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Originally Posted by CrazyLond
They aren't the same companies because the original 30 have either gone bankrupt or are no longer big enough to make the index, but this strengthens the argument that owning blue chip stocks has not been the winning proposition people claim.
I understand that return on investment includes dividends and thus, one would probably have done better owning stocks than gold for the full time, but not by much. And in 1929, pretty much everyone in the world owned either gold or a claim on gold, because the US dollar as the world's reserve currency was redeemable in gold. Now, only a tiny percentage of the population plus central banks own gold as a reserve asset but the price has still kept up with the stock index despite this drop in investment/monetary demand.
If instead we started this comparison in 1930 compared to 1929 then you would be absolutely insane to want to invest in gold over stocks. Stocks would have made a killing if you invested at the dip.
I really don’t see a reason to cherry pick the peak right before an insane crash. It seems to be your best case scenario and yet stocks still come out the clean winner.
And yeah the top 30 companies are different, that’s to be expected. No one thinks a good strategy is to hold a company for 100 years. That’s not even how indexes work anyway, stocks will be taken out and put back in. Also the dow isn’t as good of a bet as the S&P 500.
Holding some gold isn’t a horrible hedge against market conditions, but completely ignoring stocks isn’t going to be a very good idea in the long run. There is such a thing as RoR and opportunity cost as well. Holding gold you will never be able to invest in the next tesla, apple, amazon, etc.