Last month, we discussed why gold vs. stocks is not an apple to apples comparison at all. Gold is money, and stocks are claims on businesses. Typically, gold is compared to the Dow Jones or S&P 500 when a pundit talks about gold vs. stocks, but both of these indexes have a huge upside performance bias.
Since 1957, the S&P 500 has added and removed over 1,200 companies. Every year they rid the index of the weak and pack it with growth stocks. The Dow Jones, which is made up of 30 companies, only has one of the original stocks in it since its 1885 inception.
Gold is money, and from 1933 to 1974, it was illegal for Americans to even own it. Gold vs. Stocks is a false comparison, and in our opinion, they should not be pitted against one another.
Investors and savers should also not view these two assets as one or the other. Shares of stocks are real ownership in publicly-traded businesses – these are real assets, just as real as the deed that is a paper claim to a piece of real estate.
Stocks for the long-term have proven that they are a great way to participate in the profits of businesses, and are outstanding inflation hedges. Every investor should consider owning world-class business through the publicly-traded markets.
For gold, gold is the ultimate money, with a 6,000-year history. In today’s digital world, it is also the best financial insurance you can have against hackers, cyber warfare, and government theft.
Our advice: own some gold, and invest in great people and businesses through shares. Don’t allow the perma-bulls in the stock market to scare you out of gold. And don’t let the gold bugs scare you out of stocks.
On a final note, we are living in perilous times for the global economy, and it is interesting to note that for the 21st century, gold is about the best-performing asset!
The Dow is up 54% for the 21st century, and gold has risen 319%.