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Investing in Gold

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#1 · (Edited)
I'm not sure if there's any other threads about investing in gold, so I though I'd start a new one.

Investors often say that holding gold isn't a good investment. For one it obviously doesn't have a yield. And with holding gold there is a cost for storage through an ETF like GLD (or HUG) or yearly safety deposit box fees at the bank.

And there's the apparent poor annual returns. In USD Gold is down 30% from its highs in 2011 while during that same time equity indexes have returned around 150% and fixed income has returned around 30-50%. From 2010 to current the total return of the TSX 60 was 70% compared to break even by the gold ETF HUG


What about a longer term investment? Since 2002 to now, gold in USD has matched the total return on the SPY and DIA stock indexes of over 300% , and clearly surpassed the total return on treasury bond fund TLT and corporate bond fund LQD. Gold generated a stellar return of 500% from 2002 to it's highs in 2011.


What about the longer term performance of gold in CAD for Canadians? A 20 year return of nearly 300%. In comparison the total return of the SPY and XIU during that time was approximately 200%.





According to this chart calculated using Tradingview from September 1989 to current gold in CAD has matched the price performance of the TSX index.


So after looking at the 'bigger picture', what do you guys think about a long term investment in gold?

I'm going to keep digging to see if I can find or make a longer term chart of gold in CAD, say for the past 50 or 100 years.
It can be a bit more difficult information to find, but the performance of gold in CAD can be calculated using various methods like spreadsheets or charting software.
 

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#2 ·
I actually think gold is a more important investment for a Canadian than an American. We do not have a reserve currency, nor the global power (or military) to enforce anything. In past periods of economic deleveraging and global slowdowns, the CAD has generally been hurt. I think Canadian investors tend to make a mistake by looking at gold priced in USD.

The relevant measurement for us should be gold in CAD. And on that metric, gold has been a fine holding for Canadian investors. Here's a chart:

Text Red Line Font Plot


And by the way, starting at 2000-01-01 which is the oldest data stockcharts.com has for XIU, I calculate the total return of XIU since then as 157%. Gold returned 311%, much more (this ignores gold fees whereas XIU fees were taken into account so it's a bit unfair). There's no question this has been a worthwhile investment asset since 2000.
 
#3 ·
Why I invest in gold:

1. It's a very well established asset and there's some reason to believe it will preserve real purchasing power in the very long term.

2. Diversification: it behaves differently than stocks, bonds, and real estate. It has a low correlation with other asset classes, doing its own thing at times. This is great for portfolio design.

3. Protection against disasters such as currency collapse, war, high inflation, financial system implosion

I don't buy gold as a pure bet on its high performance. I hope it performs well, but there are several reasons I hold it. For instance I am happy with the portfolio diversification it offers (#2) even if it doesn't outperform. The protection (#3) is for an unlikely, but still possible, scenario that has occurred in many different countries. At the end of the day you can look to my asset allocations to see my level of trust in gold or how valuable it is to me: my targets are 30% stocks, 50% bonds/GICs, 20% gold.
 
#4 · (Edited)
I have always been a friend of Gold - with varying commitments over the years. Currently I am holding 15% in my managed accounts - Pension accounts where I have no input or accounts where gold/PM is not an option I hold none. Overall, I think I am at just under 10%.

I can be a bit more of a pessimist vs an optimist, so gold suits my nature just fine.

I think that with global debt where it is at and the cost of servicing it slowly being pushed up, there is risk there. I think central banks will in reality be held and rates wont get to high cause otherwise they would crush everyone due to the global debt load. Having said that, as our world only takes on more and more debt, rates will be forced lower and lower. There is a breaking point here somewhere and we are close to 0% rates now (vs our past)... so what next ? New global currencies ? New way to stratify debt ? Either way money will continue to devalue and Gold will have value.

Also, as was mentioned before it is a separate asset class. Remember, your not supposed to put all your eggs in one basket.

I used to use a fund that was Gold/Silver and Miners in one. I left that and went to MNT - actual Gold certified by the RCM. Now I know that some will say I have no USD exposure, BUT I feel that Gold is an international currency of its own in reality. The currency you hold it in might have little differentiating difference in the long run.

I am a fan of real bullion too vs paper gold and I have 10% of my 10% in physical gold.... so lets say 1% of our net worth. There is a bit of silver mixed into that portion... probably a 60/40 split (gold/silver) in physical bullion. No other silver in my world. I also like silver - BUT it is different than gold...
 
