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Interesting to me is that in the past some posters recommended gold, as a long term investment. They called gold and precious metals a diversifier to one's portfolio. A holding of 5-10% was considered a necessary weight to impact the portfolio to reduce volatility. Funny that I don't read about this strategy any longer from MFO/FundAlarm members, now that gold has entered a bear market. It leads me to believe the talk was just bull market hype. Of course those who sell gold or gold investments continue to recommend gold bullion and funds at 5%-10% of one's portfolio. No surprise there.
Are you referring to PRPFX which was said "must" be a core holding in everyone's portfolio till death due us part and some went so far as to say may just be the best fund for all time?? But alas, it now has a negative 3 year annualized return. Not exactly my idea of creating wealth.
Since we're cherry picking data, holding PRPFX since 2000 would have yielded 7.7% CAGR vs 4.3% for SPY. Better sharpe, half the volatility and draw down as well.
Holding GLD since its inception has a slightly better return than SPY with roughly the same draw down and volatility.
Well Maurice, I am one of those posters. I don't feel a need to do weekly posts to promote holding AU. Nor do I ponder/fret what to do about it day-to-day. So you needn't fret about why you haven't seen such posts...
I continue to hold my position in AU bullion (all of which I self-custody). And it makes a wonderful diversifier. --- A diversifier does not mean "go up all the time". AU had a VERY LONG up-market; several down-years is nothing too unusual. -- After all, equities, after topping in 2000, took a decade to reach new highs. Assets come/go out of favor. AU excelled when stocks did nothing. AU has foundered the past few years as stocks have climbed. Definitionally,that IS diversification. Breaks in the price of AU below $1K would commence my accumulating. (If I had NO AU position, I'd probably commence SLOW accumulation here --- as the GDX/GDXJ suggests possible capitulation in those securities).
I do find from time-to-time, what I will call "gold haters" post on investment message boards, why, I do not know. Energy stocks are down sharply since Nov. EM-stocks too. Is it your contention that asset are only attractive for purchase/holding if they are at/near all-time highs..? --- I generally go about deploying capital the other way: buy/accumulate when prices are down. Maybe different strokes for different folks...?
In the past month I have initiated and expanded new positions in MLPs and EM, as those have encountered price weakness, but IMO represent real longer-term value. Will probably commence accumulating shares in Aug-Nov in quality energy producers -- my thesis being the quality producers (XOM, CVX, COP, OXY, EOG) will recover -- primarily because I suspect circumstances will eventually drive WTI higher. I don't claim to know when, but $45/WTI is not conducive to producers -- so producers will (voluntarily or otherwise) curtail production, and that will "solve" the problem of low WTI (just as happened in earlier cycles).
Since we're cherry picking data, holding PRPFX since 2000 would have yielded 7.7% CAGR vs 4.3% for SPY. Better sharpe, half the volatility and draw down as well.
Holding GLD since its inception has a slightly better return than SPY with roughly the same draw down and volatility.
So it can and does diversify, IMO.
clacy, but it wasn't until PRPFX had such a great run that it became a board favorite. It's five year annualized return isn't anything to crow about either. I would wager most here succumbed to all the incessant articulate ramblings about the fund in the past five years. Just go back to 2011 in the MFO board archives on PRPFX.
Investing in gold? Like adding Tobasco sauce to food. A little bit goes a long way - and may not always agree with you.
@Maurice: Agree that recent trends tend to influence our perception of things. That's true of other areas besides gold. Growing up in the 50s, most of the adults I knew had lived through the Great Depression and wanted nothing to do with stocks.
>>> By my posting a small cynical comment, I learned something. Thanks for responding.<<<
And I too should not be so cynical in my dislike for gold and silver - at least on this board (there I go again!) Just I recall $800 gold in January 80 (was it) and $5 to $6 silver around 1974. I just can't see how these can ever be considered viable long term investments, at least compared to equities. But seriously, will try and refrain from posting anymore negativity on the subject here.
You could have purchased gold for around $150 an ounce during the 1975-1977 period (after which the price rose sharply). Today's price is close to $1100. Over a 40 year period (1975-present) that equates to around a 5% annually compounded return.* Historical gold prices http://www.nma.org/pdf/gold/his_gold_prices.pdf
It would have been better to purchase gold prior to 1975 when the price (artificially set) remained around $35 an ounce for many years. Unfortunately, U.S. law prohibited private citizens from owning gold except in smaller quantities in the form of jewelry. The Gold Reserve Act (1934) https://en.m.wikipedia.org/wiki/Gold_Reserve_Act ---
Whenever I see posts or articles discusing returns from the opening of a fund or stock to the present time which show outstanding returns I have to smile. Sure, there are some that have held the same investnents for decades, but the vast portion belong to the church of whats working now and get out when the market falls and get back in much higher than when they sold. It is very difficult to hang on to an investment when it has years of underperformance. I am guilty of it too. Having sold GLD after I saw it drop 20% from my costbasis. I did not see the silver lining of holding it anymore. I have also sold stocks in favor of others, but I generally hold on to my funds unless I exchange out for one I like better, but its seldom. I will not be rebuying any gold in the future, even recently sold some gold coins and sets I inherited. Cash or st bonds even at these anemic interest rates will at least hold its value as long as inflation is low.
