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Comments Off on Behold The Power Of Gold – Part 2

NOTE:  This post is part of an ongoing education series.  This information is for educational purposes only.  This information does not constitute investment advice.  No rational person would make investment decisions based on a blog post.  Please consult with your financial advisor before taking any action.

A few weeks ago I did a post on the value of investing in gold.  I was a little surprised by some of the responses that I received.  It was almost like the responses I get when discussing abortion, truthers and birthers.

This graph created by John C. Bogle and is in his book “Common Sense on Mutual Funds (2010).  It shows the returns for several investment classes from 1802 to 2008 in real dollars (real dollars are after an adjustment for inflation) (note2: The total return is a log scale).  John C. Bogle is the founder of Vanguard and is recognized as one of the greatest minds in the investment world. Mr. Bogle also had this to say about gold…

”  …gold is largely a rank speculation, for its price is based solely on market expectations.  Gold provides no internal rate of return.  Unlike stocks and bonds, gold provides none of the intrinsic value that is created for stocks by earnings growth and dividend yields, and for bonds by interest payments.  So in the two centuries plus shown in the chart, the initial $10,000 investment in gold grew to barely $26,000 in real terms.”  Common Sense on Mutual Funds(2010), Page 13.

With this additional support, I stand by my position that gold is not a good long term investment.