#5 ·
For me...a 10% allocation to gold helps me sleep at night.

So that's why I have it. To me, it's an insurance policy against central bank miscalculation/stupidity.

I also have physical PMs in various locations....so my actual allocation is quite a bit higher than 10%
 
#6 ·
There are other threads on gold. Go to "Advanced Search" and search on "Gold" in titles only, and you will find most of them.

As a non-believer, my impression is that most gold aficionados are attracted by considerations other than normal investment returns. Since, by your own research, gold is rather high now, it means you would be "buying high".
 
#7 ·
a handful of gold in your safe deposit box is a fine idea otherwise as an asset class its dead money ... since 2011 gold has cost you money to own it, that’s 7 straight years of paying out money year after year when the same money in a simple gic ladder would kill gold

guru has it right, people own gold for reasons completely unrelated to its worth as an asset class
 
#8 · (Edited)
guru has it right, people own gold for reasons completely unrelated to its worth as an asset class
Gold has demonstrated its value in portfolio design and diversification. At least some people own it for justifiable reasons; I can't speak for everyone.

since 2011 gold has cost you money to own it, that’s 7 straight years of paying out money year after year when the same money in a simple gic ladder would kill gold
Big deal. Stocks were dead money for about 11 years, when it also performed way less than a GIC ladder. For the big picture, in a diversified portfolio, the poor performance of gold for X years is irrelevant, just as the poor performance of stocks for Y years is irrelevant.

All asset classes go through strong and weak periods. Your comment, fatcat, that "a simple GIC ladder would kill" actually gets to the key insight in portfolio design:

There are times when GICs / bonds do best.
There are times when stocks do best.
There are times when gold does best.

That's why you need to hold all of them. It does not matter if one of those classes performs poorly for some period of time. If you get hung up on that, you're missing the point of diversification in a portfolio. For example when we hit a stretch where stocks perform worse than bonds for 15 years, it will feel bad, but it also shouldn't deter you from including a stock allocation in your portfolio.

In my early years of investing, I actually made the opposite mistake as fatcat. Starting around 2000, my experience was that my gold and bonds/GICs performed far better than stocks. In my eyes, stocks were the worthless investment. So I know how it feels from fatcat's perspective... it's very hard for people to reason in terms of multiple decades when you repeatedly (for years) see a certain pattern. Back then, stocks looked like dead money. Today gold looks like dead money.

Over time I've realized that you really need to hold all the primary asset classes (stocks, bonds, gold) for best long term results. And yes that will mean that any one of them might do badly for a long time.
 
#12 ·
This is an interesting article from InvestorsFriend comparing various asset class returns from 1926 to 2016, over the entire period then split into 20 year periods.
InvestorsFriend: Stocks, Bonds, Bills and Inflation and Gold

Stocks massively outperformed over the entire time, and had the best returns over several 20 year sub-periods. Gold did really well in a couple of time periods, due to specific economic circumstances. To me this says diversification with a concentration on stocks has the best chance of outperforming for the long term future, but be prepared for the long-term fluctuations.


There is another interesting article comparing stocks, long bonds and T-bills:
InvestorsFriend: Are Stocks Really Riskier Than Bonds?
 
#14 · (Edited)
this is precisely it ... 5% is fine but if you stay with stocks and bonds which are more predictable and much much easier to measure, you will do fine and you will understand your assets much better ... look at buffet, he just ignores gold completely and his success is well known

to carve off 20% and have it sit as dead money (again, you have to pay to own gold) until all of a sudden gold is doing well is not a strategy i could endorse

this won’t convince james or any other lover of gold because gold is more than money to some people .... gold is a symbol that exerts a powerful influence on the psyche

gold is a relic of a financial system that lacked computers, blockchains and cryptography ... it will never be used as money again, it can’t be used as money again because it is insufficient for the demands of the modern world

james, look at your misgivings with GLD, CEF and the rest, you should have misgivings, is the gold there or not and if all hell breaks loose will you have access or not ?

for armageddon there is a better case to made for bitcoin (lost passwords notwithstanding) than there is for gold
 
#13 ·
The long term amazing performance of stocks is mostly a US phenomenon. Once you look around to other countries the story for equities weakens. Plus, once you add in other countries you start to find local currency problems or even failures -- illustrating the motivations for gold & hard assets.

