I don’t recall any questions being asked on the benefits of gold investing. Gold has increased by around 7% a year for the past 10 years but it’s never mentioned on any of The Compound shows as a good investment. It is not better than holding cash as cash purchasing power will go down as inflation goes up whereas gold will at least keep up?
Gold hit a new all-time high this week at over $2,100 an ounce. So it’s a good time to take a look since more people will be paying attention to the yellow metal.
Returns for gold have been decent over the past 10 years but not quite 7% per year. I’m showing returns of more than 4% per year over the past 10 years:
Gold is seen as a diversifier so even though it hasn’t kept pace with the stock market1 over the past decade, it can be helpful to look at the longer-term returns.
Luckily, Aswath Damodaran added gold to his historical annual return data at NYU this year. These are the annual returns numbers for stocks (S&P 500), bonds (10 year Treasuries), cash (3-month T-Bills) and gold from 1928-2023:
Stocks +9.8%
Bonds +4.6%
Cash +3.3%
Gold +4.9%
So gold has done better than bonds and cash but trailed the stock market by a decent clip.
But this data requires some context.
The price of gold was essentially controlled by the government until 1971 when Nixon ended the gold standard of converting dollars to gold at a fixed rate.
From 1928-1970, gold was up 1.4% per year which was less than the annual inflation rate of 2% in that time.
From 1971 to 2023, gold was up 7.9% per year. That lags the S&P 500 return of 10.8% annually, but the correlation of the annual returns was -0.2, implying some solid diversification benefits.
However, those post-1970 returns require some context as well. The returns are front-loaded in the 1970s.
From 1971-1979, gold was up nearly 1,300% in total. That was good enough for a nine year annual return of 33.8% per year.2 Some would say gold was an amazing inflation hedge in the 1970s. Others would say those massive returns were just playing catch-up from the decades in which the government artificially held the price down.
If you look at the gains since 1980, they tell a different story. From 1980-2023, gold was up just 3.2% per year. That lagged the returns for stocks (+11.7%), bonds (+6.5%) and cash (+4.0%).
In that same timeframe, the annual inflation rate was 3.2%, meaning gold had a real return over a 44 year period of a big fat zero. Technically the price of gold has trailed the consumer price index since 1980:
That’s a tough look for a supposed inflation hedge.
It’s important to note that although gold hasn’t done much on a long-run basis outside of the 1970s, there have still been periods when it provided valuable diversification benefits.
During the lost decade of the aughts from 2000-2009, the S&P 500 was down 1% per year. In that same decade, gold rose more than 14% on an annual basis.
In fact, this century gold is outperforming the S&P 500. These are the annual returns from 2000-2023:
Gold +8.5%
S&P 500 +7.0%
That’s from an all-time bad starting point for large cap U.S. stocks but the same is true of gold in 1980.
Stocks have outperformed in the decade-and-a-half since the end of the Great Financial Crisis. Here are the annual returns from 2009-2023:
Gold +6.0%
S&P 500 +13.8%
So where does this leave us?
As with most asset classes, you could craft a good reason for or against gold depending on your start or end date of historical returns.
The long-term case for gold is up in the air. There are no cash flows — no dividends or income or earnings. But people have placed value on gold for thousands of years. That means something.
There are also the diversification benefits, which you can clearly see when breaking out the annual returns by decade:
Diversification is gold’s biggest selling point. It really does march to the beat of its own drum.
I have nothing against gold. I just don’t think it’s necessarily the right investment for my risk tolerance or allocation preferences. I don’t personally invest in gold but I can see why some investors choose to hold an allocation in their portfolio.
It’s the kind of asset class that requires rebalancing into the pain, though, because there will be times when it badly lags the stock market.
It’s also interesting to think about gold through the lens of millennial/Gen Z gold — Bitcoin.
Even with new all-time highs in the price of gold, the AUM for the biggest gold ETF (GLD) is one-third below its peak:
Gold is far less volatile than bitcoin so there can be a place for both to exist.
But it will be interesting to see if the demand for Bitcoin eventually dampens the demand for gold.
Gold has thousands of years on crypto so I wouldn’t make that bet just yet but technology can change the world in a hurry.
We talked about this question on the latest edition of Ask the Compound:
Bill Sweet joined me again on today’s show to discuss questions about the number of stocks it takes to be diversified, tax planning for a move to a high-tax state, retirement contributions when you have freelance income and how tax credits work.
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
