All that Glitters

A couple of days ago, we were talking on Twitter about the falling Dow and what we wish we’d done with our money. At the same time, my most recent issue of Jewelry Artist had an interesting article on the soaring price of gold and silver and its impact on the jewelry industry.

Many years ago, long before the dot com boom, I invested in growth funds that were heavily oriented toward tech stocks. They did not fare well, and in fact, the market as a whole faltered in 2002-2003, but then recovered. Now, of course, it’s falling again.

It made me think: what if I’d invested that same amount in gold, instead? I ran an analysis – $2,500 in in 29 shares of an index fund (using VFINX) against $2,500 in 9 ounces of gold. Giving both markets the benefit of the doubt, I bought in at the start of 1998, picked the highest price point each year, and the most recent price point in 2009 for this table.

Note: I am having site format problems — scroll down, down, down, down for the uncooperative table that illustrates that I’d have come out slightly less than even in the market but tripled my investment value in gold.

Index Fund Share Price Total
1998 $89 $2,581
1999 $135 $3,915
2000 $140 $4,060
2001 $119 $3,451
2002 $107 $3,103
2003 $102 $2,958
2004 $111 $3,219
2005 $118 $3,422
2006 $130 $3,770
2007 $143 $4,147
2008 $130 $3,770
2009 $72 $2,088

Gold Ounce Price Total
1998 $285 $2,565
1999 $326 $2,934
2000 $313 $2,817
2001 $293 $2,637
2002 $350 $3,150
2003 $418 $3,762
2004 $447 $4,023
2005 $540 $4,860
2006 $725 $6,525
2007 $845 $7,605
2008 $1,020 $9,180
2009 $942 $8,478

If wishes were horses…

6 Responses to “All that Glitters”

  1. Vince Says:

    Ah, to be omniscient. But my thoughts on investing match that of Robert Heinlein (this is a surprise why?):

    “$100 placed at 7 percent interest compounded quarterly for 200 years will increase to more than $100,000,000 — by which time it will be worth nothing.”

  2. mattw Says:

    Where’s the Delorean when you need it?

  3. Beast Mom Says:

    Hindsight is always golden, eh?

    ;) bm

    P.S. My dog’s superpower is to shed gold fibers rather than fur. I’m going to mail it all in to that “Cash for Gold!” commercial. I’ll be filthy rich.

  4. John the Scientist Says:

    Well, if you’d have bought in ’99 and then needed the money in ’01, you would have been in the red, too. There was a long stretch in the 80s where precious metals were a very bad investment.

    You’re also neglecting dividends from the S&P 500 fund. That will even things up a lot.

  5. John the Scientist Says:

    Yahoo Finance didn’t give me the dividends in the spreadsheet, and I’m not going to add them up by hand, the the average looked to be bit more than $1.50 per year per share over that time period.

    At 29 shares, if you didn’t re-invest, you’d wind up with an extra $387. It would be closer to $500 if you re-invested, so at least you would not have lost money if you had to sell right now.

    But the data on gold looks interesting. I don’t know anyhting about the dynamics of precious metal markets, I’m going to have to look into it.

  6. Becca Says:

    We have watched our retirement portfolio go higher and lower like a rollercoaster this last year. I wish I could think that we are going to get off of it sometime soon, but I have serious doubts.

    If there is an upside to this financial mess, we are actually thinking about buying a house next year. We are situated right for the first time to get in on the downside of the housing market and actually get something that we can afford. We are waiting until Spring 2010 to be sure that the housing market bottoms out some more then get in. We have almost zero debt so we are socking away all that we can. I really would like to have something we can actually call ours.