Why Not Invest in Gold?¶

This question usually comes from people with one of two philosophies:

They think Armageddon is imminent and only gold is "safe"; or
They actually think it is a good investment.

To overcome the first belief is more difficult as it requires a shift in fundamental philosophy. If you don't believe that the world will continue as it always has, and you don't have faith in the future, there is nothing further I can say to persuade you otherwise. By the way, if civilization truly does end, gold won't help either - no one is going want colored rock, they want canned food and water.

The second belief is what we will address today - whether gold is a good investment or not. And if not, what is a better alternative.

“Gold is colored rock which has no intrinsic value. Its value is arbitrary and derived from speculation ― whatever someone else is willing to buy, or sell it, for.” ―Michael

The Persistent Illusion of Gold¶

The August 7, 2023 online edition of the Wall Street Journal contained a remarkable article titled “When Markets Get Scary, Mom and Pop Buy Gold.” In addition to being a fair sample of everything that’s wrong with financial journalism, it’s a common recitation of the perceived benefits of owning gold.

The statistic at the heart of the article is as follows:

The percentage of Americans who believe gold is the best long-term investment jumped to 26% this year from 15% in 2022, according to a Gallup report from May. In contrast, those preferring stocks dropped to 18% from 24% last year, while those favoring bonds climbed to 7% from 4%.”

The illusion is not just that gold is an efficient inflation hedge but that it is somehow preferable to holding a broadly diversified portfolio of quality common stocks (ie, mutual funds) for the long term.

First, let’s get our terminology straight: gold is not an investment at all. That is, it does **not produce anything. It just sits there**. In fact, it costs money to store and to insure.

If you bought an ounce of gold nearly 44 years ago at $800, you now own an ounce of gold worth (as of Sep 2023) $1,965. It’s up about two and a half times, having produced neither dividends, nor interest, nor anything else. The Consumer Price Index in January 1980 stood at 78. In July of 2023 it was 306. It’s up just shy of four times. Which means that, just to have kept up with inflation, your $800 gold ounce would now have to be valued pretty close to $3,200. But it isn’t. Not even close.

Wait, it gets worse. The Standard & Poor’s 500 Stock Index at the end of January 1980 stood at 115. As of Sep 2023 it sits at 4,490. That’s right: while the price of gold was rising two and a half times, the S&P 500 went up 39 times, not counting dividends which — at the risk of repeating oneself — gold does not pay.

Quote

“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again, and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” ―Warren Buffett

A Better Option: The Great Companies of the World¶

Quote

“You could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all, not some, of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?” ―Warren Buffett

Quote

“While businesses were reinvesting in more plants and new inventions came along, you would look into your safe deposit box, and you'd have your 300 ounces of gold. But it didn't produce anything. It was never going to produce anything.” ―Warren Buffett

If you insist on investing in gold, I recommend finding a mutual fund that invests in companies that deal with gold, but never directly in gold itself.

Ponder this: if gold is such a great investment and these gold-selling companies you see on TV are telling you it's is going to increase so much in value - why in the world would they sell it to you?! Wouldn't they just hold onto this "great investment" for themselves?

Quote

“I collect businesses and friends, not gold.” ―Warren Buffett

Quote

“The only two things that actually make money are printing presses and the great companies of the world ― and the first is illegal.” ―Michael

Two Retirement Problems¶

The Fundamental Retirement Question

Will I outlive my money, or will my money outlive me?

“48% of retirees say they worry about outliving their money. Only 30% say they are very prepared.”

―Research published by Age Wave, "Longevity and the New Journey of Retirement", 2022

(This is Retirement Risk #1: Longevity)

The Fundamental Retirement Challenge

To keep my retirement income growing as my cost of living continues to increase.

(This is Retirement Risk #2: Inflation)

Risk #1: Longevity¶

10,000 Thousand People Retire Every Day.

“10,000 baby boomers will retire daily, and their instincts tell them to do the wrong things.”

