Golden Opportunities – Why Gold Shines Brighter than Stocks

December 22, 2023

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Navigating today’s financial landscape can feel like driving through a hurricane, with our ever looming concerns of stock market volatility and the painful prospect of losing our hard-earned legacy. It’s a scenario many investors find themselves in. 

We start to question the stability of our financial future amidst the unpredictability of the stock market. In these times, finding a safe place for your investments isn’t just a preference — you need it.

Think about the stock market for a moment. It’s often a rollercoaster ride – thrilling highs, sudden drops, and everything in between. And the crazy part is these numbers aren’t just fluctuating on a screen – – they are really impacting your life savings and the legacy you’re striving to build. 

The constant ups and downs can be more than just nerve-wracking, they can make you wonder if there’s a better and more secure path for your investments.

That’s where gold steps into the picture. Unlike the often erratic nature of stocks, gold has a reputation for being a steadfast and reliable asset. It’s not just about its enduring value. Gold gives you peace of mind and a way to protect your wealth.

But let’s dive into why gold shines brighter than stocks…

What most people think about the stock market

When it comes to investing in the stock market, many individuals enter with expectations of robust returns. The common perception, often bolstered by historical data and market trends, is that the stock market yields an average annual return of around 6.5%. This figure is attractive to many, especially when considering the power of compounding interest over time. 

For instance, let’s take a hypothetical investment scenario: if you were to invest $10,000 in the stock market, the anticipated growth at this average rate, compounded over a decade, paints an optimistic picture.

The Compounding Effect in Action

Compounding is a powerful force in finance, often referred to as the eighth wonder of the world by investment enthusiasts. In our example, investing $10,000 at an annual return of 6.5% doesn’t just add a flat rate of interest each year. Instead, each year’s gains are reinvested, earning more in the following year. 

This snowball effect means that by the end of 10 years, your initial investment of $10,000 could grow to approximately $17,626. And this growth is pretty good right?

 

Typical Annual Returns
6.5%
Year Stocks
1 $10,000
2 $10,650
3 $11,342
4 $12,079
5 $12,865
6 $13,701
7 $14,591
8 $15,540
9 $16,550
10 $17,626
10 Year Absolute Return $7,626
76.26%



And this is all true… But when you invest in the stock market you actually have a big partner, you have a silent partner.

Your Silent Partner Takes a Huge Chunk of Your Profits

When you invest in the stock market through a broker or financial advisor, it’s crucial to consider the fees they charge for their services. These fees, often overlooked by investors, can significantly impact the overall returns on your investment. Typically, a broker or financial advisor might charge around 1.5% per year in management fees. While this percentage might seem small at first glance, its cumulative effect over time can be substantial. 

For example, in the 10-year investment scenario we discussed earlier, where your $10,000 investment grows to $17,626, these annual fees would amount to approximately $1,878 over the decade.

 

Your Silent Partner gets rich even if you lose money.

The Real Impact of Fees on Your Investment

This cost of professional management is not just a one-time expense but is recurrent, diminishing your investment’s value each year. 

Change to 100k

Consequently, after accounting for these annual fees, the impressive growth of your investment diminishes significantly. Instead of the expected $17,626, your $10,000 investment would only grow to about $15,153 over the same 10-year period. This scenario highlights a critical aspect of stock market investments… the silent partnership with your broker or financial advisor. 

 

Typical Annual Returns Typical Broker Fees
6.5% 1.50%
Year Stocks Fees Result
1 $10,000 $150 $9,850
2 $10,490 $157 $10,333
3 $11,005 $165 $10,839
4 $11,544 $173 $11,371
5 $12,110 $182 $11,928
6 $12,704 $191 $12,513
7 $13,326 $200 $13,127
8 $13,980 $210 $13,770
9 $14,665 $220 $14,445
10 $15,384 $231 $15,153
10 Year Absolute Return $5,384 $1,878

 

While their expertise is invaluable, it’s important to realize that their fees can eat into a significant portion of your potential profits.

One big concept that is important for you to know is that your Silent Partner gets rich even if you lose money. They get paid no matter what. Does this seem fair to you?

The Most Important Question – What are your broker’s fees?

Given the substantial impact of these fees, one of the most important questions you can ask your broker or financial advisor is about their fee structure. Broker fees typically range between 1% and 3%, and understanding these costs upfront is crucial in assessing the true potential of your investment. 

Remember, every percentage point in fees represents a significant portion of your potential earnings, and being aware of these costs is key to maximizing your investment returns.

