Wednesday, October 29, 2008

Stock vs Gold vs Property

Below I share some historical trends for Stock Market, Gold and Property.  They are not directly correlated but each is good enough to represend some form of global historical trend.  So they are good enough as an overview and for layman entry level comparison.
Stock market
Gold
Comparison 1 - 1975 to now

Gold has earned 3.5x
Stock market 8x
Property 10.7x

Comparison 2 - origin to now
Gold 28x ( since 1930 )
Stock 800x  ( since 1944 )
Property  16x ( since 1960 )

normalize above return by the difference in years become
Gold  35.9% 
Stock  1250%
Property   33.33% 

However, stock starts at 1 in 1929 and therefore give too large a gap in above comparison.  So I decide to use 1960 where stock index is at 20.  If I use this 20(1960) instead of 1 (1944 ) for stock, then I get

Gold  35.9% 
Stock  83.33%
Property   33.33% 

Gold Trend in Longer History

Comparison 3 - lowest valley to highest peak

Gold's peak at 1000 at 2007
Property peak at 181 at 1996
Stock dip to 1 in 1984

Gold  40x ( min 1923 max 2007 )
Stock  800x  ( min 1984 max 2008 )
Property  22.6x ( min 1960 max 1996 )

Gold  47.62% 
Stock  2352.94%
Property    62.85% 

Like wise stock's number is too crazy so I use 20 instead of 1 for stock and result this:

Gold  47.62% 
Stock  117.65%
Property    62.85% 

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I am not too excited about any of these return rate because past performance does not guarantee future profits.  However, after looking at these graph I am very excited because I think I see some repeated trends in stock market.  It seems QUITE predictable from this graph alone.  However, I cannot figure out any "Patterns" for Gold and Property.  Therefore I am quite sure what I need to do for stock investment, but not the others.

==================

so my final word on this comparison is you should only read this for 'fun' or at most a guide only.  Remember that global trend and all these 'overall' figure does NOT really affect you.  Because you will NEVER buy the whole world.  You will only buy a few stocks or just 1 or 2 properties.  The unique buys you make for yourself determine the REAL profit for your very self.  Global trend does NOT mean you have no chance to out beat it.  

13 comments:

** OUT OF TRACK 思 想 出 軌 ** said...

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Carson Ding said...

i can only say that for gold chart, it applies globally. because the price chart is based on only one type of gold (999). so, u can beat the market. yes, there is a pattern in it.

for stocks and properties, the chart is not representative enough for the whole world. there are so many stocks and properties in different location all over the world. while some stocks make money, some lose. while some properties make money, some lose.

for gold, if it goes down, it is down for the whole world. and if it is up, it is up for the whole world.

it's harder to beat the game in individual stocks and properties. for stocks, it's all about identifying the right company. price can crash fast in stock markets, wiping out people's money overnight.

for properties, it's all about location. even real estate agents lose money big time investing in just one property when the project is abandoned.

for stocks and properties, we can't buy the whole world. very impossible.

for gold, you buy one, you buy all. just need to study the trend.

Michael Tsen said...

thanks for your feedback CD, your comment is true and valid for those who believe in trend and technical analysis.

but technical analysis is NOT a sure earn method, the root of a good TA eventually goes back to the person who apply it.

actually the 'location' factor for property investment is a 'myth' which I plan to talk about in future posts ...

buying the 'whole world' is relatively easy these days using index funds. like wise when you invest in gold, you actually invest in gold index.

commodity like gold is a huge topic, trading it like a trend without understanding the fundamental of commodity is actually quite dangerous, as if buying stocks without understanding what the business does.

I would strongly and easily argue that understanding what a company does is much easier like Coke, Walmart or like in Malaysia Parkson, Aeon ( Jusco ) etc.

gold does have its unique strengths ie. it will never go to Zero. if the next world war wipe out all of us again, the guy who restart the whole new finance world is 'most probably' the guy who has most gold at that time :)

LOKE, AIA BERHAD. said...

Agree with you, mtsen. Stock is the best investment in the world. Warren Buffett has already proven it...

Michael Tsen said...

thkx loke, actually needed to revise this post because its not apple to apple comparison, picking stock chart since 1929 is like picking its best performance.

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http://www.ipinglobal.com/ipin-live/blog/331743/property-versus-gold

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