Gold vs. StocksSubmitted by jruss133 on Wed, 06/29/2011 - 09:31
Over the past 40 years or so gold has risen from 35 FRNs to 1500 FRNs. That is about a 10% compounded annual return.
So my question is how much would a typical stock investor made over that same 40 year period?
I have heard 10-11% compounded annually. I don't really know if that includes taxes on dividends and capital gains.
It sounds to me like the stock returns are at best negligible when compared to gold.
Anyone want to weigh in on this?
Here are some things to keep in mind:
The S&P has yielded about 7.16% a year compounded annually since 1971. The S&P has earned derivatives averaging 3.13% a year compounded annually since 1971. Add these numbers together for a 10.29% return compounded annually for 40 years.
Gold has yielded 9.9%(EDIT 7/15/11, over 10%) compounded annually since 1971.
So it would appear that stocks have out preformed Gold by 0.3%.
But wait, capital gains taxes must be paid when the stocks or the gold are sold for FRNs. Gold coins are currently taxed as "collectibles" (28% I think), while the capital gains on the S&P will vary depending on your tax strategy and bracket.
But, for the purpose of comparing a mans holding and not selling, let's set aside the capital gains taxes.
Now we must look at the derivatives. Gold coins do not pay derivatives. The S&P pays on average 3.13% compounded annually over 40 years in derivatives.
Taxes on derivatives are going to be either 5% a year or 15% a year depending on your tax bracket.
If taxed at 5%, there will be 2.97% total derivatives.
If taxed at 15%, there will be 2.66% total derivatives.
So, the total(yield + derivatives) for stocks is between 9.82% and 10.13% depending on your tax bracket and not the original 10.29%.
Gold is at 9.9%.(EDIT 7/15/11 10%)
S&P is between 9.82% and 10.13%.
(These numbers do not indicate the changing tax systems and schemes since 1971, but provide an eyeball estimate.)
Host: "Congressman, you've been worried about it since 1971 though, If you were betting against the markets you would have lost a lot of money with that view."
Ron: "Yes, I was so foolish to buy gold coins at 35 dollars an ounce"