Going for gold

Setting the scene

I’m writing this at a time of change, with a new Prime Minister and a new King in the same week.

Whether or not you’re a Conservative voter, let’s hope Liz Truss leads us safely through these turbulent times. And whether or not you’re a royalist, I hope you don’t mind me saying God Rest HM Queen Elizabeth II – and God Save the King!

Some people find change very unsettling. This month’s article aims to reassure you – at least with regard to your investments.

Changing politics

All the changes in the world don’t mean you have to change your financial plans. The markets will go up anyway.

As we always say, the answers are in 100 years of data, so you need to stay focused on the long-term.

Here’s the proof, thanks to some graphs from TimelineApp Tech Ltd.

Investing and politics

From the above, you can see the constant rise in the markets despite the changing PMs and their political persuasion.

When talking to clients about investments, I try to stay out of talking about politics. As Abraham Okusanya, CEO of TimelineTech confirms: “The market doesn’t give a fig about your politics.”

Going for gold

At times of uncertainty, some people think it’s wise to get out of the markets and put money into something “more substantial”, such as gold.

Looking at positive v negative periods over time, its highest return per calendar year is 109%, the lowest is -29%, and the average is 8%.

The only time the value of gold has risen substantially was the 1970s and the 2000s, as shown in the big gold bars (!) here:

Returns of the decade

As you can see, there are just no consistent patterns across the decades.

To convince yourself of this, please Play the jelly bean game

You might be excited about gold, but it’s a laggard compared with other sources of investment. See how the gold-coloured line is trailing below most of the rest?

Growth of wealth

Different assets do things at different times, and we just don’t know which is going to do what and when.

To make a fortune out of gold, you’d need to time the market spot-on – and we know market timing doesn’t work.

To prove our point, please read our article Ticka, ticka, ticka, ticka, timing

What this means to you

No matter what happens, stick with the plan. We base it on low-cost, diversified funds to ensure you get the best chance of success.

With apologies for the pun, you could call it our ‘golden rule’.

For more on this, please see Stick with it

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100