3 ms·

1) is hilariously off base. S&P500 has averaged about 10% nominal return, annual, since 1928. Gold returned a little under 5% nominal over the same period.

by chiaro 9y ago

candiodari 9y ago
S&P500 has only 10% return if you ignore a number of things a) your pick of the moment. You might be tempted to pick today as a neutral point in time. Of course, it's not. The S&P500 is at a complete all-time-high. It's literally never done this well, ever. Gold is not doing so well. In fact, gold has done quite poorly for about 5 years now, and perhaps a bit better over the last year (despite central bank interventions to keep it down I might add). Comparisons at this time, will of course be skewed towards the S&P returning more. In 2012 Gold would have been the outperforming asset, and trust me on this one: it will be again. When ? Good question. Which will be the best investment for the next 10 years. The asset that's never ever been up this high, or the asset that has systematically kept it's value for 7000 (not a typo) years, but has been going down quite a bit for the last 5 years ? Much more difficult question isn't it ? I think it's quite a safe bet to say that gold will, firstly, have much worse returns than the S&P500 over the next month or two, and much better returns than the S&P500 over the next 2-5 years. When it comes right down to it, it's effectively a bet on government policy. If the FED restarts Yellen's "competitive devaluation" craze of 2011 (which is definitely a possibility), gold will have an amazing performance. Again, not going to happen over the next 2 months. Very likely going to happen within the next 5 years. b) transaction costs from buying and selling when the index gets modified, which are not counted in the index (they are counted in things like SPY, which does indeed systematically underperform the index). c) (closely related to b) the fact that quite a few stocks got thrown out when they either went bankrupt or the stocks dropped enough. This is not reflected in the index, but of course anyone actually invested would get dented in the process, more so than for transaction costs. https://www.investopedia.com/articles/investing/022416/5-famous-companies-dropped-sp-500.asp https://www.investopedia.com/articles/investing/022416/5-fam... The trouble is there is no true answer to how much the S&P500 returned over the past century to an actual investor. One thing's for sure: it would be less than the index, and (especially in the earlier part of the century) significantly so.

1) is hilariously off base. S&P500 has averaged about 10% nominal return, annual, since 1928. Gold returned a little under 5% nominal over the same period.

by chiaro 9y ago

1) is hilariously off base. S&P500 has averaged about 10% nominal return, annual, since 1928. Gold returned a little under 5% nominal over the same period.

candiodari 9y ago

S&P500 has only 10% return if you ignore a number of things a) your pick of the moment. You might be tempted to pick today as a neutral point in time. Of course, it's not. The S&P500 is at a complete all-time-high. It's literally never done this well, ever. Gold is not doing so well. In fact, gold has done quite poorly for about 5 years now, and perhaps a bit better over the last year (despite central bank interventions to keep it down I might add). Comparisons at this time, will of course be skewed towards the S&P returning more. In 2012 Gold would have been the outperforming asset, and trust me on this one: it will be again. When ? Good question. Which will be the best investment for the next 10 years. The asset that's never ever been up this high, or the asset that has systematically kept it's value for 7000 (not a typo) years, but has been going down quite a bit for the last 5 years ? Much more difficult question isn't it ? I think it's quite a safe bet to say that gold will, firstly, have much worse returns than the S&P500 over the next month or two, and much better returns than the S&P500 over the next 2-5 years. When it comes right down to it, it's effectively a bet on government policy. If the FED restarts Yellen's "competitive devaluation" craze of 2011 (which is definitely a possibility), gold will have an amazing performance. Again, not going to happen over the next 2 months. Very likely going to happen within the next 5 years. b) transaction costs from buying and selling when the index gets modified, which are not counted in the index (they are counted in things like SPY, which does indeed systematically underperform the index). c) (closely related to b) the fact that quite a few stocks got thrown out when they either went bankrupt or the stocks dropped enough. This is not reflected in the index, but of course anyone actually invested would get dented in the process, more so than for transaction costs. https://www.investopedia.com/articles/investing/022416/5-famous-companies-dropped-sp-500.asp https://www.investopedia.com/articles/investing/022416/5-fam... The trouble is there is no true answer to how much the S&P500 returned over the past century to an actual investor. One thing's for sure: it would be less than the index, and (especially in the earlier part of the century) significantly so.