This is a big problem with the US-centric view to investing that nearly all of us take. When you take a US-centric view, it's hard to see the value of gold in a portfolio. Because Wall Street is the heart of the global financial industry, we hear their philosophy, which is (currently) to load up on equities and not bother with other assets. This comes from historical American returns.

Even if the US continues on that amazing trajectory, we're in a different country. I take a more global view of investing and it shows me different prospects for stocks / bonds / gold than the Wall Street view. And while 5% may be a sensible gold allocation in the US, I think in countries like ours higher levels make sense.

Both myself, and Argonaut -- a very experienced investor who's demonstrated a great portfolio over the years here -- hold a 20% weight in gold.
 
#23 ·
I'm aware of the criticisms that my 20% gold allocation is too much. I've researched it extensively and believe me, I don't take my asset allocation decisions lightly.

Here's a presentation from a wealth management team at National Bank of Canada, under a Portfolio Manager with $300 million of client assets:
https://www.youtube.com/watch?v=SIPf6Anuch0

Their model portfolio is extremely similar to mine: 20% gold, 30% equity, 50% bonds. So if my allocation and Argonaut's doesn't mean much to you, we also have this mainstream Canadian asset manager who endorses the same gold exposure.

I think anywhere from 10% to 25% gold is a sensible weight.
 
#24 ·
I'm aware of the criticisms that my 20% gold allocation is too much. I've researched it extensively and believe me, I don't take my asset allocation decisions lightly.

Here's a presentation from a wealth management team at National Bank of Canada, under a Portfolio Manager with $300 million of client assets:
https://www.youtube.com/watch?v=SIPf6Anuch0

Their model portfolio is extremely similar to mine: 20% gold, 30% equity, 50% bonds. So if my allocation and Argonaut's doesn't mean much to you, we also have this mainstream Canadian asset manager who endorses the same gold exposure.

I think anywhere from 10% to 25% gold is a sensible weight.
first, you are a smart guy, i respect your choices since you know what works for you as i do for me

but i cannot for the life of me fathom a portfolio with a 40 year time horizon (you are 35? and lets pick 75 as the end point for the main investing horizon) devoted to an asset like gold which is absolutely occult in its behaviour, it simply doesn’t respond well to any of the known investing guidelines like fed rate, employment, inflation rate, earnings and so on

it is very, very hard to predict how and when gold will be useful ... and it costs money to own ... this can’t be overstated ... for long unpredictable periods of time gold is just dead money

50% to bonds over 40 years ? they don’t even compare to stocks over any 40 year period you can come up with

an all stock portfolio will simply outperform over any 40 year period

you have effectively a savers portfolio james, which is perfectly fine and has served many investors well, it works for you ... and that is what matters

if a 35 year old asked me what to do with their money i would say put 80-85 percent into all equties and 15-20% into bonds and cash mainly to be able to buy on dips ... assuming they weren’t a saver and ultra conservative as you are and then i would say do what you are doing, get some growth with stocks and sleep well at night knowing you are going to survive the downturns

what possible scenario is going to stop equities, which are the goods and services we all need and want every day of our lives, from being good investments for 40 years ?

nothing even remotely forseeable other than planet wide catastrophe and then all bets are off on what to own ...

no, wait, in that case, i would put all my money into antibiotics
 
#27 ·
fatcat, what I'm going for is stability and low volatility of the overall portfolio. The gold allocation achieves that due to the diversification into a new asset... the portfolio with 10% or 20% gold is far more stable than say 60/40.

I may have 40 years of investment ahead of me, true, but that's not when I will be pulling out the money. If I buy a house (very likely) I will be liquidating a huge % of my investments. I don't think it makes sense for me to take high equity risk with high vulnerability to sharp drawdowns when my time horizon for this money storage is only on the 5 to 10 year horizon. Additionally, the type of work I do does not provide job security and continuous paycheques over the years. I benefit from stability in my net worth because I frequently do live off my savings.

These short time horizons I have, and frequent needs to withdraw from savings, is not appropriate for the kind of allocations that you would endorse. Having additional portfolio stability with a gold component, even if it means lower returns, is suitable for my scenario.

an all stock portfolio will simply outperform over any 40 year period
This is just not true. You are speaking with hindsight, looking back at American and Cdn stocks, which I should remind you are pretty much the best performing stock markets in the whole world. Going forward 20 or even 40 years, it is not guaranteed that stocks will dramatically outperform fixed income. There is a high likelihood, but it's not a sure thing.

