Why Dave Ramsey And Other Financial Gurus Are WRONG about Gold
The comments below are an edited and abridged synopsis of an article by Stefan Gleason
The gold perma-bears shouldn’t feel vindicated by the precious metal’s recent price slump. After all, anyone who heeded their advice missed out on gold’s record run in 2020—and on many years of outperformance since 2001.
While gold bugs are often accused of having an obsession with the metal, the anti-gold bugs have a deep-seated bias that can only be explained as irrational or dishonest.
It’s no mystery why many who work in the financial industry hate gold. They are in the business of pushing paper assets, and physical precious metals held outside of bank and brokerage accounts generate no fees for them. Financial advisors don’t get fees for recommending physical gold.
No particular asset class can be counted on to generate strong returns every single year. The point of diversification into alternative asset classes, including precious metals, is to mitigate the risks inherent in an all-paper portfolio (inflation risk, interest rate risk, credit risk, counterparty risk, political risk).
It’s not just the opinion of bullion dealers that precious metals play a valuable role in investment asset allocation. Ibbotson Associates found that investors who put 7.1% to 15.7% of their portfolios in precious metals enjoy superior risk-adjusted returns.
Gold shows virtually no correlation to stocks and bonds, meaning it can rise when paper assets fall. Yet the average investor has nowhere near the minimum suggested by Ibbotson to hedge against risks in financial assets.
Meanwhile, investors are bombarded with misinformation about gold from Big Finance and popular personal finance gurus.
Gleason discusses the views of financial advisors like Dave Ramsey, Grayscale Investments (which operates an exchange-traded Bitcoin product) and cryptocurrency enthusiast James Altucher.