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Everything That Glitters Is Not Gold

 

 

"Is now a good time to buy gold?”  Depending on what time of day you are watching a cable news channel, you can be easily convinced now is the time to buy the asset that promises safety and never loses value.  I find myself wondering how some of those commercials get through compliance!  Gold and other commodities can provide excellent diversification benefits for your portfolio, but as the late great Dan Seals once sung, “everything that glitters is not gold.”  Gold has a track record of doing well when fear in financial markets are at a high point.  That provides a sense of comfort when the stock market is going through a normal correction, but history has told us that gold does not provide returns that rival stocks over the long term.  It is a false assumption that gold lacks volatility.  In 2013 for example, gold lost over 25% for the year while the stock market increased by more than 25%.  That would be a tough year to own gold alone as your investment.  For argument’s sake, you could look to 2008 when gold held its value relatively steady while the stock market suffered large losses.  Over time, I would rather own stocks as an asset class with a proven track record of gains by investing in the future growth of the best companies in the world.  The compounding return of the dividends stocks pay are also an argument for owning equities for the long term.  As I mentioned, gold can offer great diversification in a portfolio, especially if you have an active manager who looks at different weightings of commodities based on a disciplined process.  For an idea of which asset classes are currently in favor based on our M.A.P.S. (Macro, Asset, Portfolio Strategy) process, visit www.offofthecharts.com.

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