By the way, I know other young people beside myself. Many of them start investing with the kind of philosophy you talk about (very high equities for great long term outcomes) but then ... uh oh ... they find they need to access that money in just a few years. I've seen this happen countless times. Very few people really have a 40 year time horizon.

My gold & permanent portfolio style is an acknowledgement that I probably don't have a 40 year time horizon for the portfolio. I want more stability and more consistent returns over shorter periods. Heck, I may have to liquidate all my investments in just a few years if I buy a house.

I have enough experience in the investment sphere to see how this plays out. There's the pitch made in the books, "invest for the long term", but that's not what happens in reality, especially not for people my age.

If I already had a house, and a very stable job (like a boomer) then it would be a different story.
 
#29 ·
onagoth, with respect, you’re a gold bug, which is perfectly fine, gic’s get killed by inflation, in a catastrophe who knows whether the government will pay back its bonds or guarantee its gic’s, stock can sink into the floor but gold aint going nowhere ...

assuming you physically have it and are guarding it and going to the massive hassles to actually own the stuff ... or do you let someone else own it for you ? like GLD or CEF ... hmmm, will it be there when you need it ? hmmm ? lets hope so, or do we stuff the safe deposit box and hope the government doesn’t lock us out ... or maybe bury it the backyard and assume nobody ever gets wind and comes over in the middle of the night when we are on vacation

james, you are completely changing the game by mentioning that you want to buy a house, i assumed you were a lifelong renter, in that case, i would shorten the time horizon and get completely out of gold and maximize returns with good corporate bonds to have money to get the house

then buy the house, then buy the gold to bury in the back yard of your new house, maybe compromise and go with 10% :cheerful:

ps. here is the nyu/stern schools (a standout and well respected business school) running tally of stocks and bonds as investment vehicles

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html
 
#30 · (Edited)
I wouldn’t say I’m a gold bug. Certainly I try not to be passionate about it. I like gold for several reasons most of which is that it has no counter party risk (when owned physically) and behaves differently from other asset classes. This is also why I’m opetimistic about crypto’s

In a better world, gold would be mostly irrelevant. I wish I didn’t need it but given my world view, it’s a requisite
 
#32 · (Edited)
And some relevant data. Here are CAGR performances since inception of two really important iShares funds. They're important because they cover two of the biggest equity markets in the modern era, and also illustrate that even long periods (20 to 22 years) do not assure high returns in stocks.

iShares S&P 500 returned 4.94% since inception in 2000.
iShares Japan returned 0.41% since inception in 1996.

They were created when the investments were popular and there was strong demand for them. Think of all the eager investor $ that poured into these at the time... and let's pretend they had the self discipline to buy and hold (which they most certainly did not).

That's 2.7% CAGR for these 20+ year stock investments. This is really worth thinking about.

But you're going to say I'm cherry picking and finding bad looking results, right? And let me guess, when you choose a lower starting point, I suppose that's not cherry picking. Let's remember these giant iShares funds exist because there was investor demand for them. They were created when money wanted to pour in. So the performance since inception is important... it is representative of the kind of experience real people get in real stocks.

And that real experience is pretty bad. 2.7% CAGR for 20+ years. Those investors would have done far better in bonds or GICs.

My advice: don't get overconfident about stock returns, even over multiple decades.
 
#35 ·
As income goes up the value the added income adds to ones life decreases. If a person is creative As income rises there will become a point when more income adds no value to their life. To me it makes no sense to go for income beyond that point & put @ risk losing it all. A less greedy plan would be to put some money into gold in case the system falls apart & you would then still be able to live the life of Reilly spending the gold.
 
#40 ·
I'm showing that even if you play the same game as fatcat, with historical returns, that a portfolio with a significant gold allocation produces a desirable effect. So if we believe that historical returns are somewhat predictive, you still want gold. fatcat has ideological problems with gold, and uses historical numbers to argue for high stock allocations, but even those historical numbers support a gold weighting.

And yes, we don't know how anything will do in the future. All of this is a gamble. Given that uncertainty, I'd rather diversify into multiple asset classes instead of pinning the entire future outcome on just stocks.

Either way you look at it, some % gold is good for the investor. Whether you take the historical returns seriously or not, the argument for gold remains.
 
