Gold vs. Stocks in 2011: Which Has Done Better?
For all the hoopla and hand-wringing over gold topping $1,500 an ounce and now the possible popping of the commodities bubble, stocks have been a better and less volatile investment so far this year.
Yes, there are a bunch of credible macroeconomic forces pushing up the price of the precious metal, but there is also a lot of emotional investing going on, too. They call it gold fever for a reason. Anyway, so far in 2011 stocks, by a number of measures, have been a better bet than gold.
Check out this chart we created using data from Capital IQ. Gold, as represented by the SPDR Gold ETF, is essentially tied with major U.S. equity indexes for the year-to-date. However -- and this is important -- gold has been far more volatile (meaning more risky) and has actually underperformed the Dow Jones Industrial Average, of all things.
Here's the nitty gritty: The Wilshire 5000, the broadest measure of the U.S. stock market, gained 6.1 percent for the year-to-date through May 12. The S&P 500, the most commonly used proxy for U.S. equities, was up 6 percent. The tech-heavy Nasdaq Composite gained 6.4 percent.
Meanwhile, the SPDR Gold ETF was up 6.2 percent. And as for that antiquated basket of 30 blue-chip stocks known as the Dow? It busted out to the tune of 8.9 percent. Go figure.
Yes, this is just a snapshot of recent trends, but it's instructive nonetheless. (And it's worth noting that stocks have crushed gold since the market bottom in March, 2009.) An indexed, properly allocated and regularly rebalanced portfolio, which may or may not include commodities, is an investment strategy you can live and perhaps eventually retire by. Gold, outside of a broader plan, is just another speculative bet. And despite all the hype, it hasn't been winning the race recently.
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