Long-Term Investing (and This Will Probably Surprise You)

I would speculate that if you asked the typical American what the best long term investment is, many (if not at least half) would probably say “Gold.”  But the real long-term returns of gold might surprise you.

If you bought gold in January 1980, as of October 2010, you would be up 95.5 percent (assuming no transaction costs and no holding costs).  Once you adjust for inflation, however, you would have lost 30 percent (no kidding—the value of gold in the last almost 30 years did not even kept up with inflation).

So what out-performed gold?  Housing.  Yep, no kidding.  If you purchased the median-priced existing home in the U.S. in January 1980 and sold it in October 2010, you would have gained 252 percent (again, assuming no transaction costs nor any holding costs).  And unlike gold, you were able to live in the property, reap the tax benefits of the home mortgage interest deduction (like wise for property taxes), and the first $250,000 of gain for single individuals is tax free ($500,000 for couples).  And this is despite the 23 percent decline in home values seen since 2006.

Even after adjusting for inflation, housing is still up 18.6 percent.

Granted, those individuals that purchased gold in 2001 have seen an incredible return—but how many individuals know when to buy and when to sell?

So in the long-run, housing has outperformed gold and inflation.

Given the phenomenal low interest rates today makes this a great time to buy a house.

While everyone needs to keep a diversified investment portfolio, this is the time to over-weight into real estate.


  1. marianne Sacco

    Dear Mr. Jones,
    I attended the Stewart seminar yesterday in Pittsburgh and enjoyed your presentation (although I did not enjoy hearing again the dim economic projections that I was already aware of). I especially loved your article on Gold vs. Real estate as an investment. I am sending it to all my Realtors today, it is a great marketing article; as I own a mortgage company as well as a title agency. Thanks again for attending the seminar and all the good information.
    Marianne Sacco
    CLS Settlement Services, Inc.

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