―Nick Murray, The Advisor to Advisors, bestselling author, lecturer and trainer.

62 is the Average Retirement Age.

On Average at Least One Spouse Will Attain Age 92.

“Over half of Americans born today may live to 100."

―Christensen, K, Doblhammer. Ageing populations: The challenges ahead (2009).

Thus, the Average Couple Needs 30 years of Rising Income.

Risk #2: Inflation¶

The 2^nd retirement risk is inflation which is the erosion of purchasing power. It is often called "The Silent Killer".

Quote

“What is the greatest danger to your investments? Inflation.” —Paul Cabot
"Inflation: When nobody has enough money because everybody has too much." ―Harold Coffin
“Just as the danger of getting a sunburn is enhanced when there is cloud cover because sunbathers tend to let their guard down, inflation is a formidable foe to investors because it is invisible, slow-moving, and does its damage over time, not in a given monthly statement.” ―David Bahnsen

Sources¹

Compound Interest¶

Quote

“Compound interest is the most powerful force in the universe.” —Albert Einstein

$15k @ 30 YearsThe High Cost of Waiting

$15,000 One-Iime Investment For 30 Years¶

$15,000, or $1,250 / month, is the maximum contribution for two IRAs (husband and wife).

When is $52,500 > $217,000 ?¶

Contributions	Sam	Linda
Ages 28 - 35:	$7,500	$0
Ages 36 - 65:	$0	$7,500
Total Contributions:	$52,500 7 Years	$217,000 30 Years
End Result @ 10%:	$1,128,706	$1,114,731

Where to Get Compound Interest?¶

Performance of Various Assets¶

Quotes

"You need to defend purchasing power with equities, rather than defending principle with bonds (or other fixed accounts)." —Nick Murray
“Stocks are the best financial asset if you fear rapid inflation since many countries with high inflation can still have quite viable, if not booming, stock markets. Fixed-income assets, on the other hand, cannot protect investors from excessive government issuance of money.” ―Jeremy Siegel

8 Facts of the Market¶

Eight Facts of the U.S. Equity Market From 1926 - 2025 Source²

1) Performance
- Inflation: 3.1%
- Residential Real Estate: 4.%
- Bonds: 6%
- Large U.S companies: 10%
- Small U.S companies: 12%
2) Annual Rolling Periods
- In the ninety-nine 12-month rolling-periods the market's return has been positive 94% of the time.
3) Twice a Year
- Declines of -5% occur about twice a year.
4) Every 18 Months
- Declines of -10% occur about once every 18 months.
5) Every Three Years
- Declines of -15% occur about once every three years.
6) Every Six Years
- Declines of -20% occur about once every six years ("Bear Market").
“Our plan continues to anticipate that at least 20% of our invested capital will appear to disappear temporarily about every six years or so.” ―Nick Murray
7) Bear Market Recovery
- 40 months (~1,200 days) is the average length of time it has taken for a Bear Market to breakeven.
“Since the end of World War II the longest it has ever taken an investor to recover an original investment in the stock market was the five-year, eight-month period from August 2000 through April 2006 (68 months).” —Jeremy Siegel, Stocks for the Long Run
8) After Bear It Comes Back Fast
- Returns in the first year after the five biggest market declines ranged from 36% to 137%, and averaged 70%.

Insights

Inflation (the loss of purchasing power) is countered by investing in equities.
Volatility is not risk because the market always comes back.
You can't outsmart or trick the market.
The market does what it does. If you know what's going to happen, it's not risky.
An Advisor can help you avoid the Big Mistake (selling when the market is down).

Mutual Funds¶

A mutual fund is a broadly diversified collection of the world's great publicly-traded, mainstream, profit-seeking companies.

Nick Murray

“It can be historically demonstrated that the best defense against retaining your purchasing power through retirement is to invest in a broadly diversified portfolio of the world’s great companies.

And the finest method of investing in them are good, long-term, mutual funds.”

