the long term (50-100+ years) it’s an unbelievable difference in outcome.
The S&P 500 (which benefits from productive enterprise, innovation and produces cashflows and income) produced a total return of over 2,300,000%. Yes, 2.3 million percent. Gold, on the other hand, returned over 8,000%. A tiny, tiny return in comparison. The second chart (total return stock index) on this page shows it, just toggle the timeframe to get a greater perspective: https://www.longtermtrends.net/stocks-vs-gold...
Which makes sense when you think about it: one is owning a large collection of productive and dynamic businesses which make lots of money and grow over time… the other is a lump of metal which does nothing and produces nothing, it’s value is based on popularity.
Certain assets may smooth out returns, but at what cost? Like insurance, holding other assets due to their non-correlation will be a losing bet, on average, unless they themselves have solid long term fundamentals built on cashflows like stocks and real estate do.
None of this to say what you should or shouldn’t do. But it’s important to understand the two are fundamentally very different, and so are their long term return outlooks (30-100 years). Hope that helps.
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