##{"id":61318,"date":"2013-02-15T10:35:56","date_gmt":"2013-02-14T23:35:56","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2013\/02\/15\/gold-safety-blanket-or-quilting-essential\/"},"modified":"2013-02-15T10:35:56","modified_gmt":"2013-02-14T23:35:56","slug":"gold-safety-blanket-or-quilting-essential","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2013\/02\/15\/gold-safety-blanket-or-quilting-essential\/","title":{"rendered":"Gold \u2013 Safety Blanket or Quilting Essential?"},"content":{"rendered":"<p>\n\t<strong><span>SMSFundamentals<\/span> is an ongoing feature series dedicated to providing <span>SMSFs<\/span> (<span>smurfs<\/span>) with valuable news, investment ideas and services, in line with <span>SMSF<\/span> requirements and obligations.<\/strong><\/p>\n<p>\n\t<strong>For an introduction and story archive please visit <span>FNArena&#039;s<\/span> <a href=\"http:\/\/www.fnarena.com\/index4.cfm?type=dsp_newsitem&amp;n=019E6DBA-E499-1790-29AFBD48BCC0AFAD\"><span>SMSFundamentals<\/span><\/a>&nbsp;website.<\/strong><\/p>\n<p>\n\t<br \/>\n\tBy Adrian Ash, <span>BullionVault<\/span><\/p>\n<p>\n\tThe patchwork quilt of diversification looks awful smart. It&#039;s more than pretty with gold in it, too&#8230;<\/p>\n<p>\n\tINVESTMENT experts keep telling us two things.<\/p>\n<p>\n\tOne, you must diversify your savings. Nothing works for ever. Two, your annual returns are set to be miserable, because there&#039;s no return to the out-sized gains of the <span>1980s<\/span> and &#039;<span>90s<\/span>. The last 10 years prove that.<\/p>\n<p>\n\tNow, we don&#039;t doubt Point 1. Not even people buying gold in 2001 could in fact see the future (though we might tell you different tomorrow). That second claim needs a closer look, however.<\/p>\n<p>\n\t<strong>US Assets, US Dollars: Total Annual Returns (before expenses &amp; tax)<\/strong><\/p>\n<p>\n\t<img decoding=\"async\" alt=\"\" src=\"http:\/\/www.fnarena.com\/ckfinder\/userfiles\/images\/Portfolio of Diversified Assets - Performance.jpg\" style=\"width: 606px;height: 326px\" \/><\/p>\n<p>\n\tSource: <span>BullionVault<\/span> via <span>CRB<\/span>, <span>LBMA<\/span>, <span>NAREIT<\/span>, NYU Stern, St.Louis Fed<\/p>\n<p style=\"text-align: center\">\n\t<em><span>REITS<\/span> = FTSE Real Estate Investment Trusts<br \/>\n\tS&amp;P = S&amp;P 500 equity index<br \/>\n\t<span>CCI<\/span> = <span>CRB<\/span> Continuous Commodity Index<br \/>\n\tCorp = Barclays Aggregate US Bond Index<br \/>\n\t<span>Trsy<\/span> = 10-year US Treasury bonds<br \/>\n\tCash = 3-month Treasury bills<\/em><\/p>\n<p>\n\tThe idea is simple enough. Our patchwork quilt above looks a lot like the more famous <span>Callan<\/span> Periodic Table (well, famous to finance nerds and investing professionals). It compares the annual returns on a selection of assets. In the case of the <span>Callan<\/span> Table, those assets are mostly stock-market indices, split into emerging markets vs. Europe vs. a range of thinly sliced US segments (Russell 2000 Growth anybody?).<\/p>\n<p>\n\tBut while that&#039;s useful, perhaps, for equity-fund investing, there are lots of other things which both private savers and the professional investors supposed to be working for them also buy. What about commodities, real estate, gold, cash or T-bonds?<\/p>\n<p>\n\tNow, as you can, and just like the people <span>Callan<\/span> say &ndash; as well as more finely-sliced examples, such as Frank Holmes at US Funds ranking the different tradable commodities &ndash; &quot;The Table highlights the uncertainty inherent in all capital markets.<\/p>\n<p>\n\t&quot;Rankings change every year.&quot;<\/p>\n<p>\n\tThere are broad patterns over time, however. No asset class makes #1 for more than two years running, for instance, not in the 35 years of data we&#039;ve crunched. (More on the full table next week.) Most recently, and with the calls for a gold bear market in 2013 growing louder each day, it&#039;s also notable that:<\/p>\n<p>\n\t&#8211; Gold has been the #1 asset only once. It placed in the top 3 performers in eight out of the last 10 years;<br \/>\n\t&#8211; Real Estate Investment Trusts, if averaged, were the #1 asset class in 3 of the last 10 years. They made the top 3 seven times, but slumped to worst position twice;<br \/>\n\t&#8211; Cash has now lagged inflation 4 years running for US savers.