Deep Dive
Shownotes Transcript
What's up, guys? George here, and today we're talking about everyone's favorite precious metal. - Gold. - Gold. - Gold. - Gold.
Okay, full disclosure, these are actually chocolate. Nope, that one's actually real gold. Okay. But there are people out there claiming that real gold is a stable investment with a great return and it's gonna help you survive the next economic collapse. But are they right? Should you buy gold? Well, Scrooge McDuck seems to think so. Personally, I don't like to take financial advice from cartoon ducks. So let's dive into the dirty details ourselves to see if gold is a good investment.
But before we do, do yourself a favor and like and subscribe to this channel so you don't miss out on the gold we're bringing to YouTube every week.
So you've probably seen the people on social media or infomercials on TV trying to get you to buy gold and telling you it's the thing that's going to save you in a financial collapse. If these beautiful precious metals will save you in an economic collapse. And they're going to tell you things like it maintains its value and it's a hedge against inflation. Sounds pretty good, right? Some good word salad there to give you some hope. But an investment that does well even when the economy's in the toilet?
That's what they're telling you. Let's look past all the panic and paranoia for just a moment and focus on the facts first. Anytime you're thinking about investing in anything, you've got to look at the track record of success over a long period of time and look for patterns. So let's take a look at gold's track record and put it up against the stock market to see how it's performed. Now, the gold line shows us what your returns would be if you had invested in gold.
The red line shows the S&P 500, which tracks the top 500 largest U.S. companies on the stock exchange. And that gives us a pretty good idea of the returns you would see if you had invested in mutual funds or index funds with those companies.
And this red line doesn't even include the potential dividends if you reinvested them. What are dividends, you might ask? Well, they're small payouts given to a company's shareholders, aka you, the shareholder. And so when they make profits, they give you a little piece of that as a thank you for investing. Now, if those dividends are automatically reinvested, that red line would be even higher. You know who doesn't pay dividends? Your boy, Gold.
Now, all of a sudden, gold's not looking like such a good investment after all. And here's what I mean. Let's say you invested $1,000 into gold in the year 1989. Why 1989? Well, I'm a big Swifty, and it's also the year I was born, and I'm a big fan of me. I promise that you'll never find another like me.
The price for one ounce of gold on February 10th, 1989 was $389 an ounce. So a thousand bucks would have bought you 2.57 ounces of gold that day. Now, as of the week we're making this video, gold is sitting at about $2,000 per ounce. So your 2.57 ounces would be worth a little over $5,000 today.
Not too shabby, right? All right, we can all admit that. A thousand bucks turned into five thousand. But let's say you invested a thousand dollars into the S&P 500 that same year. Well, on February 1st, 1989, the S&P 500 opened at just over two hundred ninety seven dollars. So your one thousand dollars would have bought three point three six shares. And the last time we checked, the S&P was sitting right over four thousand dollars.
meaning those 3.36 shares are now worth $13,806. For those of you doing the math at home, which is weird if you're doing math while I'm talking, that's a difference of $8,611. Math is a really cool thing.
So the S&P 500 clearly outperformed gold by a long shot, over 8,000 bucks. So why are people still looking for gold in all the wrong places? Potentially on the horizon, we have stock market correction, we have inflation, we have currency devaluation. It's not sensible not to own gold. This stack of silver and gold won't collapse like some bank. You don't buy gold coins to make money.
You buy gold coins because the dollar is going to go down. I've been buying it myself because I don't want my money in the banking system either. These sort of issues actually drive safe havens like gold and silver up. These guys want you to think the economy is going to crash and you're going to need gold bricks to survive. Seriously? Even if it all goes down, right? Let's say the stock market tanks, every company in America goes bankrupt. You know what's going to be valuable at that point? Things like water, food, food.
Fuel, not gold. Now here's some fun facts about gold. It won't fuel your car, you can't drink it, and you can't eat it. My point is, this argument for buying gold just doesn't make sense. If we're actually living in some kind of I Am Legend, Walking Dead universe, Steve across the street's not gonna wanna trade you a tank of gas for a shiny brick that he can't eat. So why are they using fear to sell gold? Well, frankly, because it works. 60% of the time, it works every time.
That doesn't make sense. Historically, when people are afraid the economy might crash or the dollar's going to go down in value, they run to invest in gold. And when people rush to invest in gold, it makes the price of gold go up. That's classic supply and demand. So of course they want you to think the economy's going to crash. It's a sales tactic. Like,
Like BOGO sales, or free shipping, or the free samples of the Party Pack pierogies at Costco. I dare you not to buy a crate of those after you try one. Once you pop, you just can't stop. And they're always run by a cartel of 78-year-old women, aren't they? You can't say no to them.
That's all they have is this sample cart. And the people selling are betting you'll buy based on emotions, not facts. But let me tell you, fear is a terrible financial advisor, and it can get you into a lot of trouble. And aside from the fact that gold is not a great investment, the gold buying industry is ripe with scams and fraud.
For example, many of these rapscallions, hawking commodities will tell you they'll buy gold or silver for you and they'll store it in a safe place until you need it. But even if you do find a reputable precious metals dealer, like, I don't know, maybe this guy, he seems fine. He seems like a nice guy. He seems like a guy you'd do business with. Why would you buy gold? I don't know about you, but if gold's not gonna make me rich and allow me to build wealth or allow me to barter for Slim Jims in a zombie apocalypse, I'm not buying it.
You're going to risk our lives for a Twinkie? So now that we know that gold is not the best place to put your hard-earned money, the only thing I'd ever put my money in is mutual funds and real estate. It's that simple. Growth stock mutual funds are the best way to invest for long-term, consistent growth because they allow you to spread your investment among a ton of different companies, from large stable companies to new, fast-growing startups. And when you do that, when you spread it out like this, it's called
diversification. That's a $10 word. And all it really means is it helps you avoid the risks that come with buying single stocks or commodities like gold. It's the old eggs in the basket advice you got from your nana, your abuela, your meemaw, your babushka, or in my case, your teta. And the best part about investing in mutual funds, it's really simple to get started. In fact, a great way to do this is by contributing to a Roth IRA or taking advantage of your company's 401k. You know, just like you take advantage of your company's printer for your Amazon return labels.
Now, there's a key here to building real wealth with your retirement account that not everyone does. You see, most people will only invest up to their company match. In other words, their company matches up to 6% of their paycheck. They only invest 6% of their paycheck. And don't get me wrong. I love the company match. It's amazing. It's free money. And you should take advantage of that. But no matter what the company matches, the number you want to shoot for is 15%.
Now, for some of you, putting 15% of your paycheck in retirement might sound like a lot of money. But the more you contribute in these early years, the more time compound interest has to work its magic. All right, guys, I hope this video was helpful. And if you want to dive a little deeper into the world of investing, check out the Investing Hub on our website at ramseysolutions.com.
It is chock full of articles and tools to help you build wealth the smart way. I'm going to drop a link for you below so you can check that out. And if you have any friends who are leprechauns, number one, that's awesome. Number two, make sure you share this video with them so they can trade in that pot of gold for a heaping pile of diversified gross stock mutual funds. They're magically auspicious. They're magically auspicious. And even if you don't have leprechaun friends, please share this video with someone who might enjoy it. Be sure to like and subscribe to get more content like this. Thanks for watching. We'll see you next time.
I like the dink.