Friday, November 12, 2010

Slow Market? Buy Gold! Please!

It's funny to hear people complain about the market not giving high enough returns, then "investing" their money in gold. The New York Times provides a nice graphic showing how risky this is. If you had invested lots of money in gold around the last time gold was over-valued, January 1980, you'd be sitting on a negative inflation-adjusted return, even considering how far up the price of gold has risen recently. In comparison, had you invested in the S&P 500, you'd have an inflation-adjusted return of 300%, even considering the lackluster recent decade the market has experienced. But, I'm happy to see people buy gold. Why? Because it keeps stock prices low, giving me more opportunities to buy up cheap stocks before the tide turns, gold drops like a rock and the stock market finds a new darling to chase after.

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