#45 ·
james, james, james ... you say that i am playing a game with historical returns when, my god man, you are the back-tester extraordinaire :)

a cursory glance at your posts show that you love to backtest, in fact, one of the problems i have following you is that you post so damn many numbers on so many hypothetical portfolios

we actually agree on the most important parts here james: you can't predict the future so be invested broadly, own some stocks, some bonds, some growth stocks, some dividend stocks, own across at least 7 or 8 stock sectors, have some rock solid gic's, have some bonds so you stay liquid, have a diversified portfolio that will try and weather as many scenarios as possible

we are in complete agreement here

where we part company is the amount of gold to own, 5% seems fine to me, and is a number that many portfolio managers recommend but anything over that does not seem wise to me at all

but you are you and you are a smart guy so if you want to put 20% into gold be my guest

i just saw a really sobering youtube on the debt in china right now and wow, if that thing pops and takes the rest of the world with it, you will be proven very wise
 
#47 ·
It doesn't scare me in the least, fatcat, because I'm looking at the overall portfolio's behaviour -- not one component's. The historical data shows that a gold weight was beneficial over that period, for the characteristics that interest me.

From 1980-2008, the portfolio mix which I currently invest with (20% gold) using US data, returned 9% annually, just about 1% less than a traditional 60/40. It exhibited milder declines and its worst year was only -5% versus -14% for the 60/40. Overall it was a smoother experience for the investor, plus it had embedded insurance against currency collapse which 60/40 does not offer.

If that's the "horrible result" looking at the worst period for gold, I think I'm good. Even in the greatest bull period for stocks, and worst period for gold, the portfolio that includes gold shows less risk and volatility. And is more diverse. What a huge win! fatcat surely you are lining up to buy gold right now.
 
#48 ·
It doesn't scare me in the least, fatcat, because I'm looking at the overall portfolio's behaviour -- not one component's. The historical data shows that a gold weight was beneficial over that period, for the characteristics that interest me.

From 1980-2008, the portfolio mix which I currently invest with (20% gold) using US data, returned 9% annually, just about 1% less than a traditional 60/40. It exhibited milder declines and its worst year was only -5% versus -14% for the 60/40. Overall it was a smoother experience for the investor, plus it had embedded insurance against currency collapse which 60/40 does not offer.

If that's the "horrible result" looking at the worst period for gold, I think I'm good. Even in the greatest bull period for stocks, and worst period for gold, the portfolio that includes gold shows less risk and volatility. And is more diverse. What a huge win! fatcat surely you are lining up to buy gold right now.
i need to understand what the above bolded part means

gold "weight" is beneficial, so it hedges against something ? down years in stocks ? inflation ? what ? ... what does it do ? ... what is the "characteristic" that interests you ?

in a hypothetical all stock portfolio vs a permanent portfolio the hedging aspect of each component becomes useful year by year but by no means does this mean that the overall portfolio will do nearly as well as stocks on a long horizon

sure gold may have a better year than stocks or bonds from year to year

but remember we are holding for 40 years so stocks can have good and bad years and still come out way ahead, as long as you are holding for the long ride, why do you even need gold ?

in other words, you don't need the ballast that gold provides on that time horizon especially when you risk long periods of dead money

the sp 500 has never had more than 3 straight losing years and that was from 1929 to 1932 when it had 4 ... you can point to japan's market which has been dead for 28 years (but still paid dividends) and say that gold is insuring against that but that is a complete outlier and the price you are paying (15% extra in gold) seems to me not worth the hedge for such a possibility

ps. you can say you need gold to smooth the ride so when you are ready to buy a house you will have the capital but that is really the wrong way to go about it, make your move, decide what you want to buy, how much you want to spend and then hone in on that goal with all your resources

and then go back to your long horizon

you seem to me to be rather undecided, you are sort of in for the long haul but sort of want to have money for a house, right ?
 
#60 ·
James is right, Gold has a great diversification benefit due to its low or negative correlation with Stocks and Bonds.

Use this handy backtesting tool to verify yourself: http://www.ndir.com/cgi-bin/downside_adv.cgi
You can go back to 1970 which allows you to experience most market conditions, and have Gold unhedged to the US dollar.

If you take a hypothetical classic 60/40 risk/safety portfolio, most traditional money managers would say to go 60% Stocks and 40% Bonds.
What I say, is that you can actually substitute Gold for the safety component, Bonds, and come out ahead.

If you instead go 60% Stocks, 20% Bonds, and 20% Gold...

