From time to time our national newspapers print stories in their finance pages about what a wonderful investment x or y is, or has been – provided you were smart enough to be in at the start of the boom.
Postage stamps and fine wines are periodically held up as examples of what savvy investors have turned into substantial nest eggs.
More usually, however, it is gold, with all its glitter and allure, that is paraded before us as perfect investment advice.
The gold bugs – usually those who make money from selling it – have been out again recently, spreading breathless stories of the multi-tiered Eldorados of wealth that are waiting to be claimed by those farsighted and brave enough to commit their savings to the yellow metal.
Their propaganda usually results in paragraphs such as this from The Telegraph website: “If you were an earlier investor in gold and have stuck by the precious metal for the past 43 years you will have made a small fortune.”
It goes on to cite a report that states that the price of gold has “soared by some 3,500 per cent” since 1970, meaning that someone who bought £27,800-worth of the stuff that year and sat on it ever since would now be a millionaire.
If you had had the odd £27,800 to invest in 1970 (the equivalent then of about £360,000 in today’s money) and had bought gold and had held the investment until now and are reading this, all I can say is, haven’t you done well.
You’re in the same league as the mythical investor loved by shares boosters who twist statistics to show that £1 invested in the stock market 100 years ago is worth xmillion today.
We at The Whitehall Partnership are on permanent alert for anything that could separate our clients from their wealth and peace of mind, and the dangers of imagining yourself a second Goldfinger are just too great to ignore.
To begin with, the data cited in The Telegraph article is highly selective. As the writer was honest enough to point out, the price of gold has had a “rocky ride” since 1970.
Although it is currently trading at about $1,275 a troy ounce today, as recently as 2001 it was $260. And anyone who bought at the 1980 peak price of $2,100 would be nursing massive losses.
Anyway, it is not just wildly fluctuating prices and inflation that derail such an investment. There are trading and storage costs to be factored in, assuming you are sophisticated enough to buy gold bullion or coins. And if you invest in funds with exposure to gold you can pretty sure that the managers of those funds are going to sting you for some high, returns-reducing, fees.
But if you have a big appetite for risk and some silly money to stake, then an investment in gold will give you all the fun of the fair – bearing in mind that most people walk away from funfairs with empty pockets.
If, however, you prefer to sleep soundly at night, then stamp on the gold bugs and their siren songs promising high returns.
My underlying message here is: do not look to the personal finance pages of the newspapers for investment advice, but come to a truly independent and unbiased financial adviser such as The Whitehall Partnership.
We take the time and trouble to get to know our clients and help them to identify their tolerance to risk, clarify their financial dreams, minimise their exposure to inheritance tax while steering them well away from dodgy investments and high fees.
To arrange a free initial meeting at a time and place to suit you call us on 0845 43 47 250 today.