I was recently reading the April 2016 issue of Kiplinger’s Personal Finance magazine. Yeah im a bit behind on my magazine reading but thats ok. One of the side notes stated that Gold had a historical total return of 2%.
That means on average if you hold gold in your portfolio, your total return will not even surpass the average rate of inflation, 3%.
Now that is not to say that you can’t use shorter term plays with gold to make a nice gain. In the long term though it doesn’t seem to be a good investment.
“I will say this about gold. If you took all the gold in the world, it would roughly make a cube 67 feet on a side…Now for that same cube of gold, it would be worth at today’s market prices about $7 trillion – that’s probably about a third of the value of all the stocks in the United States…For $7 trillion…you could have all the farmland in the United States, you could have about seven Exxon Mobils and you could have a trillion dollars of walking-around money…And if you offered me the choice of looking at some 67 foot cube of gold and looking at it all day, and you know me touching it and fondling it occasionally…Call me crazy, but I’ll take the farmland and the Exxon Mobils. – Warren Buffett”
Now if you invest in a good dividend paying company instead, your investment will continue to grow and compound. You will not be subject to just the capital gains, you will also be paid along the way for investing your money in the company.
Why am I even bringing this up you may ask? Well ever so often I read a compelling article that supports gold or silver and I have to remind myself why I choose to invest in dividend stocks.
Dividend growth stocks will continue to give you raises while you hold the stocks and they should also beat the rate of inflation. Plus once you do the research on a company and you decide to invest, you should be able to hold the stock for the long term. This is a good strategy because it makes your investment become passive so it will continue to grow while your off working on your next investment. Also if you hold your stocks in a RothIRA ( Say hello to my new friend Roth ) you can collect your dividends and capital gains tax free
Other investment vehicles can look very tempting but if your like me and you have a long term investment plan, dividend growth stocks are where you want to be at.