2017 3rd Quarter Commentary


In 1849, gold was discovered in California. Back east, the media picked up on it and began to publish stories about people getting rich overnight in the California gold fields. As a consequence, thousands of people sold everything they had, pulled up stakes, and crossed the great American continent in hopes of striking it rich! A few of them made it, but many of them lost everything, including their lives, in search of the gold about which they had heard.

Today gold is not being sold by using a “strike it rich” story. It is being sold on fear. Over the last 5 to 10 years, there have been countless television commercials talking about how the federal government is going to collapse, the economy is going to melt down, and the U.S. dollar is going to become worthless. The commercials then tell listeners the best way to save themselves from these calamities is to buy gold. Because of the 2000, 2001, 2002 recession, and the recession in 2008, the public is primed for a message that gold will be the answer to all their fears and worries.

Recently, Financial Planning magazine published an online article titled “Worst Performing Funds Over 5 Years.” It was a very interesting article. Of the 10 worst funds over the last 5 years, the “least bad” one was an oil & gas exploration fund. The 9 worst funds were all gold and precious metals funds.

The 9 gold and precious metals funds averaged -21.75% over the previous 12 months, and had an average return of -9.49% per year over the last 5 years.

We are not saying you should never own gold or gold company stock in a portfolio. However, we are saying an investor should not base an investment decision on frequency of advertising or media hype. Sometimes it can end in tragedy – as it did for many in the 1849 gold rush.

Source: Financial Planning on-line article published 08/10/17

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