The Investment Company of America (ICA)¶

The premiere long-term equity mutual fund by Capital Group's American Funds.

Started in 1934.
The expense ratio is 0.56%.
Invests in 191 of the World’s Companies.
It has paid a dividend every year since 1936.
The average annual total return is 12.13% for 91 years!
$1,000 invested in 1934 would have grown to $40,261,542 by 12/31/2025!
Never had three consecutive “down” years!
Never lost principle in any 10-year period! (The worst was 1999 - 2008: 1.0%)

Example: Taxes and Inflation: Double Trouble

You save $10,000 at your bank.
You earn 3% interest for the year: +$300
You pay taxes on that interest at 20%: -$60
With inflation at 3.5% percent, you reduce the original $10,000’s purchasing power by: -$350
With taxes and Inflation your net balance is: $9,890

That's a real-dollar loss of $110

Mutual Fund Wrapped in a Tax Shelter¶

The magic combination is to "wrap" the ICA (or any mutual fund) in a Roth IRA which makes the earnings and the withdrawals tax-free.

Example: ICA + Roth IRA

From age 35 to 65 (30 years), a husband and wife each invest $625 per month ($15,000** annualy) into the American Funds Investment Company of America (ICA) mutual fund, registered as a **Roth IRA**. Total investment is **$420,000.
This chart shows the real-life results of sixty-two 30-year rolling periods of the ICA 1934 to 2025 year-end.

	30-Year Period	Result	Return
Best	1970 - 2000	$7,158,681	15.47%
Worst	1993 - 2023	$1,849,485	8.46%
Median	All 30-year time-frames	$3,770,491	12.21%

Note³

Risk #3: Volatility¶

The 3^rd retirement risk is taking withdrawals while the market is declining (volatility).

Mutual Funds have one challenge: short-term they are unpredictable. If you encounter "red boxes" at the beginning of your retirement it could negatively affect your withdrawals.

Eliminate Income Volatility When Taking Withdrawals¶

When you’re approximately 10-years (or closer) from retirement withdrawals start considering a variable annuity with a guaranteed income rider. This will provide a minimum 5% guaranteed withdrawal for the rest of your life, while staying 100% invested in the world's great companies (equity mutual funds). When mutual funds go up, your income increaes; when they go down your income stays the same. When you pass away, the income continues for your spouse. When he/she passes your children inherit the account balance.

Note⁴

Resources

Read what American Funds says about variable annuities.

Barron's article: Annuities Are Coming in New Shapes and Sizes, July 28, 2025

...once you’re retired, by establishing a reliable lifetime income stream to supplement Social Security.

The major stock market dip in early April underscored a major benefit of annuities’ income guarantees: peace of mind. “We had to talk a lot of people out of pulling money out of the market,” says Howard Sharfman, at NFP Insurance Solutions. “But nobody who has guaranteed income called us to have that discussion.”

There are other benefits, too. “You can take more risk by holding more in stocks because you have the income in place with the annuity,” Elder says. “You don’t need to provision as much money for later in life because you know you have an income floor. So you can use the money earlier.”

Variable annuity is the best choice because it doesn’t cap upside and allows you to potentially build more assets.

Quotes

"48% of retirees say they worry about outliving their money. While 72% claim they feel financially prepared for retirement, only 30% say they are very prepared. Nearly half say they often worry about outliving their money."

―Research published by Age Wave, "Longevity and the New Journey of Retirement", 2022

"I know of only two ways of coping with equity volatility during retirement withdrawals:

Abiding faith in the historical record, in the greatness of free-market democratic capitalism.
The other method is what the variable annuity industry is pleased to call 'living benefits'.”

―Nick Murray, On Panic, Faith, and the Determined Primitive

"Insurance companies promise that annuitants won't run out of income, ever! When there is a living benefit, an annuitant may run out of cash but not out of income.”

―Richard Hoe, ChFC, CLU, AEP], from the article "The Better IRA" in The Investment Edge magazine.

What John Huggard Says...

