David John MarottaDavid John Marotta is the President of Marotta Wealth Management, a fee-only financial planning and asset management firm in Charlottesville, Virginia. He is an oft-quoted writer and speaker on financial matters and his weekly financial column can be found at www.eMarotta.com
Speaker:Is investing in hard-assets stock the same as investing in commodities?
David Marotta:You need to keep in mind that investing in hard-asset stocks is not the same thing as investing in commodities. Commodities are things like gold, silver, oil; it even includes things like soybean, contracts and things like that. But investing in a commodity like gold will generally hold its value but it wont appreciate the value. When you invest in a gold mining company, they actually have profits, returns, they are expanding their business. Studies have shown that investing in stocks appreciates at about 6.
5% over inflation. Investing in commodities ends up appreciating just with inflation. So, over the last 200 years, stocks have been appreciating about 6.
5% of inflation. But a dollars worth of gold 200 years ago, after in just adjusting for inflation is worth about $1.
7 today. Now, a dollar 200 years ago is worth about $0.
7 today because of inflation. So, a dollar isnt worth as much but a dollars worth of gold back then is equivalent to a dollars worth of gold today. So, gold and commodities hold their value but hard-asset stocks actually appreciate value.