The stock markets have been crushed over the last 18 months and in our neverending search for safety and security combined with great returns, we have seen a seemingly mindnumbing amount of commercials and print telling you to invest in gold. However, don’t get the impression that gold is without it’s risks.

First, I should mention that one of the easiest ways to invest in gold is through an ETF, ticker GLD.

But while the commercials argue that gold provides safety or “if gold goes to $2000 an ounce the gold in my hand and on this table could be worth $160,000,” the returns of gold can often be very stock-market like.

Last summer gold hit $1000 an ounce, a nominal record high. As the economy slipped the price fell below $700 marking a 30% plus decline. Since then, it has raced back up to $1000 before falling in recent days to around $920. Seems pretty equity like to me.

Then consider the fact that gold is an asset, and that’s it. It doesn’t produce anything. It doesn’t pay any dividends. You are mearly betting on the fact that others will value gold in the future more than they value it right now – a simple supply and demand play.

Now I’m not arguing that gold and other hard assets don’t have a place in a well diversified portfolio, because it does at perhaps a 5% weight. I’m simply saying, don’t sell out of the stock market expecting to find safety in gold. It doesn’t work that way.

The FundPicker

The FundPicker