John Huggard, J.D., CFP, CLU, ChFC, is a sought after expert witness in securities cases and a nationally recognized speaker on the topic of variable annuities.

“Win-Win Situation:
- If the market goes up - you're a winner.
- If the market goes down - you're a winner.
- No more disgruntled clients.
―Page 42 from his lecture notes, "Understanding the New Variable Annuity Living Benefit Riders" (January 8, 2007).

“Living Benefits are not new variable annuities, but riders available with existing variable annuities. Often, only a box on the application need be checked to obtain a specific living benefit. Living benefit riders provide long-term investors with:
- An opportunity to obtain stock market gains if the market goes up.
- An opportunity to obtain an upward ratcheting lifetime stream of income regardless of the stock market's future direction without annuitization.
- The ability to avoid the 'longevity problem' for both spouses.
- The ability to avoid the 'sequence of return' trap.
- The advantages of obtaining basic variable annuity benefits (commission-free investing, no transaction costs, death benefit, etc.).”
―Page 8 from his lecture notes, "Understanding the New Variable Annuity Living Benefit Riders" (January 8, 2007).

What Moshe Milesky Says...

Moshe Arye Milesky is a tenured professor at York University with a Ph.D. in Finance, a Master of Arts in Mathematics and cum laude from Yeshiva University. Over the last 25 years he has published 15 books and 60 peer-reviewed scholarly articles on wealth and risk management.

“I purchased a variable annuity with a guaranteed living benefit and allocated 100% to stocks.” ―End Notes from the book In Defense of Annuities.
“... with a guaranteed and predictable lifetime of income that can't be outlived.” ―Section IV from the book In Defense of Annuities.
“A living benefit is paid to the annuitant for as long as they live and ceases upon death.” ― Section V from the book In Defense of Annuities.
“It protects against the risk of living beyond, even far beyond, life expectancy - without surrendering either upside potential of liquidity of the underlying portfolio.” ―Section V from the book In Defense of Annuities.
“The income is guaranteed to never decline for the remaining life of the annuitant. If the underlying investment portfolio ever reaches zero, the guaranteed income will continue so long as the annuitant or, for a joint product, one member of the couple is still alive. Whatever remains in the account at the time of death goes to the heirs.” ―Section V from the book In Defense of Annuities.
“... to provide an assortment of lifetime income guarantees meant to protect the policyholder against longevity risk as well as what the industry has coined as ‘sequence-of-returns risk’, which refers to the chance that a retirement portfolio, from which cash is being withdrawn, suffers early losses, magnified by the retiree living longer than average. All you need is a bear market at the wrong time, and the sustainability of your income can be cut dramatically.” ―Section V from the book In Defense of Annuities.
“By promising a lifetime of retirement income, insurance companies are taking on the above-noted longevity risk.” ―Section V from the book In Defense of Annuities.
“Invest aggressively, diversify, exposure to equities, and wrap some protection around it. Optimize your variable annuity by having an aggressive allocation and protecting it with a lifetime income.” ―From his Annuities for a Biological Age webinar (2020).
“Fees and periodic withdrawals are deducted from the VA account as long as there are funds available. But if those periodic withdrawals every fully deplete this account, the insurance component is triggered to fulfill the remaining withdrawals for the lifetime of the investor.” ―Section V from the book In Defense of Annuities.

Risk #4: Investor Emotions¶

The 4^th retirement risk is avoiding making bad decision based upon negative investor emotions.

DALBAR Investment Study 2018¶

This chart shows the difference between the growth of a $100,000 in the S&P 500 from 12/31/1997 to 12/31/2017, and the average investor who is investing in the same investment.

How can the two be different?

To put it another way: How can the driver of the car move at a slower rate than the car he is in?

Aanswer: the driver doesn't stay-put in the car.

