No, cash is never an investment, money by definition is not an investment. It is the unit of account in which investments are denominated. The map is not the terrain. It is part of a portfolio.
Now it is possible of course to become very wealthy speculating on currency moves, and it’s also possible to lose your shirt. But strictly speaking, it’s not investing, anymore than we can invest in Zloty or Pesos. That’s why they are called “currency speculators”.
Money is a unit of account, a means of exchange and a store of value. In latter role it’s an investment. Again, speculation is a matter of what you use an instrument to do. As mentioned you can speculate on stocks, that doesn’t mean stocks aren’t an investment.
I’d recommend some basic reading, but anyway this is a semantic tangent basically.
The longer original post I think covers the basic issue of ‘putting wealth into’ gold as opposed to fiat money or bonds. Whether you refuse to call one or more of those things ‘investing’ (which they all would be) is beside the point.
I found some data to show how silly the claim that gold wouldn’t have helped during the 2008 crash is:
In 2008 the stock market, as measured by the S&P 500 index, returned -37%. Foreign stocks, as measured by the Morgan Stanley Capital International Europe Australasia and the Far East (MSCI EAFE) index, returned -43%. Small cap stocks, as measured by the Russell 2000 index, returned -34%. Value stocks, as measured by the S&P 500 Value index, returned -39%. Growth stocks, as measured by the S&P 500 Growth index, returned -35%. Emerging Markets, as measured by the MSCI Emerging Markets Index, returned -53%. Bonds, as measured by the Barclays U.S. Aggregate Bond Index, returned 5.2%. But gold beat everything in 2008, returning 5.8%.
I personally have never invested in gold but I can certainly understand why some investors might choose to include some in their portfolios.
The argument was that gold was a “good hedge” against the stock market. A hedge is supposed to move opposite of your main investment to limit risk by offsetting losses. If your hedge loses value along side your main investment it is not a good hedge. One that nets loses of 20% compared to cash is a terrible one.
Surreal: Please note the context of this thread by re-reading the OP.
One problem with dealing with “gold bugs” is their insistence on cherry-picking the data. During the market crash of 2008, when did The Big Uh-Oh happen? It didn’t start in January, that’s for sure.
The period of maximal uncertainty, as in “Holy cow, this is bad!” was focused in August to October. That was the period of the most uncertainty by far. (The decline of the Dow began the previous October and bottomed in Feb. 2009.)
So I only looked at gold in that range. But note that gold peaked in March and bottomed in October. I could have really cherry picked if I wanted to.
So, if you can cherry pick to prove a point, but others can cherry pick (with better reasoning), if at all, to prove the opposite, you really don’t have a point.
The OP is intrinsically flawed.
In addition, these threads always have people who think they can outsmart the market using very simple observations. Another basic flaw.
Here’s a historical gold chart with markings for recessions. I suggest clicking on “50 years” (since buying gold in the US was legal) and turning off the the inflation adjusted and log scales. Note how erratic gold behaves during a recession. Sometimes up, sometimes down, sometimes flat. If anything the most common trend is a steep drop then a rise as the recession ends. But that’s still not reliable enough to be a strategy.
For one thing, no one colors gray areas on such trends as they are happening! We don’t know if we are in a recession right this minute. During a recession we have no idea if we are at the bottom or not until afterwards.
BTW: It’s a shame that “investing” gets tossed around like it does here. Buying gold isn’t investing to me.
Investing is stuff like buying shares of stock so that a company can expand, getting a CD from a bank so it can makes house loans (insert George Bailey speech), buying bonds to a city can build a road, stuff like that.
Putting money into something hoping to get more money out while not actually generating any significant economic development is basically gambling. Gold is the epitome of that. If people stopped gambling and started true investing, our economy would be very different.
LOL!! Yes, let’s.
Websters International
in•vest’
It’s taking longer than we thought
You didn’t bold the rest of that definition. It says “with the expectation of dividends, rentals, etc”. There’s no expectation of anything like that with gold.
What about corporations that announce they have no plans to pay dividends for the medium-term future? Is buying their stocks “investment”?
Strictly speaking, gold can be an investment, if, for example, you’re a jeweler. A jeweler buys gold bullion, with the expectation that he’ll be able to turn it into jewelry that he’ll be able to sell for more than the bullion value.
But of course, in that sense, it’s a lot easier to invest in iron ore, or bauxite, or pitchblende, or any other more practically-useful raw material.
Yes, because you’re buying shares in the company because you believe in its potential to generate income going forward. Whether that income is distributed to you directly is somewhat irrelevant as you still own a piece of that income.
This is the rabbit hole you go down once you start trying to parse what’s ‘investment’, a word with different meanings in different contexts, then try to apply an out of context meaning to say various asset classes are or aren’t ‘investments’.
So for example
"Investment Definition: According to economists, investment refers to any physical or tangible asset, for example, a building or machinery and equipment.
On the other hand, finance professionals define an investment as money utilized for buying financial assets, for example stocks, bonds, bullion, real properties, and precious items."
http://finance.mapsofworld.com/investment/meaning.html
In this discussion the latter definition is the relevant one. But the clear mistake is to believe there’s any particular significance to whether you conclude buying and holding gold is an ‘investment’ or not. What matters is expected return and risk. Again see the long post which originally generated this tangential semantic quibbiling.
Here you’re agreeing with the point I was making. Rightly or wrongly some people even collect old comic books as an “investment.”
Let me ask you a question: In the present-day situation, if there were a sudden spurt in wholesale commodity prices what would you predict would happen to U.S. stock prices? What would happen to U.S. bond prices?
I think stock and bond prices are sometimes correlated and sometimes anti-correlated. I hear you about to respond
“Duh, that’s what uncorrelated means. Sometimes they move in the same direction, sometimes opposite.” but it isn’t quite the same. The correlation depends on other factors.
I’m also curious about stock-bond correlation in other countries. Perhaps U.S. bonds hold up well when stocks fall in part due to their safe-haven status.