- Your returns will be higher
- Your volatility will be lower
- You will have fewer years of drawdown, and a shorter timeframe to recover from losses

Proper diversification is the ONLY FREE LUNCH IN FINANCE, and although one may not believe in Gold, you cannot deny its effectiveness in doing the job it is supposed to do in a portfolio.
 
#61 ·
james references an article which i took a look at and hoped to find some common ground in our ability to get some standard metrics on gold bonds and equities but the author references statistics that differ from the statistics i tend to look at

in order to make sense of the argument we need a common reference set and that seems hard to do

also, we need to look at time lines ... volatility and smoothing make much less sense if you are simply buying over a very long time line like 40 years and for some young people 50 years of just steadily contributing to a set of low cost mutuals or etf’s

we need some common metrics that take into account golds cost of ownership

i cannot see how an asset that costs money to own and goes dead for long periods of time is going to add value to a portfolio composed of all stocks over 50 years for example, i don’t see it

why do you need low volatility or smoothing or ballast if you have a 50 year time horizon ?
 
#62 ·
I need lower volatility for many reasons. One reason is that money I invest will not be left alone for 50 years. I would argue that most people, even very young people, simply don't have 50 year time horizons. Inevitably, they need some money sooner, especially in the modern economy where there's no job stability.

Another reason is that my income, like most people's, correlates with the economy/stock market. If I invested 100% in stocks as fatcat endorses, every time there's a global recession, my employment income would go to $0 and then my net worth would tank 40% to 60%. What kind of life is that?

Everyone talks a big game about being ready for volatility, but I saw what happened in 2008 including with young people (my coworkers). People either capitulate and get out of the market when things get really bad, or they experience severe stress (including sleepless nights) and even change how they live life due to the losses. Or people simply need the money.

One reason I'm still investing today, and have consistently invested since 1998, is because I had a pretty safe portfolio that hasn't had catastrophic losses. Having low volatility in my investments has helped me "stay in the game" -- a huge win compared to some of my peers who got wiped out or capitulated. I plan to continue staying in the game by making it easy on myself.

Any reduction in volatility I can achieve while still getting a solid positive real return is a big win, in my eyes. It will help me stick with the plan, avoid stress, not put me in a jam when I need money from my savings. This is a no-brainer IMO.
 
#64 ·
Everyone talks a big game about being ready for volatility, but I saw what happened in 2008 including with young people (my coworkers). People either capitulate and get out of the market when things get really bad, or they experience severe stress (including sleepless nights) and even change how they live life due to the losses. Or people simply need the money.
Everyone has a different FUD (fear, uncertainty and doubt) line and one should adjust their portfolio accordingly. If you have a very high FUD factor keep you investments managed through an adviser, DIY is NOT for everyone.
 
#63 ·
Just some quick numbers to ponder from the calc Argonaut linked to earlier,
Using $1000 starting for each decade and ending $ value in 2018, 100% Gold vs 100% S&P500 vs 100% Long Cdn Bonds

Year Gold S&P500 Bonds
1970 46019 148143 83717
1980 2921 77357 40492
1990 3788 15485 11183
2000 4165 2329 3742
2010 1527 3521 1759
 
#65 ·
sorry do not understand the above table ...

in 1970 gold was still pegged at USD $36 per ounce on the gold standard. If today it's $1527, it's risen more than 40-fold. By contrast the house where i grew up has risen roughly x 28 over same time period. Barrel of oil, roughly x 20.
 
#69 ·
If it's your money with no benefit then sure - avoiding one's employer's stock may be the best move.

If it's a discount options/share plan like some of my co-workers had that guaranteed them a 6% gain on the purchase date then it would be different. They knew about having too much employer stock from former Digital employees. They dealt with it by liquidating everything the day after buying. Being more conservative, I probably would have liquidated half and let the other half ride but sadly have never worked for a company offering such a plan.


As for Nortel ... many who *didn't* work for Nortel have told me they regret their actions so it's not just employees. It boggles my mind that some told me they had $500K to $1 million but didn't sell until the end.