Compared to Gold

When you compare this to gold you can see that for the last 10 years gold has seen an average yearly increase of 5%. In fact Last 25 Years the average increase has been 8.6%

https://goldprice.org/gold-price-history.html

But if we use 5% as the rate and we reinvest your same $10,000 into gold, we see that the person who bought gold actually out performed the typical investor…

Because Gold Has: 

  • A Limited Supply
  • No Counterparty Dependency
  • Physical gold does not rely on another party’s ability to meet obligations, unlike stocks or bonds.

If we look back at the price of gold over the years we can see that

 

Year

Gold Price / Oz
2003 $363
2013 $1,200
2023 $1,900



So now we know that gold doesn’t just hold its value – it actually increases over the years.

Gold’s Steady Appreciation Over the Years

In the realm of investments, gold has consistently proven to be a robust asset, especially when we look at its performance over the past decade and beyond. Over the last 10 years, gold has experienced an average annual increase of about 5%.

In fact – this steady appreciation becomes even more impressive when we extend our view to the past 25 years, where gold has seen an average yearly increase of 8.6%. These figures, which can be verified through resources like goldprice.org, highlight gold’s resilience and growth potential, making it an attractive option for investors seeking stability and consistent growth.

Comparing Gold to Stock Market Returns

When we compare gold’s performance with that of the stock market, an interesting picture takes shape. Let’s consider the same $10,000 investment, but this time, put into gold. Using a conservative estimate of a 5% annual increase, which is lower than the 25-year average but aligns with recent trends, the growth trajectory of gold investment appears quite promising. 

Unlike stock market investments, where broker fees can significantly reduce net gains, gold investments are not typically subject to such deductions. This means that the growth in the value of gold is more directly beneficial to the investor.

Gold Outperforming the Typical Stock Market Investor

Under these conditions, an investor who chose gold over stocks could potentially see greater protection of their wealth AND greater returns. The absence of recurring management fees in gold investments means that the increase in value is not eroded over time. Therefore, the $10,000 invested in gold, growing at an average rate of 5% per year, could yield better returns than the same amount invested in the stock market with average returns diminished by broker fees. This scenario underscores gold’s potential not just to preserve wealth but also to enhance it, making it a compelling choice for those looking to diversify their investment portfolios and seek alternatives to traditional stock investments.

Gold Price Over the Years is Proof

Reflecting on gold’s price history:

  • 2003: $363 per ounce
  • 2013: $1,200 per ounce
  • 2023: $1,900 per ounce

This demonstrates not just value retention but significant growth over time.

Why Gold is Your Ultimate Wealth Protector

In today’s rapidly changing economic landscape, protecting your wealth has never been more crucial.

We know owning gold is the number one way to protect your wealth – –  safeguarding your financial future, and here’s why…

Unmatched Hedge Against Inflation
In an era where inflation rates are soaring – reaching a staggering 9.1% under the current administration, the highest since 1980 – gold emerges as a steadfast protector of your wealth. Unlike fluctuating currencies that lose value, gold typically appreciates as inflation rises. This makes gold not just a shield against diminishing currency value but a proactive tool for wealth growth in inflationary times.

Your Safe Haven in Turbulent Times
The world is witnessing unprecedented geopolitical tensions – from the ongoing conflict in Ukraine to the escalating tensions between China and Taiwan, and the severe unrest in the Middle East. In these times of uncertainty, gold stands as a beacon of stability. Recognized globally as a ‘safe haven’ asset, gold provides a sense of security that is unrivaled, ensuring your investment remains resilient even when global markets are shaken.

The Power of Tangibility 

Gold is more than an investment… it’s a tangible asset you can hold in your hands. This tangibility is invaluable, especially in scenarios where the future of global currencies is uncertain. With discussions about the potential decline of the dollar’s reserve status, the question looms: what will your paper assets be worth in such a scenario? Gold offers an answer – a physical, enduring asset that transcends the vulnerabilities of paper currencies.

 

In conclusion, gold is not just an investment – –  it’s your financial safeguard. In a world brimming with economic uncertainties and inflationary pressures, gold stands as a symbol of stability, safety, and tangible security. 

It’s time to think beyond traditional investments and embrace gold as the cornerstone of your wealth protection strategy.

Do you want the peace of mind knowing your investments are safe and secure?

Schedule a call with us now to answer any other questions you might have and to begin protecting your wealth. Do yourself and your family a favor and call us now.

American Alternative Assets is here to help you with a personalized, educational approach to wealth protection.

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