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S&P beats gold in long term.

Gold has clobbered the Standard and Poor's 500-stock index the last five years, but stocks have romped in the long run. How gold has fared vs. stocks:
Total return*
Investment 1 year 5 years 10 years 15 years 20 years 25 years
Gold-oriented funds 62.9% 52% 51% 10% 41% 637%
S&P 500 -22.1% -3% 144% 409% 992% 2,013%
* - Dividends, gains reinvested Source: Lipper

therealchips wrote: Most of the sites I found this way are in PDF format which seems designed to prevent copying and pasting. Sigh.

peteyperson wrote: How could I find out the data going back possibly several decades for the performance of Gold, Gold mutual funds and Energy (Oil & Natural Gas)?

So far all I have can find is a decade worth of stats at best which includes the bumped gains with Gold but doesn't show the realistic long term performance of this asset class. I ask because Gold funds here carry a 5.25% sales load and 1.5-1.7% annual mgmt fees, so I wonder if their usual performance warrants any investment at all. More data would help to make that decision.

Thanks,
Petey

BenSolar wrote:

therealchips wrote: Most of the sites I found this way are in PDF format which seems designed to prevent copying and pasting. Sigh.

As an aside, if your browser is like mine (a recent microsoft product with the adobe acrobat extension) then you can copy text out of a PDF by first selecting the 'Text Select Tool'. Look on the tool bar at the top. If you see a button with a large 'T' on it, then you can usually click that and then copy text as usual on a webpage. Some pdfs have security in place to prevent this, but most allow it. If you don't see the button with the 'T', then try right clicking on the lower adobe tool bar and select 'basic tools' to show that particular toolbar.

raddr wrote:

peteyperson wrote: How could I find out the data going back possibly several decades for the performance of Gold, Gold mutual funds and Energy (Oil & Natural Gas)?

So far all I have can find is a decade worth of stats at best which includes the bumped gains with Gold but doesn't show the realistic long term performance of this asset class. I ask because Gold funds here carry a 5.25% sales load and 1.5-1.7% annual mgmt fees, so I wonder if their usual performance warrants any investment at all. More data would help to make that decision.

Thanks,
Petey

Look here http://www.efficientfrontier.com/ef/997/precio97.htm for returns on gold stocks going back to 1942.

While Chips is correct that the S&P500 outperformed for the last 25 years, if you look at the last 30 years returns for the S&P500 and gold stocks have been virtually identical. Remember also that the last 25 years have greatly favored paper assets as governments have printed money and our own Federal Reserve has pumped massive liquidity into our financial system. During this time the dollar became the safe haven that gold once was. Will these trends continue indefinitely without triggering resurgent inflation and a loss of confidence in paper assets? I doubt it. I'd have at least a little exposure to gold stocks just in case things aren't as rosy as our governments would like us to believe.

therealchips wrote: I understand that you are wondering about how gold (maybe bullion, maybe mining stocks, maybe gold-oriented funds) might reduce volatility in a portfolio holding investments like the S&P 500 Index, and how reducing volatility this way would help or, more likely?, hurt long term gains in the portfolio. This quotation does not answer that question, but it is relevant. I found it at google by searching on

Kramer wrote:

...But as raddr has stated, the huge benefit of precious metals is lack of correlation to standard portfolio assets. ...

A big negative, IMO, is the lack of low cost passive alternatives, which is something I'm pretty religious about. There are also big dividend distributions for taxable accounts; the impact is attenuated, however, by the new lower dividend taxes....

Kramer

peteyperson wrote: Other than the last five years, I'm just wondering whether allocating say 2.5% of a portfolio to Gold mutual funds is likely to be of a drag on performance

Kramer wrote:
Another negative is technology risk. They are manufacturing jewelry grade diamonds in Florida by the bushel load now. De Beers has to distribute specialized kits to jewelry dealers now so they can even tell the difference. I do not know what the situation is with gold, platinum, or palladium.
Kramer

Since 1942 the optimal allocation between the S&P500 and gold stocks would've been about 88:12 and would've returned slightly more than a 100% S&P500 allocation with lower volatility, assuming annual rebalancing.

therealchips wrote:

Since 1942 the optimal allocation between the S&P500 and gold stocks would've been about 88:12 and would've returned slightly more than a 100% S&P500 allocation with lower volatility, assuming annual rebalancing.

Ah, 88:12 is just the kind of quantitative result I was looking for, although the reference didn't define "slightly more" and "lower". Do you have a source, preferably online? Did the study also allow for annual trading and taxation costs associated with rebalancing, and taxation of S&P500 annual dividends?

I used to make the case for real estate (in the face of the moronic argument that the CAGR was lower for real estate than for equities) on diversification alone. her second point explains, exactly, why we have been reluctant to invest outside vanguard. waiting on that gold etf.

*****

did anyone ever see the seinfeld episode where jerry meets his female equivalent?

i don't like how kramer keeps using big words like 'attenuated'. [/i]

Kramer wrote: Precious metals, as in the actual hard asset, in the long run return about zero. Precious metals stocks, on the other hand, seem to have a decent real return, albeit probably not as large as broad based stocks. It is difficult to use historical data because past performance has been distorted so much by the previous history of gold as a de facto national currency exchange.

But as raddr has stated, the huge benefit of precious metals is lack of correlation to standard portfolio assets. This raises the returns of a balanced portfolio, and often at the best possible times (eg., 1973-1974,
2001-2003). Looking at it from an efficient market point of view, if they provide so much diversification value, it makes sense that the return is low. You can't look at precious metals returns in isolation, because what seems like high risk on the surface is almost entirely DIVERSIFIABLE risk, meaning it can lower the risk of a larger portfolio.

A big negative, IMO, is the lack of low cost passive alternatives, which is something I'm pretty religious about. There are also big dividend distributions for taxable accounts; the impact is attenuated, however, by the new lower dividend taxes.

Another negative is technology risk. They are manufacturing jewelry grade diamonds in Florida by the bushel load now. De Beers has to distribute specialized kits to jewelry dealers now so they can even tell the difference. I do not know what the situation is with gold, platinum, or palladium.

I blindly bought Vanguard's precious metals fund back in 2000 (taxable account), strictly for diversification, after reading the Intelligent Asset Allocator. When I told a co-worker, he laughed and told me precious metals equities were a loser's game. The precious metals fund has since doubled -- our company's stock, on the other hand, has since declined 90%, of which he was and is a major shareholder.

Kramer

But as there is no other form of gold but the one we know as the metal the making of gold becomes an entirely other matter, as in this case one needs to change the atomic structure of the element used as base.

peteyperson wrote: If Gold shares perform better than Gold, the hard asset, I would like to be able to view data from a selected bunch of return dates to see how it has done. Morningstar only has 5 year history on gold funds and gold mining funds. The William Bernstein info doesn't really provide anything other than an average over time but that doesn't tell me what it did per decade on average to see whether, like Gold, the price could have been up 30 years ago to $600 and never to be seen again, making it very dependent on your exact timing of the initial investment.

What sort of allocation did you take in Gold stocks?