Quotes

"At the end of an investor's life, less than 5% of his total lifetime return will come from what his investments did versus other, similar investments. The other 95% will come from how the investor behaved. And the primary determinant of that behavior will be the quality of the advice he got, or didn't get." -Nick Murray
"Investing is like a bar of soap… The more you touch it, the smaller it gets." -Darcy Howe, VP with Merrill Lynch
"Fidelity has done a study as to which accounts had done the best at Fidelity. They were the people who forgot they had an account!" -James O'Shaughnessy, Principal, Chairman and Co-Chief Investment Officer of O'Shaughnessy Asset Management
"I know exactly what will happen in the market in the next 10 - 20 years; it will go up. But I have no idea what will happen Monday morning." -Peter Lynch, American investor, mutual fund manager, and philanthropist

The Story of How Warren Buffet Didn't Lose $300 Million

On October 19, 1987, "Black Monday", the S&P 500 Index dropped 23%. Warren Buffet's holdings in Berkshire Hathaway plunged more than $300 million dollars.

Had he been unnerved and sold, he would have "lost" $300 million.

However, he didn’t sell and the value of his shares by February 2001 (14 years later) were worth $6.6 billion (over 22 times more).

This Time It’s Different (not!)¶

Negative Headlines In The News Regarding the Market¶

Expand each headline...

Wall Street: The Rise in Red Ink.

April 16, 1973

The Economy: Blood, Sweat and Tears.

August 12, 1974

The Death of Equities.

August 13,1979

Staring into the Abyss…crash is a shocking warning that the economy is living on borrowed time.

November 2, 1987

…the flight of individual investors and the breakdown of the markets foreshadow the end of the capitalistic system as we have known it.

September 14, 1974

Quotes

"The only thing new to this world is the history you do not know. This observation is among the greatest pieces of investment advice ever." -Nick Murray
"The four most dangerous words in investing are: "this time it’s different". -Sir John Marks Templeton

My Offer & Next Steps¶

My Offer

When you think of your retirement, does it seem more probable that you will outlive your money or that your money will outlive you?

Here's what I offer: a no-cost, no-obligation second opinion to help you figure that out.

If you're open to it, I'd like to have relaxed and easy-going conversation with you about your retirement plan. If I think your investments continue to be well-suited, I'll gladly tell you so, and be on my way.

If, on the other hand, I think some of your strategies no longer align with your Golden Years, I'll explain why in plain English and recommend some alternatives.

Next Steps

Have a Candid Conversation With Me
Create a Simple Financial Plan
Implement the Strategies You Choose

Tips from Longevity and the New Journey of Retirement by Age Wave, 2022

Start savings early
Reduce debt
Maximize contributions
Work with a financial advisor

Stamps | S&P 500 ↩
Capital Group's article (February 13, 2025), Should investors be nervous about the stock market?. ↩
This table is for illustrative purposes only. Figures shown are past results and are not predictive of results in future periods. Results shown are at the 5.75% maximum sales charge for Class A shares. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value. Please refer to a tax consultant regarding the details of Roth IRAs. ↩
This diagram is for illustrative purposes only. The hypothetical example does not reflect a specific investments. Does not project or guarantee future results. Contractual obligations are backed by the claims-paying ability of Insurer. Products and features are subject to state availability. Limitations and exclusions may apply. Variable products are sold by prospectus. Consider the investment objectives, risks, charges, and expenses of the variable product and its underlying investment options carefully before investing. The prospectus contains this and other information about the variable product and its underlying investment options. You may request a prospectus from your registered representative. Read it carefully before investing. Living benefits can provide consistent income. Variable annuities are long-term investment products designed for retirement purposes and are subject to market fluctuation, investment risk, and possible loss of principal. Variable annuities contain both investment and insurance components and have fees and charges, including mortality and expense, and administrative fees. Optional features are available for additional charges. The annuity’s value fluctuates with the market value of the underlying investment options, and all assets accumulate tax-deferred. Withdrawals of earnings are taxable as ordinary income and, if taken prior to age 59½, may be subject to an additional 10% federal tax. Withdrawals will reduce the death benefit and cash surrender value. ↩