Category: Stocks

Gold destroys stocks and bonds over past 20 years!

Why gold should be the foundation of all investment portfolios.


If an investor made a single lump sum investment of $100,000 into the US Stock Market in March 2000 – their portfolio as at 31 March 2020 would be worth approximately $250,000 (1). This result assumes dividends were reinvested and no tax was payable.

Unfortunately for the stock investor, March 2000 was shortly before the Dot-com Crash. This early crash certainly hurt the overall performance of this asset class over a 20 year period, which averaged a mere 4.76% per annum.

A savvy investor might have noted that stock prices were high in 2000 and taken on a more conservative investment strategy by investing $100,000 in US Bonds. Assuming income was reinvested, over the past 20 years they would have turned their $100,000 into $270,000 (2).

This savvy investor took on far less investment risk and achieved a greater return – which in itself is an excellent result!

Or was it?



A third investor, both savvy and Financially Awakened was even more cautious and wanted to take on almost no investment risk whatsoever. This investor therefore invested their $100,000 entirely in gold.

Their March 2020 investment is now worth approximately $580,000 (3). More than twice that of the stock and bond investment portfolios.

The gold investor has achieved an average annual return of 9.24%.



The past 2 decades has been a bonanza for those cautious investors who focused their investment portfolios on gold. So the question remains –

Why doesn’t everyone build gold into their investment portfolios?

Plus a couple of other questions

Why don’t financial advisers and bankers recommend gold to their clients?

Why doesn’t mainstream media report on the out-performance of gold over other asset classes?

I would love to get your answers and comments.

GOLDSMITH


Charts and data thanks to GOLDHUB and the World Gold Council.
https://www.gold.org/goldhub

Metrics:
1. MSCI USA Net Total Return USD Index 1971+
2. Bloomberg Barclays US Agg Total Return Value Unhedged USD 1976+
3. LBMA Gold Price PM USD 1971+


Notes on results and disclaimers:

  • All results are hypothetical
  • Past performance is not a guarantee of future returns and data and other errors may exist.
  • The entered time period is automatically adjusted based on the available return data for the specified assets
  • CAGR = Compound Annual Growth Rate
  • Stdev = Annualised standard deviation of monthly returns
  • Sharpe and Sortino ratios are calculated and annualised from monthly excess returns over risk free rate (1-month t-bills)
  • Stock market correlation is based on the correlation of monthly returns
  • Drawdowns are calculated based on monthly returns
  • The results use total return and assume that all dividends and distributions are reinvested. Taxes and transaction fees are not included

IMPORTANT: The calculations and any other information generated by this tool are provided by Silicon Cloud Technologies, LLC based on the back-testing functionality of their Portfolio Visualizer software. Note that the resulting performance of various investment outcomes are hypothetical in nature, may not reflect actual investment results and are not guarantees of future results. World Gold Council and its affiliates and subsidiaries, provide no warranty or guarantee regarding the functionality of msgid the tool including without limitation any projections, estimates or calculations. For more information on the data used for each asset class, please visit our FAQs

* The investment horizon for the hypothetical analysis starts at the end of the month selected in the “from” date and ends at the end of the month selected in the “to” date. Quarterly, semi-annually and annually rebalancing as well as periodical adjustments, if any, happen on a calendar basis (eg, March, June, September, and December where applicable) regardless of the starting investment period. For more information, please visit our FAQ