If you paid $1700 an ounce for gold several years ago, congratulations! You just about broke even - if you don't account for inflation, or how much you could have earned with a savings bond instead - and that's just pathetic.
Gold Buggery has sort of faded from the scene, after making a big splash a few years ago. The plebes and apes have moved on to "crypto" and hyped "stonks" to dissipate their wealth. It wasn't long ago, though, that a lot of the same hype attached to "crypto" was being used to hype gold. "It's a hedge against inflation!" they argue, and "it's gone up in value, so it must be a good investment!" Sadly, these folks who lost money on gold, lost money on crypto and stonks. So now, like the annoying man, they blame "the system" and claim the Federal Reserve somehow stole their money. Better march on the capitol and overthrow the government! Uncle Donald will get all their money back in the form of TrumpCard NFTs! Free ponies - the dream to beautiful to let die!
What got me started on this was wondering whatever happened to the price of gold, anyway. And the reality is, as the chart above shows, the price has gone nowhere in the last few years. It kind of peaked at $1700 or so, almost exactly a decade ago (October 2012). Ten years later, it is trading for... $1800. Taking into account inflation (particularly over the last year) and anyone who bought gold during the 2012 bubble is way behind the game. Even lowly savings bonds have done better than that - increasing in value by 50% over that time period (I know, as I recently cashed some out and re-invested the money in Series I bonds which are paying 6-9%). If you just invested in a tame mutual fund (you know, one that invests in real companies that make real things, earn profits, and pay dividends) you would likely have doubled your money over the last decade.
Note, however, that by choosing starting and end points on a graph like this, you can show wild gains, losses,or breaking even. So perhaps I am being a bit disingenuous here, as the graph I chose was the first one I saw when Googling "price of gold." If the start point was 2018, you could show a 50% gain in a short period of time. But this just illustrates how risky it is to invest in volatile commodities (or commodities in general) as you can't really pick your start and end points with accuracy unless you have a working time machine. That right there is a key indicator whether something is a shitty investment - does it require a working time machine to make money? If so, it is probably a bad bet, whether it is lottery tickets, gold, crypto, or hyped stocks. Just walk away from time-machine investments.
I digress, but right there is probably another quotable quote.
So why do people invest in get-rich-quick schemes? Well the answer is in the question. Buying "boring" things and then forgetting about them for a decade doesn't seem very interesting or profitable. You check your account every day and it grows - if at all - at a snail's pace. Then there is some minor snafu and you lose 10% of your account. Surely gold has to be a better deal than that! People are becoming millionaires overnight with this stuff! And they are - by selling gold to you.
Insert whatever other scam-du-jour is on the menu - crypto, hyped stonks, whatever. People are convinced there is an "inside secret" to making money and that helpful con-men are willing to share it with you as they are decent people who want to see you succeed! Yes, people are that gullible.
The other part of the equation is that many folks don't think about what they are investing in. I saw a posting online from a Musk fanboy asking whether Tesla was a good buy these days as the price was so low. "Buy on the dip!" the stonk-meisters argue - usually when the "stonk" they are hyping has plummeted in value. Hey, you wasted $1000 on some hyped stock, why not double-down your bet, now that is has halved in value?
But you have to look at more than share price. And yes, I know, that's all the shouting guy talks about, or CNBC or even "Marketplace" on NPR. Stock price! Stock price! Stock price! That's all that matters, they say. That, and whether it is trending up or down and by how much.
Things like dividends, which for some stocks can be 5% or more (a lot more, particularly if you paid little for the stock years ago) can make a big difference in your rate of return. Maybe the share price is increasing very slowly, but if you factor in dividends, the rate of return might be much higher than you think.
Then there is the company's financials and products. Are they making profits, and if so, how? And for how long? And if not, do they have a realistic plan on how to make money? So many "tech" stocks are just vehicles to enrich the founders of the companies, who take out huge salaries and stock options, leaving little for the IPO share buyers (who bought 5% of the company at IPO). Meanwhile, some international company with factories on five continents, selling trillions of dollars of products a year, with a track record of a century or more, is dismissed out-of-hand as "old school" investing. You'll never make money at that!
So, what is the answer? Well, since we don't have a working time machine (well, I don't, anyway - maybe the lizard people do) you will likely go broke buying into time machine investments. The people hyping and promoting these get-rich-quick schemes make tons of money (even as they go to jail) but you and I are the ones putting money into these schemes and rarely taking out, other than the pennies-on-the-dollar we receive when it all goes horribly wrong.
As "boring" as it sounds, investing in a panoply of things, over time, tends to be the best outcome for the average middle-class investor. And often, being less active in investing is a better mode than active investing. The temptation is all-too-great to invest based on the news of the day, rather than long-term objectives.
For example, I recently wrote about how Tesla stock is overpriced. It has a P/E ratio of 50 or so. Meanwhile, "old line" companies like Ford and GM have startlingly low P/E ratios - Ford as low as 9! (UPDATE: Now 7!). That means Ford is earning 12% or more whereas Tesla is earning 2% or less. But there are other factors to consider. Many are predicting a major recession next year, and if so, we will go from "car shortage" to "car surplus" in a real hurry. Maybe Ford has over-extended itself (much as Tesla has) building EV factories to satisfy a demand that may not materialized (or may materialize but not be as high as anticipated). I have noted before that Hybrids and EVs are neat and all, but when it comes time to getting out my own checkbook, I find that I can buy a lifetime's supply of gasoline for the delta in market price of an EV or Hybrid over a conventional IC engine.
In other words, there are no guarantees in investing, even in an "old line" company like Ford (or indeed, GM, which went bankrupt last time around). So investing in one stock or one thing is very risky. If one is to buy gold, well, it would be safest to not make it more than a minor part of your portfolio. Even then, if you buy at the wrong time, it could be decades before you recoup your investment, as people who bought during the 1982 bubble discovered. On the other hand, if you wanted to make a "pile" on gold, you have to go all-in with a huge investment, as even a 50% gain means nothing if all you invested was $500. The risks of "losing it all" are just too great.
So just steer away from time-machine investments. What kills the small investor is trying to time the market. And I say this from experience! Nearly every investment I made based on the news of the day has gone South. Mutual funds and other long term "invest and ignore" things have done far better.
There is a lesson in there, somewhere.
