Investing in Commodities

A friend of mine asked me today “Should I invest in Gold“? We had a long conversation and I think the following parts of the discussion will be useful to the readers:

My view: Gold will not make money over the long term. I always say ‘People with a long term view should buy S&P 500 and forget about it’. I cannot say the same about Gold. In my opinion, Gold will never deliver above average market returns.

The immediate question I am often asked is – then why do people invest in Gold? The main reason is ‘People are hedging their bets’. They believe Gold prices rise when stock prices fall.

Let us expand our discussion to talk about Commodities (Gold is a commodity. Other examples of commodities include Coffee, Copper, Silver, Aluminum).

The conceptual difference between Corporations and Commodities – if you own shares of Microsoft, you own Continue reading