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The Importance of Owning Stocks

By Matthew Kerkhoff

 

It's often touted that gold is a great, perhaps the best hedge against inflation. I'm not sure why this belief is so widespread among precious metal enthusiasts, but a quick look at the chart below, courtesy of Jeremy Siegel, Professor at the University of Pennsylvania and Senior Investment Strategy Advisor to Wisdom Tree Investments, should help put things in perspective.

 

This is a long-term chart looking back more than 200 years at the real, inflation adjusted returns of major asset classes.

 

The fact that gold shows a positive real return (0.6%) demonstrates that over the long run, gold is in fact a good hedge against inflation. But as you can see, stocks and bonds are much, much better. During that same time period, bonds have provided a 3.5% annual return in excess of the rate of inflation. Stocks, the best performing asset class over the last couple hundred years, provided a ... Log in or subscribe to continue reading.


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