<\/p>\n<p>\n\tThe upshot? Going forwards, no idea. But looking at that &quot;poor returns ahead&quot; warning, it only gains credence from the past decade if you ignore gold. Which is of course what most packaged-finance promoters do. They might well ignore real estate and commodities as well.<\/p>\n<p>\n\tInvesting money evenly split however between US equities, investment-grade corporate bonds, Treasuries, cash, gold, commodities and real estate would have returned 6.5% per year on average, over and above inflation, since the start of 2003. Even if you&#039;d avoided miserable gold all through the <span>1980s<\/span> and &#039;<span>90s<\/span>, you would still have made only 5.4% per year during those go-go decades.<\/p>\n<p>\n\tIncluding an even allocation to gold investment, in fact, the last decade&#039;s returns stand very nearly two full percentage points better than the average real return since 1977 (again, pre-tax but post-inflation, and excluding trading costs). At 4.6% per annum, that 35-year average also sneaks ahead of the average return if you had avoided gold too, at 4.4%.<\/p>\n<p>\n\t&quot;Gold is the equivalent of a financial teddy bear,&quot; as one UK fund manager never tires of saying. And saying &ndash; and again. People cling to it, in short, for emotional support instead of rational reasons. Yet the patchwork quilt of a diversified portfolio is no mere safety blanket. And it&#039;s warmer still if you add gold to your color scheme.<\/p>\n<p>\n\tRe-published with permission.<\/p>\n<p>\n\t<a href=\"http:\/\/www.bullionvault.com\/\"><span>BullionVault<\/span><\/a> is the world&#039;s largest physical bullion market online, where buyers and sellers meet 24\/7. A member of professional trade body the London Bullion Market Association (<span>LBMA<\/span>), <a href=\"http:\/\/www.gold.org\/investment\/partners\/bullion_vault\/\"><span>BullionVault<\/span> is recommended<\/a> by gold market development organization the World Gold Council. In 2009, <span>BullionVault<\/span> won the UK&#039;s prestigious Queen&#039;s Award for Enterprise Innovation. Some $2.5 billion of gold and silver changed hands on <span>BullionVault<\/span> in 2011.<\/p>\n<p>\n\tAll views expressed are the author&#039;s, not <span>FNArena&#039;s<\/span> (see our disclaimer).<\/p>\n<p>\n\tEditor of <a href=\"http:\/\/goldnews.bullionvault.com\/\">Gold News<\/a>, the analysis and investment research site from world-leading gold ownership service <a href=\"http:\/\/www.bullionvault.com\/\" target=\"_blank\"><span>BullionVault<\/span><\/a>, <strong>Ben <span>Traynor<\/span><\/strong> was formerly editor of the <em>Fleet Street Letter<\/em>, the UK&#039;s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.<\/p>\n<p>\n\t(c) <a href=\"http:\/\/www.bullionvault.com\/\">BullionVault<\/a> 2011<\/p>\n<p>\n\t<strong>Please Note: <\/strong>This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events &ndash; and must be verified elsewhere &ndash; should you choose to act on it.<\/p>\n<p>\n\t<em>Find out why FNArena subscribers like the service so much: &quot;<a href=\"http:\/\/www.fnarena.com\/index4.cfm?type=dsp_newsitem&amp;n=29EB960D-9DFF-C00E-7F6B464E5D52E250\">Your Feedback (Thank You)<\/a>&quot; &#8211; Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n<p>\n\t<strong>Technical limitations<\/strong><\/p>\n<p>\n\t<strong><span style=\"font-style: italic\">If you are reading this story through a third party distribution channel and you cannot see charts included<\/span>, <em>we <span>apologise<\/span>, but technical limitations are to blame.<\/em><\/strong><\/p>\n<p>\n\t<em>Find out why FNArena subscribers like the service so much: &quot;<a href=\"http:\/\/www.fnarena.com\/index4.cfm?type=dsp_newsitem&amp;n=29EB960D-9DFF-C00E-7F6B464E5D52E250\">Your Feedback (Thank You)<\/a>&quot; &#8211; Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>BullionVault&#8217;s Adrian Ash argues gold still has a role to play in any long term, diversified investment portfolio.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[16],"tags":[22,49],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61318"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=61318"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/61318\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=61318"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=61318"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=61318"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}