Cheers
 
#71 ·
james, we are using two entirely different scenarios, you are investing where your investment portfolio functions in a certain way as your part time job

you are using it to supplement income and to save to buy a house, therefore you are much more likely to need to lower volatility than the person i am using as an example, which is someone who works for 40 years and merely adds to their investment portfolio along the way with a limited number of planned withdrawals, their employment income is their life working capital and their investment portfolio is their "nest egg"

most people do dip into the egg somewhat but this is a completely different scenario from yours, their need for "smoothing" and a reduction in volatility is much lower than yours

over the long haul, and 40 years is a long haul, you can ride volatility out quite nicely and if you do need protection, bonds do a better job than gold because they are more predictable

with gold you are parking 20% of your money in an asset that doesn't pay a red-cent and actually costs you money to own and is entirely unpredictable and virtually only measurable and useful by a single metric, fear, which itself is impossible to measure and it goes for long periods as simply dead money, something the stock market has never done

and no, the non-correlation value is bunk ... the armageddon model is bunk too, better to own diamonds which are transportable, or crypto or scotch than gold

$100 invested in 1928 in the SP500 including dividends would return $382,850.00 today

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

$100 invested in 1928 would buy you roughly 4.8379 ounces of gold which would be worth $6374.40 today ... minus ... the money, sweat and time it costs you to own it

http://onlygold.com/Info/Historical-Gold-Prices.asp

gold is now a relic as an investable asset, which says nothing about its desirability, its collectability, its value for jewelry which will never go away
 
#72 · (Edited)
$100 invested in 1928 in the SP500 including dividends would return $382,850.00 today

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

$100 invested in 1928 would buy you roughly 4.8379 ounces of gold which would be worth $6374.40 today ...

gold is now a relic as an investable asset,
Not a fair comparison here. It's misleading to just compare the returns on the DJIA since 1928 to the returns on gold in the same period, as though it proves gold is a poor investment today. For a period of time the US government made it illegal to own gold and confiscated it. FDR's Executive Order 6102 in 1933 was only ended by Ford by 1974.

Remember that gold was pegged at a fixed value to the USD until the early 1970's. Once it's value was permitted to float free by supply and demand it skyrocketed in value from $36 to 675 in less than a decade.

chart https://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

Claiming "gold is now a relic as an investable asset" is perhaps just one opinion.

But lets review the known facts:

Some might be surprised to know that in 2016 the average daily trading volume in gold was 175 billion U.S. dollars worth. ( source: statista.com)

Approximately 190,040 tonnes of gold has been mined throughout history and almost all of this metal is still around in one form or another, and valued over $8 trillion in value.

About half the world's supply is held in the form of jewelry, 90,718 tonnes worth, approximately 3.8 trillion in value.
About 1.7 trillion worth is held privately for investment or approximate 40,035 tonnes in 2017.
About 33,828 tonnes of gold are held globally by central banks, approximately valued at $1.5 trillion in value.
 
#73 ·
Fatcat I don't think you grasp what non-correlation is and how it can affect a portfolio over time. Your historical timeline going back to 1928 is also very silly considering that Gold was pegged to the US Dollar for much of that time. Unless you see a return to the gold standard, it's much better to look at comparative historical performance since the 1970s.

Again, I'm showing two different portfolios composed of 60/40 risk/safety since 1970 using this tool: http://www.ndir.com/cgi-bin/downside_adv.cgi

Portfolio 1
30% TSX Composite
30% S&P 500
20% Long Canadian Bonds
20% US Bonds

Average Gain (Geometric): 9.833%
Standard Deviation: 9.992%
Total Value of a $1000 Investment: $99,078.98
Total Down Years: 8 years (16%)

Worst Drops
1973: -18.61%, 3 years to recover
1974: -15.47%, 1 year to recover
2007: -11.91%, 3 years to recover
2008: -10.72%, 2 years to recover
2001: -8.48%, 2 years to recover

Portfolio 2
30% TSX Composite
30% S&P 500
10% Long Canadian Bonds
10% US Bonds
20% Gold

Average Gain (Geometric): 10.196%
Standard Deviation: 9.889%
Total Value of a $1000 Investment: $116,435.57
Total Down Years: 6 years (12%)

Worst Drops
1981: -10.90%, 1 year to recover
2008: -8.06%, 1 year to recover
2001: -6.05%, 2 years to recover
1990: -4.40%, 1 year to recover
2002: -3.96%, 1 year to recover

As you can see, Portfolio 2 not only has higher returns, lower volatility (standard deviation), but also fewer and less drastic down years. But more importantly, it recovered from those down years quickly -- within a mere 1 year, with the exception of 2001 when a small 6% drop took 2 years to recover from.
 
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