Comments
I got stopped out of my gold position. It is not to say I will not reenter it sometime in the future. But for now it is history within my portfolio.
Old-Skeet
Holding GLD since its inception has a slightly better return than SPY with roughly the same draw down and volatility.
So it can and does diversify, IMO.
I continue to hold my position in AU bullion (all of which I self-custody). And it makes a wonderful diversifier. --- A diversifier does not mean "go up all the time". AU had a VERY LONG up-market; several down-years is nothing too unusual. -- After all, equities, after topping in 2000, took a decade to reach new highs. Assets come/go out of favor. AU excelled when stocks did nothing. AU has foundered the past few years as stocks have climbed. Definitionally,that IS diversification. Breaks in the price of AU below $1K would commence my accumulating. (If I had NO AU position, I'd probably commence SLOW accumulation here --- as the GDX/GDXJ suggests possible capitulation in those securities).
I do find from time-to-time, what I will call "gold haters" post on investment message boards, why, I do not know. Energy stocks are down sharply since Nov. EM-stocks too. Is it your contention that asset are only attractive for purchase/holding if they are at/near all-time highs..? --- I generally go about deploying capital the other way: buy/accumulate when prices are down. Maybe different strokes for different folks...?
In the past month I have initiated and expanded new positions in MLPs and EM, as those have encountered price weakness, but IMO represent real longer-term value. Will probably commence accumulating shares in Aug-Nov in quality energy producers -- my thesis being the quality producers (XOM, CVX, COP, OXY, EOG) will recover -- primarily because I suspect circumstances will eventually drive WTI higher. I don't claim to know when, but $45/WTI is not conducive to producers -- so producers will (voluntarily or otherwise) curtail production, and that will "solve" the problem of low WTI (just as happened in earlier cycles).
@Maurice: Agree that recent trends tend to influence our perception of things. That's true of other areas besides gold. Growing up in the 50s, most of the adults I knew had lived through the Great Depression and wanted nothing to do with stocks.
And I too should not be so cynical in my dislike for gold and silver - at least on this board (there I go again!) Just I recall $800 gold in January 80 (was it) and $5 to $6 silver around 1974. I just can't see how these can ever be considered viable long term investments, at least compared to equities. But seriously, will try and refrain from posting anymore negativity on the subject here.
You could have purchased gold for around $150 an ounce during the 1975-1977 period (after which the price rose sharply). Today's price is close to $1100. Over a 40 year period (1975-present) that equates to around a 5% annually compounded return.*
Historical gold prices http://www.nma.org/pdf/gold/his_gold_prices.pdf
It would have been better to purchase gold prior to 1975 when the price (artificially set) remained around $35 an ounce for many years. Unfortunately, U.S. law prohibited private citizens from owning gold except in smaller quantities in the form of jewelry.
The Gold Reserve Act (1934) https://en.m.wikipedia.org/wiki/Gold_Reserve_Act
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*(interest compounded yearly - added at the end of each year)
Year Year Interest Total Interest Balance
1 $7.50 $7.50 $157.50
2 $7.88 $15.38 $165.38
3 $8.27 $23.64 $173.64
4 $8.68 $32.33 $182.33
5 $9.12 $41.44 $191.44
6 $9.57 $51.01 $201.01
7 $10.05 $61.07 $211.07
8 $10.55 $71.62 $221.62
9 $11.08 $82.70 $232.70
10 $11.63 $94.33 $244.33
11 $12.22 $106.55 $256.55
12 $12.83 $119.38 $269.38
13 $13.47 $132.85 $282.85
14 $14.14 $146.99 $296.99
15 $14.85 $161.84 $311.84
16 $15.59 $177.43 $327.43
17 $16.37 $193.80 $343.80
18 $17.19 $210.99 $360.99
19 $18.05 $229.04 $379.04
20 $18.95 $247.99 $397.99
21 $19.90 $267.89 $417.89
22 $20.89 $288.79 $438.79
23 $21.94 $310.73 $460.73
24 $23.04 $333.76 $483.76
25 $24.19 $357.95 $507.95
26 $25.40 $383.35 $533.35
27 $26.67 $410.02 $560.02
28 $28.00 $438.02 $588.02
29 $29.40 $467.42 $617.42
30 $30.87 $498.29 $648.29
31 $32.41 $530.71 $680.71
32 $34.04 $564.74 $714.74
33 $35.74 $600.48 $750.48
34 $37.52 $638.00 $788.00
35 $39.40 $677.40 $827.40
36 $41.37 $718.77 $868.77
37 $43.44 $762.21 $912.21
38 $45.61 $807.82 $957.82
39 $47.89 $855.71 $1,005.71
40 $50.29 $906.00 $1,056.00
Standard CalculationBase amount: $150.00
Interest Rate: 5%
Effective Annual Rate: 5%
Calculation period: 40 years
From "The Calculator Site" http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php