200 years of return at a glance (Stock vs Gold/Commodities vs Bond)
Nov '23 (edited) in Long term investing ideas
200 years of return at a glance (Stock vs Gold/Commodities vs Bond)
Recently, someone in the free Invest & Retire community asked about whether it makes sense to invest in commodities.
What you will find is that stock makes around 6-10% which outperforms bonds.
Stocks also outperform commodities as a whole. My theory is that the commodities supercycles led to big swings in the commodities prices in the last 100 years.
This means that the best investment class is stock if you are able to withstand the volatility (and not panic)
What about gold?
Having said that, you may wonder if you can narrow it down to GOLD alone and see if it would be a positive return (since gold is limited right? It used to be the standard currency in the world)
1915 - $600
2020 - $2000
This represents an annual increase of 1.5% in the last 105 years.
This means investing in stocks still outperforms gold (5-10% > 1.5%)
Having said that, it doesn't mean you can't make a positive return with commodities.
I've successfully made 30% or more with gold companies, copper/zinc companies as well.
The key takeaway is that if you plan to invest in commodities-driven companies, you need to be better at timing the market and riding on the commodities supercycle in order to profit.
It's not that you can't profit with commodities. It is that you need to be smarter and more careful.
Cheers,
Eric Seto, CPA, CIM
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