Warren Buffett: Why stocks beat gold and bonds
He's wrong. Stocks do not beat gold once inflation outpaces the rate of average market returns, which is exactly where we're at now.<p>Gold is up 87 fold over 90 years or so. There is no way to capture that kind of return out of stocks, other than to buy one stock, Apple at the absolute bottom, or buy Dell the day it IPO'd or other similar freak scenarios, and then hold all the way through, and then sell at the absolute top. On a long term duration, it becomes increasingly difficult to survive even modest inflation and market changes (you have to constantly shift your investment strategies for all sorts of reasons: age, family, economic conditions, and so on). Few people are skilled enough to do that well.<p>With gold, you merely need to buy and hold - IF you believe the fiat currency will continue to depreciate due to 'printing' (to pay for entitlements, to devalue national debt, to fund deficits, and so on). There are very few things you could leave for your grandchildren that will retain their value, real estate and gold are two prime options.<p>If you had bought and held the stocks that make up the Dow over 60 or 70 years, you'd have gotten demolished because the Dow constantly shuffles its index. That is to say, you can't look at the Dow from 70 years ago and compare it to today, because the index is completely different, and the average investor could only easily purchase index ETFs in the last 30 or so years.<p>In reality, the Dow is not at 13,000 today as we knew 13k to be back in 1998/99 during the huge stock market bubble. Inflation has eroded that nominal value by at least half. The Dow is more likely at 5,000 to 6,500 depending on what you believe real inflation has been over the past 14 years (not the Fed's bogus CPI numbers).<p>The dollar has lost 97% of its value since the Fed came into existence. There's no way you can outrun that unless you hit homeruns in the stock market, which is what Buffett did, and which is exactly what your average investor cannot do regularly. The majority of people that invest in the stock market lose money. That's tracking since the late 1960s when the US went off the gold standard and inflation skyrocketed (sending oil, gold, and nearly everything radically higher).<p>Buffett hasn't made most of his wealth in the stock market anyway (nor that of Berkshire). He has made it by using insurance company float cash to purchase other high float companies, and then rolling that ball forward. Nearly all of his big market gains peg to one period of time, the 1970s, when stocks were once-in-a-generation cheap; his timing was brilliant, but it was an exceedingly rare scenario.